10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________________________________________

FORM 10-Q

_________________________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                     

COMMISSION FILE NUMBER 001-33089

_________________________________________________________

EXLSERVICE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

_________________________________________________________

Delaware		82-0572194
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
320 Park Avenue,	29th Floor,
New York,	New York	10022
(Address of principal executive offices)		(Zip code)

(212) 277-7100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:	Trading symbol(s)	Name of Each Exchange on Which Registered:
Common Stock, par value $0.001 per share	EXLS	NASDAQ

Securities registered pursuant to Section 12(g) of the Act:

None

________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and

(2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12

months (or for such shorter period that the registrant was required to submit and post such files).   Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐    No  ☒

As of May 4, 2020, there were 34,316,121 shares of the registrant’s common stock outstanding, par value $0.001 per share.

TABLE OF CONTENTS

		PAGE
ITEM
	Part I. Financial Information	3
1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and December 31, 2019	3
	Consolidated Statements of Income (Unaudited) for the Three months ended March 31, 2020 and 2019	4
	Consolidated Statements of Comprehensive (Loss)/Income (Unaudited) for the Three months ended March 31, 2020 and 2019	5
	Consolidated Statements of Equity (Unaudited) for the Three months ended March 31, 2020 and 2019	6
	Consolidated Statements of Cash Flows (Unaudited) for the Three months ended March 31, 2020 and 2019	7
	Notes to Consolidated Financial Statements (Unaudited)	8
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
3.	Quantitative and Qualitative Disclosures About Market Risk	49
4.	Controls and Procedures	49
	Part II. Other Information	49
1.	Legal Proceedings	49
1A.	Risk Factors	49
2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
3.	Defaults Upon Senior Securities	51
4.	Mine Safety Disclosures	51
5.	Other Information	51
6.	Exhibits	51
Signatures		53

2

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	As of
	March 31, 2020			December 31, 2019
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	224,874		$	119,165
Short-term investments	142,539			202,238
Restricted cash	6,369			5,453
Accounts receivable, net	187,137			171,864
Prepaid expenses	11,776			13,246
Advance income tax, net	6,024			4,698
Other current assets	26,173			24,594
Total current assets	604,892			541,258
Property and equipment, net	90,513			79,142
Operating lease right-of-use assets	99,940			86,396
Restricted cash	2,291			2,426
Deferred tax assets, net	16,640			11,855
Intangible assets, net	69,734			73,982
Goodwill	348,076			349,529
Other assets	32,045			36,016
Investment in equity affiliate	3,128			2,484
Total assets	$	1,267,259		$	1,183,088
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	8,048		$	6,564
Current portion of long-term borrowings	100,666			40,867
Deferred revenue	16,038			13,436
Accrued employee costs	28,937			71,626
Accrued expenses and other current liabilities	84,495			71,023
Current portion of operating lease liabilities	18,236			24,148
Income taxes payable, net	1,692			1,432
Current portion of finance lease liabilities	252			253
Total current liabilities	258,364			229,349
Long-term borrowings, less current portion	234,820			194,131
Operating lease liabilities, less current portion	93,707			74,709
Income taxes payable	1,790			1,790
Deferred tax liabilities, net	773			966
Finance lease liabilities, less current portion	380			430
Other non-current liabilities	21,521			11,712
Total liabilities	611,355			513,087
Commitments and contingencies (Refer to Note 24)
Preferred stock, $0.001 par value; 15,000,000 shares authorized, none issued	—			—
ExlService Holdings, Inc. Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized, 38,813,775 shares issued and 34,315,996 shares outstanding as of March 31, 2020 and 38,480,654 shares issued and 34,185,241 shares outstanding as of December 31, 2019	39			39
Additional paid-in capital	396,939			391,240
Retained earnings	574,314			551,903
Accumulated other comprehensive loss	(113,104		)	(84,892		)
Total including shares held in treasury	858,188			858,290
Less: 4,497,779 shares as of March 31, 2020 and 4,295,413 shares as of December 31, 2019, held in treasury, at cost	(202,284		)	(188,289		)
Stockholders’ equity	655,904			670,001
Total equity	655,904			670,001
Total liabilities and stockholders’ equity	$	1,267,259		$	1,183,088

See accompanying notes to unaudited consolidated financial statements.

3

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except share and per share amounts)

	Three months ended March 31,
	2020			2019
Revenues, net	$	245,990		$	239,573
Cost of revenues(1)	162,656			157,240
Gross profit(1)	83,334			82,333
Operating expenses:
General and administrative expenses	28,941			32,531
Selling and marketing expenses	14,456			18,047
Depreciation and amortization expense	12,450			13,667
Impairment and restructuring charges	—			1,227
Total operating expenses	55,847			65,472
Income from operations	27,487			16,861
Foreign exchange gain, net	1,377			1,260
Interest expense	(3,072		)	(3,582		)
Other income, net	2,529			4,423
Income before income tax expense and earnings from equity affiliates	28,321			18,962
Income tax expense	5,855			4,200
Income before earnings from equity affiliates	22,466			14,762
Loss from equity-method investment	55			67
Net income attributable to ExlService Holdings, Inc. stockholders	$	22,411		$	14,695
Earnings per share attributable to ExlService Holdings, Inc. stockholders:
Basic	$	0.65		$	0.43
Diluted	$	0.65		$	0.42
Weighted-average number of shares used in computing earnings per share attributable to ExlService Holdings Inc. stockholders:
Basic	34,401,565			34,374,815
Diluted	34,720,603			34,833,435

(1) Exclusive of depreciation and amortization expense.

See accompanying notes to unaudited consolidated financial statements.

4

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME (UNAUDITED)

(In thousands)

	Three months ended March 31,
	2020			2019
Net income	$	22,411		$	14,695
Other comprehensive (loss)/income:
Unrealized (loss)/gain on cash flow hedges	(14,846		)	5,937
Foreign currency translation (loss)/gain	(17,337		)	2,680
Reclassification adjustments
Gain on cash flow hedges(1)	(929		)	(671		)
Retirement benefits(2)	101			(39		)
Income tax benefit/(expense) relating to above(3)	4,799			(1,652		)
Total other comprehensive (loss)/income	$	(28,212	)	$	6,255
Total comprehensive (loss)/income	$	(5,801	)	$	20,950

(1) These are reclassified to net income and are included either in cost of revenues or operating expenses, as applicable in the unaudited consolidated statements of income. Refer to Note 16 to the unaudited consolidated financial statements.

(2) These are reclassified to net income and are included in other income, net in the unaudited consolidated statements of income. Refer to Note 19 to the unaudited consolidated financial statements.

(3) These are income tax benefit/(expense) recognized on cash flow hedges and retirement benefits. Refer to Note 21 to the unaudited consolidated financial statements.

See accompanying notes to unaudited consolidated financial statements.

5

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

For the three months ended March 31, 2020 and 2019

(In thousands, except share and per share amounts)

	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Treasury Stock					Total Equity
	Shares	Amount									Shares		Amount
Balance as of January 1, 2020	38,480,654	$	39	$	391,240	$	551,903	$	(84,892	)	(4,295,413	)	$	(188,289	)	$	670,001
Stock issued against stock-based compensation plans	333,121	—		921		—		—			—		—			921
Stock-based compensation	—	—		4,778		—		—			—		—			4,778
Acquisition of treasury stock	—	—		—		—		—			(202,366	)	(13,995		)	(13,995		)
Other comprehensive loss	—	—		—		—		(28,212		)	—		—			(28,212		)
Net income	—	—		—		22,411		—			—		—			22,411
Balance as of March 31, 2020	38,813,775	$	39	$	396,939	$	574,314	$	(113,104	)	(4,497,779	)	$	(202,284	)	$	655,904

	Common Stock			Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Treasury Stock					Non - Controlling Interest		Total Equity
	Shares	Amount										Shares		Amount
Balance as of January 1, 2019	37,850,544	$	38	$	364,179		$	484,244	$	(83,467	)	(3,628,068	)	$	(146,925	)	$	250	$	618,319
Stock issued against stock-based compensation plans	405,492	—		22			—		—			—		—			—		22
Stock-based compensation	—	—		6,956			—		—			—		—			—		6,956
Acquisition of treasury stock	—	—		—			—		—			(262,531	)	(15,408		)	—		(15,408		)
Allocation of equity component related to issuance costs on convertible notes	—	—		(13		)	—		—			—		—			—		(13		)
Non-controlling interest	—	—		—			—		—			—		—			9		9
Other comprehensive loss	—	—		—			—		6,255			—		—			—		6,255
Net income	—	—		—			14,695		—			—		—			—		14,695
Balance as of March 31, 2019	38,256,036	$	38	$	371,144		$	498,939	$	(77,212	)	(3,890,599	)	$	(162,333	)	$	259	$	630,835

See accompanying notes to unaudited consolidated financial statements.

6

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	Three months ended March 31,
	2020			2019
Cash flows from operating activities:
Net income	$	22,411		$	14,695
Adjustments to reconcile net income to net cash (used for)/provided by operating activities:
Depreciation and amortization expense	12,472			13,724
Stock-based compensation expense	4,778			6,956
Amortization of operating lease right-of-use assets	6,853			7,017
Unrealized gain on short term investments	267			(3,185		)
Unrealized foreign exchange (gain)/loss, net	(5,112		)	127
Deferred income tax expense	3,539			1,049
Allowance for expected credit losses	195			298
Loss from equity-method investment	55			67
Amortization of non-cash interest expense related to convertible senior notes	635			600
Impairment charges	—			1,227
Others, net	(26		)	(1,401		)
Change in operating assets and liabilities:
Accounts receivable	(17,518		)	(12,016		)
Prepaid expenses and other current assets	(3,249		)	591
Advance income tax, net	(1,109		)	(2,099		)
Other assets	925			388
Accounts payable	1,400			(1,159		)
Deferred revenue	2,579			3,262
Accrued employee costs	(37,046		)	(22,436		)
Accrued expenses and other liabilities	972			5,837
Operating lease liabilities	(6,576		)	(5,199		)
Net cash (used for)/provided by operating activities	(13,555		)	8,343
Cash flows from investing activities:
Purchases of property and equipment	(12,274		)	(10,878		)
Investment in equity affiliate	(700		)	—
Purchase of investments	(23,830		)	(47,683		)
Proceeds from redemption of investments	72,844			21,361
Net cash provided by/(used for) investing activities	36,040			(37,200		)
Cash flows from financing activities:
Principal payments of finance lease liabilities	(67		)	(137		)
Proceeds from borrowings	110,000			46,000
Repayments of borrowings	(10,201		)	(10,572		)
Payment of debt issuance costs	—			(97		)
Acquisition of treasury stock	(13,995		)	(15,408		)
Proceeds from exercise of stock options	921			22
Net cash provided by financing activities	86,658			19,808
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,653		)	(455		)
Net increase/(decrease) in cash, cash equivalents and restricted cash	106,490			(9,504		)
Cash, cash equivalents and restricted cash at the beginning of the period	127,044			104,131
Cash, cash equivalents and restricted cash at the end of the period	$	233,534		$	94,627

See accompanying notes to unaudited consolidated financial statements.

7

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

(In thousands, except share and per share amounts)

1. Organization

ExlService Holdings, Inc. (“ExlService Holdings”) is organized as a corporation under the laws of the state of Delaware. ExlService Holdings, together with its subsidiaries and affiliates (collectively, the “Company”), operates in the Business Process Management (“BPM”) industry providing operations management services and analytics services that helps its clients build and grow sustainable businesses. By orchestrating its domain expertise, data, analytics and digital technology, the Company looks deeper to design and manage agile, customer-centric operating models to improve global operations, drive profitability, enhance customer satisfaction, increase data-driven insights, and manage risk and compliance. The Company’s clients are located principally in the United States of America (“U.S.”) and the United Kingdom (“U.K”).

2. Summary of Significant Accounting Policies

(a) Basis of Preparation and Principles of Consolidation

The unaudited consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements and therefore should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The unaudited consolidated financial statements reflect all adjustments (of a normal and recurring nature) that management considers necessary for a fair presentation of such statements for the interim periods presented. The unaudited consolidated statements of income for the interim periods presented are not necessarily indicative of the results for the full year or for any subsequent period.

The accompanying unaudited consolidated financial statements include the financial statements of ExlService Holdings and all of its subsidiaries. The standalone financial statements of subsidiaries are fully consolidated on a line-by-line basis. Intra-group balances and transactions, and gains and losses arising from intra-group transactions, are eliminated while preparing those financial statements.

Accounting policies of the respective individual subsidiary and associate are aligned wherever necessary, so as to ensure consistency with the accounting policies that are adopted by the Company under U.S. GAAP.

The Company’s investments in equity affiliates are initially recorded at cost and any excess cost over proportionate share of the fair value of the net assets of the investee at the acquisition date is recognized as goodwill. The proportionate share of net income or loss of the investee is recognized in the unaudited consolidated statements of income.

Effective January 1, 2020, the Company made certain operational and structural changes to more closely integrate the Company’s businesses and to simplify its organizational structure. Under the new structure, the Company reports its financial performance based on new segments described in Note 3 - Segment and Geographical Information to the unaudited consolidated financial statements. In conjunction with the new reporting structure, the Company has recast certain prior period amounts, wherever applicable, to conform to the way the Company internally manages and monitors segment performance. This change primarily impacted Note 3 - Segment and Geographical Information and Note 9 - Goodwill to the unaudited consolidated financial statements, with no impact on the unaudited consolidated balance sheets, statements of income, comprehensive (loss)/income, equity and cash flows.

(b) Use of Estimates

The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the unaudited consolidated statements of income during the reporting period. Although these estimates are based on management’s best assessment of the current business

8

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

environment, actual results may be different from those estimates. The significant estimates and assumptions that affect the unaudited consolidated financial statements include, but are not limited to, allowance for expected credit losses, expected recoverability from customers with contingent fee arrangements, recoverability of dues from statutory authorities, assets and obligations related to employee benefit plans, deferred tax valuation allowances, income-tax uncertainties and other contingencies, valuation of derivative financial instruments, assumptions used to calculate stock-based compensation expense, assumptions used to determine the incremental borrowing rate to calculate lease liabilities and right-of-use (“ROU”) assets, lease term to calculate lease cost, depreciation and amortization periods, purchase price allocation, recoverability of long-lived assets including goodwill and intangibles, and estimated costs to complete fixed price contracts.

(c) Leases

The Company determines if an arrangement is a lease at inception of the contract. Operating leases are recorded in "operating lease right-of-use ("ROU") assets", "current portion of operating lease liabilities" and "operating lease liabilities, less current portion" in the Company's unaudited consolidated balance sheets. Finance leases are recorded in "property and equipment", "current portion of finance lease liabilities" and "finance lease liabilities, less current portion" in the Company's unaudited consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. For leases in which the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date for determining the present value of lease payments. Lease terms includes the effects of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating lease arrangements is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately.

The Company accounts for a modification as a separate contract when it grants an additional right of use not included in the original lease and the increase is commensurate with the standalone price for the additional right of use, adjusted for the circumstances of the particular contract. Modifications which are not accounted for as a separate contract are reassessed as of the effective date of the modification based on its modified terms and conditions and the facts and circumstances as of that date.

On January 1, 2019, the date of initial application, the Company adopted Leases (Topic 842) using the modified retrospective method. The modified retrospective method provides a method of recognizing those leases which had not expired as of the date of adoption of January 1, 2019.

The adoption resulted in the recognition of ROU assets of $80,328 (net of deferred rent of $8,626) and lease liabilities of $88,954 for operating leases as of January 1, 2019. The Company's accounting for finance leases remained substantially unchanged. The adoption had no impact on opening balance of retained earnings. Refer to Note 20 to the unaudited consolidated financial statements for details.

(d) Recent Accounting Pronouncements    

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (("Subtopic 715-20")): Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this ASU remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The adoption of this ASU is not expected to have any material effect on the Company’s consolidated financial statements.

In March 2020, FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as

9

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

interbank offered rates and LIBOR. The ASU provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments are elective and are effective upon issuance for all entities through December 31, 2022. The Company is currently evaluating the impact of this ASU.

(e) Recently Adopted Accounting Pronouncements

In June 2016, FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The new guidance replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. These changes will result in earlier recognition of credit losses. The allowance for credit losses is a valuation account that is to be deducted from the amortized cost of the financial asset(s) so as to present the net carrying value at the amount expected to be collected on the financial asset. The Company adopted Topic 326 as of January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to its retained earnings. The adoption of the ASU had no impact to equity as of January 1, 2020 with a corresponding offset to accounts receivable. Further, the impact of adoption of this guidance did not have a material effect on the Company's accounting policies, processes, and systems. Refer to Note 4 to the unaudited consolidated financial statements for details.

In August 2018, FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820, by prescribing new disclosure requirements, and the elimination and modification of disclosure requirements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. An entity was permitted to early adopt either the entire standard or only the provisions that eliminate or modify requirements. The early adoption of this ASU, effective January 1, 2020, did not have any material effect on the Company’s disclosures in the unaudited consolidated financial statements.

In August 2018, FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software ("Subtopic 350-40"): This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the ASU requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in FASB Accounting Standard Codification Subtopic 350-40 on internal-use software to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The ASU 2018-15 also provides guidance on amortization and impairment of any costs capitalized, along with new presentation and disclosure requirements. The new guidance is effective for fiscal years beginning after December 15, 2019 and adoption was allowed prospectively. The adoption of this ASU effective January 1, 2020 did not have any material effect on the Company’s unaudited consolidated financial statements.

In April 2019, FASB issued ASU No. 2019-04, Codification Improvements to Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Financial Instruments: Targeted Transition Relief (Topic 825). The amendments clarify the scope of the credit losses standard and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. With respect to hedge accounting, the amendments address partial-term fair value hedges, fair value hedge basis adjustments, and certain transition requirements, among other things. With respect to recognizing and measuring financial instruments, the amendment in the ASU address the scope of the guidance, the requirement for remeasurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities have to be remeasured at historical exchange rates. This ASU is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption was permitted. The adoption of this ASU did not have any material effect on the Company’s unaudited consolidated financial statements.

In May 2019, FASB issued ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief. This ASU provides entities with the option to irrevocably elect the fair value option, on an instrument-by-instrument

10

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

basis in accordance with Subtopic 825-10, for certain financial instruments that are within the scope of Subtopic 326-20, upon adopting Topic 326. The fair value option election does not apply to held-to-maturity debt securities. The amendments in this ASU provide entities with targeted transition relief that is intended to increase comparability of financial statement information for some entities that otherwise would have measured similar financial instruments using different measurement methodologies. The Company adopted Topic 326 as of January 1, 2020, whereby no such fair value election was made, accordingly, the adoption of this ASU did not have any material effect on the Company’s unaudited consolidated financial statements.

3. Segment and Geographical Information

The Company operates in the BPM industry and is a provider of operations management and analytics services.

Effective January 1, 2020, the Company made certain operational and structural changes to more closely integrate its businesses and to simplify its organizational structure. The Company now manages and reports financial information through its four strategic business units: Insurance, Healthcare, Analytics and Emerging Business, which reflects how management will review financial information and make operating decisions. These business units will develop client-specific solutions, build capabilities, maintain a unified go-to-market approach and be integrally responsible for service delivery, customer satisfaction, growth and profitability. In line with the Company’s strategy of vertical integration and focus on domain expertise, the Company has integrated its Finance & Accounting and Consulting operating segments within each of the Insurance and Healthcare operating segments based on the corresponding industry-specific clients to whom those services are provided. Finance & Accounting and Consulting services to clients outside of the Insurance and Healthcare industries will now be part of the Company’s newly formed business unit and reportable segment Emerging Business. In addition, the Company integrated its former Travel, Transportation and Logistics, Banking and Financial Services, and Utilities operating segments under the Emerging Business unit to further leverage and optimize the operating scale in providing operations management services.

The Company’s new reportable segments effective January 1, 2020 are as follows:

• Insurance,

• Healthcare,

• Emerging Business, and

• Analytics

In conjunction with the new reporting structure, the Company has recasted its segment disclosures for prior periods presented to conform to the way the Company internally manages and monitors segment performance.

The chief operating decision maker (“CODM”) generally reviews financial information such as revenues, cost of revenues and gross profit, disaggregated by the operating segments to allocate an overall budget among the operating segments.

The Company does not allocate and therefore the CODM does not evaluate, certain operating expenses, interest expense or income taxes by segment. Many of the Company’s assets are shared by multiple operating segments. The Company manages these assets on a total Company basis, not by operating segment, and therefore asset information and capital expenditures by operating segment are not presented.

11

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Revenues and cost of revenues for the three months ended March 31, 2020 and 2019, respectively, for each of the reportable segments, are as follows:

	Three months ended March 31, 2020
	Insurance		Healthcare		Emerging Business		Analytics		Total
Revenues, net	$	83,739	$	27,029	$	42,791	$	92,431	$	245,990
Cost of revenues(1)	58,965		19,593		25,482		58,616		162,656
Gross profit(1)	$	24,774	$	7,436	$	17,309	$	33,815	$	83,334
Operating expenses									55,847
Foreign exchange gain, interest expense and other income, net									834
Income tax expense									5,855
Loss from equity-method investment									55
Net income									$	22,411

	Three months ended March 31, 2019
	Insurance		Healthcare		Emerging Business		Analytics		Total
Revenues, net	$	81,286	$	22,248	$	49,078	$	86,961	$	239,573
Cost of revenues(1)	55,243		17,802		27,293		56,902		157,240
Gross profit(1)	$	26,043	$	4,446	$	21,785	$	30,059	$	82,333
Operating expenses									65,472
Foreign exchange gain, interest expense and other income, net									2,101
Income tax expense									4,200
Loss from equity-method investment									67
Net income									$	14,695

⁽¹⁾ Exclusive of depreciation and amortization expense.

Revenues, net by service type, were as follows:

	Three months ended March 31,
	2020		2019
BPM and related services(1)	$	153,559	$	152,612
Analytics services	92,431		86,961
Revenues, net	$	245,990	$	239,573

⁽¹⁾ BPM and related services include revenues of the Company's Insurance, Healthcare and Emerging Business operating segments. Refer to the reportable segment disclosure above.

12

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

The Company attributes the revenues to regions based upon the location of its customers.

	Three months ended March 31,
	2020		2019
Revenues, net
United States	$	207,880	$	196,104
Non-United States
United Kingdom	23,278		29,101
Rest of World	14,832		14,368
Total Non-United States	38,110		43,469
Revenues, net	$	245,990	$	239,573

Long-lived assets by geographic area, which consist of property and equipment, net and operating lease right-of-use assets were as follows:

	As of
	March 31, 2020		December 31, 2019
Long-lived assets
India	$	99,385	$	78,244
United States	52,772		52,375
Philippines	27,350		26,006
Rest of World	10,946		8,913
Long-lived assets	$	190,453	$	165,538

4. Revenues, net

Refer to Note 3 to the unaudited consolidated financial statements for revenues disaggregated by reportable segments and geography.

Contract balances

The following table provides information about accounts receivable, contract assets and contract liabilities from contracts with customers:

	As of
	March 31, 2020		December 31, 2019
Accounts receivable, net	$	187,137	$	171,864
Contract assets	$	5,518	$	5,391
Contract liabilities
Deferred revenue (consideration received in advance)	$	14,136	$	11,259
Consideration received for process transition activities	$	2,877	$	3,036

Accounts receivable includes $74,386 and $73,920 as of March 31, 2020 and December 31, 2019, respectively, representing unbilled receivables. The Company has accrued the unbilled receivables for work performed in accordance with the terms of contracts with customers and considers no significant performance risk associated with its unbilled receivables.

13

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Contract assets represent upfront payments such as deal signing discounts or deal signing bonuses made to customers. These costs are amortized over the expected period of the benefit and are recorded as an adjustment to transaction price and reduced from revenues. The Company’s assessment did not indicate any impairment losses on its contract assets for the periods presented.

Contract liabilities represent that portion of deferred revenue for which payments have been received in advance from customers. This may also include revenues deferred for certain contracts where services have been rendered but other conditions for revenue recognition have not been met for example, where a legally enforceable contract is not executed. The Company also defers revenues attributable to certain process transition activities for which costs have been capitalized by the Company as contract fulfillment costs. Consideration received from customers, if any, relating to such transition activities are classified under contract liabilities and are included within “Deferred revenues” and “other non-current liabilities” in the unaudited consolidated balance sheets. The revenues are recognized as (or when) the performance obligation is fulfilled under the contract with customer.

Revenue recognized during the three months ended March 31, 2020 and 2019 that was included in the contract liabilities balance at the beginning of the period was $5,968 and $2,777, respectively.

Contract acquisition and fulfillment costs

	Contract Acquisition Costs									Contract Fulfillment Costs
	Quarter Ended						Year Ended			Quarter Ended						Year Ended
	March 31, 2020			March 31, 2019			December 31, 2019			March 31, 2020			March 31, 2019			December 31, 2019
							(Audited)									(Audited)
Opening Balance	$	1,307		$	713		$	713		$	7,255		$	4,051		$	4,051
Addition	—			—			1,222			284			726			4,652
Amortization	(92		)	(200		)	(628		)	(623		)	(305		)	(1,448		)
Closing Balance	$	1,215		$	513		$	1,307		$	6,916		$	4,472		$	7,255

There was no impairment for contract acquisition and contract fulfillment costs as of March 31, 2020 and December 31, 2019. The capitalized costs are amortized on a straight line basis over the life of the contract.

Allowance for expected credit losses

On January 1, 2020, the Company adopted ASC Topic 326, Financial Instruments-Credit Losses. Accounts receivable and contract assets are in the scope for which assessment is made. In compliance with the guidance, the allowance for credit losses recognized based on historical loss experience is adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to the industries of the Company’s customers and the countries where it operates. In calculating expected credit loss, the Company also considered past payment trends, credit rating and other related credit information for its significant customers to estimate the probability of default in the future and estimates relating to the possible effects resulting from global Coronavirus Disease 2019 pandemic (“COVID-19”).

The Company applied the expected credit loss model to assess any required allowance; and used a provision matrix devised based on historical trends of losses across aging categories to calculate the expected credit loss allowance for trade receivables and unbilled receivables. This matrix takes into account available external and internal credit risk information such as ratings from international credit rating agencies and the Company's historical collection experience from customers.

14

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

As of January 1, 2020 the Company’s provision for doubtful receivables was $1,163, which was based on previous U.S. GAAP standards. There was no material impact on provision when calculated by applying Topic ASC 326 guidelines.

	As of
	March 31, 2020			January 1, 2020
Accounts receivable, including unbilled receivables	$	188,483		$	173,027
Less: Allowance for lifetime expected credit loss	(1,346		)	(1,163		)
Accounts receivable, net	$	187,137		$	171,864

The movement in allowance for lifetime expected credit loss on customer balances for the quarters ended March 31, 2020 and December 31, 2019 was as follows:

	As of
	March 31, 2020			December 31, 2019
Balance at the beginning of the period	$	1,163		$	1,113
Additions during the period, net	195			184
Charged against allowance	—			(139		)
Translation adjustment, if any	(12		)	5
Balance at the end of the period	$	1,346		$	1,163

5. Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding, adjusted for outstanding shares that are subject to repurchase during each period. Diluted earnings per share is computed using the weighted average number of common shares plus the potentially dilutive effect of common stock equivalents (outstanding stock options, restricted stock and restricted stock units) issued and outstanding at the reporting date, using the treasury stock method. Common stock equivalents that are anti-dilutive are excluded from the computation of weighted average shares outstanding. The Company includes performance stock unit awards in dilutive potential common shares when they become contingently issuable and have a dilutive impact per authoritative guidance and excludes such awards when they are not contingently issuable.

The following table sets forth the computation of basic and diluted earnings per share:

15

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

	Three months ended March 31,
	2020		2019
Numerators:
Net income	$	22,411	$	14,695
Denominators:
Basic weighted average common shares outstanding	34,401,565		34,374,815
Dilutive effect of share-based awards	319,038		458,620
Diluted weighted average common shares outstanding	34,720,603		34,833,435
Earnings per share attributable to ExlService Holdings Inc. stockholders:
Basic	$	0.65	$	0.43
Diluted	$	0.65	$	0.42
Weighted average potentially dilutive shares considered anti-dilutive and not included in computing diluted earnings per share	170,313		425,432

6. Cash, Cash Equivalents and Restricted Cash

For the purpose of unaudited statements of cash flows, cash, cash equivalents and restricted cash comprise of the following:

	As of
	March 31, 2020		March 31, 2019
Cash and cash equivalents	$	224,874	$	86,688
Restricted cash (current)	6,369		5,364
Restricted cash (non-current)	2,291		2,575
Cash, cash equivalents and restricted cash	$	233,534	$	94,627

7. Other Income, net

Other income, net consists of the following:

	Three months ended March 31,
	2020			2019
Gain on sale and mark-to-market of mutual funds, net	$	2,056		$	3,526
Interest income	532			796
Others, net	(59		)	101
Other income, net	$	2,529		$	4,423

16

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

8. Property and Equipment, net

Property and equipment, net consists of the following:

	Estimated useful lives	As of
	(Years)	March 31, 2020			December 31, 2019
Owned Assets:
Network equipment and computers	3-5	$	96,669		$	98,309
Software	3-5	88,813			79,746
Leasehold improvements	3-8	43,896			44,982
Office furniture and equipment	3-8	21,038			22,046
Motor vehicles	2-5	575			601
Buildings	30	1,051			1,114
Land	—	688			729
Capital work in progress	—	14,381			10,309
		267,111			257,836
Less: Accumulated depreciation and amortization		(177,192		)	(179,331		)
		$	89,919		$	78,505
Right-of-use assets under finance leases:
Leasehold improvements		$	640		$	738
Office furniture and equipment		238			308
Motor vehicles		689			711
		1,567			1,757
Less: Accumulated depreciation and amortization		(973		)	(1,120		)
		$	594		$	637
Property and equipment, net		$	90,513		$	79,142

Capital work in progress represents advances paid towards acquisition of property and equipment and costs incurred on internally developed software not yet ready to be placed in service.

During the three months ended March 31, 2020, there were no changes in estimated useful lives of property and equipment.

The depreciation and amortization expense, excluding amortization of acquisition-related intangibles, recognized in the unaudited consolidated statements of income was as follows:

	Three months ended March 31,
	2020		2019
Depreciation and amortization expense	$	8,297	$	8,139

The depreciation and amortization set forth above includes the effect of foreign exchange gain upon settlement of cash flow hedges, amounting to $22 and $57 for the three months ended March 31, 2020 and 2019, respectively. Refer to Note 16 to the unaudited consolidated financial statements for further details.

17

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Internally developed software costs, included under Software, was as follows:

	As of
	March 31, 2020			December 31, 2019
Cost	$	16,147		$	15,784
Less : Accumulated amortization	(5,812		)	(4,989		)
Internally developed software, net	$	10,335		$	10,795

The amortization expense on internally developed software recognized in the unaudited consolidated statements of income was as follows:

	Three months ended March 31
	2020		2019
Amortization expense	$	831	$	647

During the three months ended March 31, 2019, the Company performed an impairment test of its long-lived assets related to its Health Integrated business. Based on the results, the long-lived assets carrying value exceeded its fair value. The primary factor contributing to a reduction in the fair value is the wind down of the Health Integrated business, due to reduction to the Company's estimated future cash flows. As a result of this analysis, the Company recognized impairment charges of $1,227 during the three months ended March 31, 2019, to write down the carrying value of internally developed software to its fair value. This impairment charge was recorded in the unaudited consolidated statements of income under "Impairment and restructuring charges".

As of March 31, 2020, the Company believes no impairment exists because the long-lived asset's future undiscounted net cash flows expected to be generated exceeds its carrying value; however, there can be no assurances that long-lived assets will not be impaired in future periods. Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which undiscounted cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount, and the asset’s residual value, if any. It is reasonably possible that the judgments and estimates described above could change in future periods.

9. Goodwill and Intangible Assets

Goodwill

The Company transitioned to new segment reporting structure effective January 1, 2020, which resulted in certain changes to its operating segments and reporting units. The Company reallocated goodwill to its reporting units using a relative fair value approach. In addition, the Company completed an assessment of any potential goodwill impairment for all its reporting units immediately prior to the reallocation and determined that no impairment existed.

The following table sets forth details of changes in goodwill by reportable segment of the Company:

18

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

	Insurance			Healthcare			Emerging Business			TT&L			F&A			All Other			Analytics			Total
Balance at January 1, 2019	$	38,203		$	19,276		$	—		$	12,697		$	47,193		$	5,326		$	227,289		$	349,984
Currency translation adjustments	73			—			—			(240		)	(288		)	—			—			(455		)
Balance at December 31, 2019	$	38,276		$	19,276		$	—		$	12,457		$	46,905		$	5,326		$	227,289		$	349,529
Goodwill reallocation(1)	12,192			2,693			49,803			(12,457		)	(46,905		)	(5,326		)	—			—
Currency translation adjustments	(293		)	(39		)	(1,119		)	—			—			—			(2		)	(1,453		)
Balance at March 31, 2020	$	50,175		$	21,930		$	48,684		$	—		$	—		$	—		$	227,287		$	348,076

⁽¹⁾ Represents the reallocation of goodwill as a result of the Company reorganizing its operating segments as described in Note 3 to the unaudited consolidated financial statements.

As of March 31, 2020, due to the deteriorating macroeconomic conditions arising from the COVID-19 pandemic, the Company performed a goodwill impairment test for its reporting units. The Company considered the effects of the COVID-19 pandemic on its significant inputs used in determining the fair value of the Company’s reporting units. Key assumptions used in determining the fair value of the Company’s reporting units were a long-term debt-free net cash flow growth rate in the terminal year of 3.0% and discount rates ranging from 9.0% to 10.0%. Based on the results, the fair value of each of the Company’s reporting units exceeded their carrying value and the Company’s goodwill was not impaired. However, for the Healthcare Analytics reporting unit within the Analytics reportable segment, the fair value was not substantially in excess of its carrying value. The Healthcare Analytics reporting unit was formed as a result of the Company’s transition to a new organization structure effective January 1, 2020 and the integration of the SCIOinspire Holdings Inc. acquisition in July 2018 with other analytics services offered to clients in the Healthcare industry. As of March 31, 2020, the goodwill associated with the Healthcare Analytics reporting unit was $181,217, representing approximately 52.0% of the Company’s total goodwill, and the percentage by which the fair value of the Healthcare Analytics reporting unit exceeded the carrying value as of the date of the most recent annual impairment test was approximately 15.0%. While the goodwill of this reporting unit is not currently impaired, there could be an impairment in the future as a result of changes in certain assumptions, including those related to the pandemic. For example, the fair value could be adversely affected and may result in an impairment of goodwill if this reporting unit is not able to expand its existing customer relationships, win new clients, improve profitability, the estimated cash flows are discounted at a higher risk-adjusted rate, or the market multiples decreases. The Company also believes that it is possible that its actual revenue growth rates could be higher than the long-term revenue growth rates used in the impairment test due to a number of factors, including (i) increased demand for the Company’s reimbursement and care optimization services to help clients identify overpayments and enhance their claims payment accuracy, (ii) the Company's ability to improve business outcomes for its healthcare customers through data-driven insights thereby generating more demand for its analytics services, and (iii) the Company’s ability to offer integrated solutions by leveraging technology platforms, digital, customizable and configurable analytics for its clients. The Company believes that its discount rate utilized is appropriate to use for its future cash flow assumptions considering current market conditions. However, keeping all other variables constant, a further 50 basis point increase in discount rate will decrease the percentage by which the fair value exceeds the carrying value of the Healthcare Analytics reporting unit to approximately 10.0%. The Company continues to monitor the cash flows of the Healthcare Analytics reporting unit for changes in the business environment that could impact recoverability.

The recoverability of goodwill is dependent upon the continued growth of cash flows from our business activities. There can be no assurances that goodwill will not be impaired in future periods. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. These estimates and judgements may not be within the control of the Company and accordingly it is reasonably possible that the judgments and estimates described above could change in future periods.

19

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Intangible Assets

Information regarding the Company’s intangible assets is set forth below:

	As of March 31, 2020
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	97,483	$	(45,819	)	$	51,664
Developed technology	26,878		(11,889		)	14,989
Trade names and trademarks	5,100		(2,919		)	2,181
	$	129,461	$	(60,627	)	$	68,834
Indefinite-lived intangible assets:
Trade names and trademarks	900		—			900
Total intangible assets	$	130,361	$	(60,627	)	$	69,734

	As of December 31, 2019
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	97,602	$	(43,330	)	$	54,272
Developed technology	26,976		(10,687		)	16,289
Trade names and trademarks	5,100		(2,579		)	2,521
	$	129,678	$	(56,596	)	$	73,082
Indefinite-lived intangible assets:
Trade names and trademarks	900		—			900
Total intangible assets	$	130,578	$	(56,596	)	$	73,982

The amortization expense for the period is as follows:

	Three months ended March 31,
	2020		2019
Amortization expense	$	4,153	$	5,528

The remaining weighted average life of intangible assets is as follows:

	(in years)
Customer relationships	7.54
Developed technology	3.41
Trade names and trademarks (Finite lived)	2.22

20

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Estimated future amortization expense related to intangible assets as of March 31, 2020 is as follows:
2020 (April 1 - December 31)	$	10,262
2021	12,732
2022	11,326
2023	9,037
2024	6,695
2025 and thereafter	18,782
Total	$	68,834

10. Other Current Assets

Other current assets consist of the following:

	As of
	March 31, 2020		December 31, 2019
Derivative instruments	$	3,671	$	4,076
Advances to suppliers	2,477		1,581
Receivables from statutory authorities	12,334		12,608
Contract assets	1,650		1,414
Deferred contract fulfillment costs	2,143		1,673
Others	3,898		3,242
Other current assets	$	26,173	$	24,594

11. Other Assets

Other assets consist of the following:

	As of
	March 31, 2020		December 31, 2019
Lease deposits	$	9,720	$	9,983
Derivative instruments	1,075		3,433
Deposits with statutory authorities	6,108		6,252
Term deposits	2,098		1,983
Contract assets	3,868		3,977
Deferred contract fulfillment costs	4,773		5,582
Others	4,403		4,806
Other assets	$	32,045	$	36,016

21

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

12. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

	As of
	March 31, 2020		December 31, 2019
Accrued expenses	$	51,449	$	53,133
Payable to statutory authorities	15,718		6,506
Derivative instruments	6,904		1,783
Client liabilities	6,565		6,378
Interest payable	2,843		1,492
Other current liabilities	1,016		1,731
	$	84,495	$	71,023

13. Other Non-Current Liabilities

Other non-current liabilities consist of the following:

	As of
	March 31, 2020		December 31, 2019
Derivative instruments	$	7,766	$	1,250
Unrecognized tax benefits	1,047		1,047
Retirement benefits	6,519		6,517
Deferred transition revenue	1,797		1,911
Others	4,392		987
Other non-current liabilities	$	21,521	$	11,712

14. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss (“AOCI”), consists of actuarial gain/(loss) on retirement benefits and changes in the cumulative foreign currency translation adjustments. In addition, the Company enters into foreign currency exchange contracts, which are designated as cash flow hedges in accordance with ASC 815. Changes in the fair values of these foreign currency exchange contracts are recognized in AOCI on the Company's unaudited consolidated balance sheets until the settlement of those contracts. The balances as of March 31, 2020 and December 31, 2019 are as follows:

	As of
	March 31, 2020			December 31, 2019
Cumulative foreign currency translation loss	$	(104,928	)	$	(87,591	)
Unrealized (loss)/gain on cash flow hedges	(11,171		)	4,604
Retirement benefits	(1,679		)	(1,780		)
Income tax benefit/(expense) relating to above (1)	4,674			(125		)
Accumulated other comprehensive loss	$	(113,104	)	$	(84,892	)

(1) These are income tax benefits/(expenses) recognized on cash flow hedges and retirement benefits. Refer to Note 21 to the unaudited consolidated financial statements.

22

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

15. Fair Value Measurements

Assets and Liabilities Measured at Fair Value

The following table sets forth the Company’s assets and liabilities that were accounted for at fair value as of March 31, 2020 and December 31, 2019.

As of March 31, 2020	Level 1		Level 2		Level 3		Total
Assets
Mutual funds*	$	114,116	$	—	$	—	$	114,116
Derivative financial instruments	—		4,746		—		4,746
Total	$	114,116	$	4,746	$	—	$	118,862
Liabilities
Derivative financial instruments	$	—	$	14,670	$	—	$	14,670
Total	$	—	$	14,670	$	—	$	14,670
As of December 31, 2019	Level 1		Level 2		Level 3		Total
Assets
Mutual funds*	$	166,330	$	—	$	—	$	166,330
Derivative financial instruments	—		7,509		—		7,509
Total	$	166,330	$	7,509	$	—	$	173,839
Liabilities
Derivative financial instruments	$	—	$	3,033	$	—	$	3,033
Total	$	—	$	3,033	$	—	$	3,033

* Represents those short-term investments which are carried at the fair value option under ASC 825 "Financial Instruments” as of March 31, 2020 and December 31, 2019.

Derivative Financial Instruments: The Company’s derivative financial instruments consist of foreign currency forward exchange contracts. Fair values for derivative financial instruments are based on independent sources including highly rated financial institutions and are classified as Level 2. Refer to Note 16 to the unaudited consolidated financial statements for further details.

Financial instruments not carried at fair value:

The Company’s other financial instruments not carried at fair value consist primarily of cash and cash equivalents, short-term investments (except investment in mutual funds, as disclosed above), restricted cash, and accrued expenses for which fair values approximate their carrying amounts due to their short-term nature. The carrying value of the Company’s outstanding revolving credit facility approximates its fair value because the Company’s interest rate yield is near current market rates for comparable debt instruments.

Convertible Senior Notes:

The total estimated fair value of the convertible senior notes as of March 31, 2020 and December 31, 2019 was $120,033 and $149,934, respectively. The fair value was determined based on the market yields for similar Notes as of the March 31, 2020 and December 31, 2019, respectively. The Company considers the fair value of the Notes to be a Level 2 measurement due to the limited inputs available for its fair valuation.

23

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

16. Derivatives and Hedge Accounting

The Company uses derivative instruments and hedging transactions to mitigate exposure to foreign currency fluctuation risks associated with forecasted transactions denominated in certain foreign currencies so as to minimize earnings and cash flow volatility associated with changes in foreign currency exchange rates. The Company’s derivative financial instruments are largely forward foreign exchange contracts that are designated as effective hedges and that qualify as cash flow hedges under ASC 815. The Company had outstanding cash flow hedges totaling $449,495 (including $2,550 of range forward contracts) as of March 31, 2020 and $410,390 (including $4,300 of range forward contracts) as of December 31, 2019.

Changes in the fair value of these cash flow hedges are recorded as a component of accumulated other comprehensive income/(loss), net of tax, until the hedged transactions occurs. The resultant foreign exchange gain/(loss) upon settlement of derivative financial instruments are recorded along with the underlying hedged item in the same line of unaudited consolidated statements of income as either a part of “Cost of revenues”, “General and administrative expenses”, “Selling and marketing expenses”, “Depreciation and amortization expense”, as applicable.

The Company evaluates hedge effectiveness at the time a contract is entered into as well as on an ongoing basis. For hedging positions that are discontinued because the forecasted transaction is not expected to occur by the end of the originally specified period, any related amounts recorded in equity are reclassified to earnings.

The Company estimates that approximately $4,480 of net derivative losses, excluding tax effects, included in AOCI, representing changes in the value of cash flow hedges, could be reclassified into earnings within the next twelve months based on exchange rates prevailing as of March 31, 2020. At March 31, 2020, the maximum outstanding term of the cash flow hedges was 45 months.

The Company enters into foreign currency forward contracts to economically hedge its intercompany balances and other monetary assets and liabilities denominated in currencies other than functional currencies, against the risk of foreign currency fluctuations associated with remeasurement of such assets and liabilities to functional currency. These derivatives do not qualify as fair value hedges under ASC 815. Changes in the fair value of these derivatives are recognized in the unaudited consolidated statements of income and are included in foreign exchange gain/(loss). The Company’s primary exchange rate exposure is with the Indian Rupee, the U.K. pound sterling and the Philippine peso. The Company also has exposure to Colombian pesos, Czech Koruna, the Euro, South African ZAR and other local currencies in which it operates. Outstanding foreign currency forward contracts amounted to $137,700, GBP 9,590 and EUR 1,446 as of March 31, 2020 and $124,045, GBP 10,843 and EUR 1,289 as of December 31, 2019.

24

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

The following tables set forth the fair value of the foreign currency exchange contracts and their location on the unaudited consolidated financial statements:

Derivatives designated as hedging instruments:	As of
Foreign currency exchange contracts	March 31, 2020		December 31,2019
Other current assets	$	2,403	$	3,945
Other assets	$	1,075	$	3,433
Accrued expenses and other current liabilities	$	6,883	$	1,524
Other non-current liabilities	$	7,766	$	1,250
Derivatives not designated as hedging instruments:	As of
Foreign currency exchange contracts	March 31, 2020		December 31,2019
Other current assets	$	1,268	$	131
Accrued expenses and other current liabilities	$	21	$	259

The following tables set forth the effect of foreign currency exchange contracts on the unaudited consolidated statements of income and accumulated other comprehensive loss for the three months ended March 31, 2020 and 2019:

	Three months ended March 31,
Forward Exchange Contracts:	2020			2019
Unrealized (loss)/gain recognized in AOCI
Derivatives in cash flow hedging relationships	$	(14,846	)	$	5,937
(Loss)/Gain recognized in consolidated statements of income
Derivatives not designated as hedging instruments	$	(4,214	)	$	1,396

25

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Location and amount of gain/(loss) recognized in unaudited consolidated statements of income for cash flow hedging relationships and derivatives not designated as hedging instruments
	Three months ended March 31,
	2020					2019
	As per unaudited consolidated statements of income		Gain/(loss) on foreign currency exchange contracts			As per unaudited consolidated statements of income		Gain on foreign currency exchange contracts
Cash flow hedging relationships
Location in unaudited consolidated statements of income where gain was reclassed from AOCI
Cost of revenues	$	162,656	$	812		$	157,240	$	531
General and administrative expenses	$	28,941	73			$	32,531	80
Selling & marketing expenses	$	14,456	4			$	18,047	7
Depreciation & amortization expense	$	12,450	40			$	13,667	53
			$	929				$	671
Derivatives not designated as hedging instruments
Location in unaudited consolidated statements of income where gain/(loss) was recognized
Foreign exchange gain/(loss), net	$	1,377	$	(4,214	)	$	1,260	$	1,396
	$	1,377	$	(4,214	)	$	1,260	$	1,396

17. Borrowings

Revolver Credit Agreement

On November 21, 2017, the Company and each of the Company’s wholly owned material domestic subsidiaries entered into a credit agreement with certain lenders and Citibank, N.A. as Administrative Agent (the “Credit Agreement”). The Credit Agreement provides for a $200,000 revolving credit facility (the “Credit Facility”) with an option to increase the commitments by up to $100,000, subject to certain approvals and conditions as set forth in the Credit Agreement. The Credit Agreement also includes a letter of credit sub-facility. The Credit Facility has a maturity date of November 21, 2022 and is voluntarily pre-payable from time to time without premium or penalty. Borrowings under the Credit Facility may be used for working capital and general corporate purposes, including permitted acquisitions. On July 2, 2018, the Company exercised its option under the Credit Agreement to increase the commitments by $100,000 thereby utilizing the entire revolver under the Credit Facility of $300,000. The incremental commitments were made pursuant to (and constitute part of) the existing commitments and are subject to the terms and conditions applicable to the existing commitments as set forth in the Credit Agreement.

Depending on the type of borrowing, borrowings under the Credit Agreement bear interest at a rate equal to the specified prime rate (alternate base rate) or adjusted LIBOR rate, plus, in each case, an applicable margin. The applicable margin is tied to the Company’s total net leverage ratio and ranges from 0% to 0.75% per annum with respect to loans pegged to the specified prime rate, and 1.00% to 1.75% per annum on loans pegged to the adjusted LIBOR rate. The revolving credit commitments under the Credit Agreement are subject to a commitment fee, which is also tied to the Company’s total net leverage ratio, and ranges from

26

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

0.15% to 0.30% per annum on the average daily amount by which the aggregate revolving commitments exceed the sum of outstanding revolving loans and letter of credit obligations. The Credit Facility carried an effective interest rate of 3.0% per annum and 3.9% per annum during the three months ended March 31, 2020, and 2019, respectively.

Obligations under the Credit Agreement are guaranteed by the Company’s material domestic subsidiaries and are secured by all or substantially all of the assets of the Company and its material domestic subsidiaries. The Credit Agreement contains customary affirmative and negative covenants, including, but not limited to, restrictions on the ability to incur indebtedness, create liens, make certain investments, make certain dividends and related distributions, enter into, or undertake, certain liquidations, mergers, consolidations or acquisitions and dispose of assets or subsidiaries. In addition, the Credit Agreement contains a covenant to not permit the interest coverage ratio (the ratio of EBITDA to cash interest expense) or the total net leverage ratio (total funded indebtedness, less unrestricted domestic cash and cash equivalents not to exceed $50,000 to EBITDA) for the four consecutive quarter period ending on the last day of each fiscal quarter, to be less than 3.5 to 1.0 or more than 3.0 to 1.0, respectively. As of March 31, 2020, the Company was in compliance with all financial and non-financial covenants listed under the Credit Agreement.

The Company entered into a second amendment (the “Amendment”) to its Credit Agreement, as amended, among the Company, as borrower, with certain lenders, and Citibank, N.A. as Administrative Agent to, among other things, permit the issuance by the Company of the convertible notes, and settlement upon maturity or conversion thereof, in accordance with the Investment Agreement, the indenture dated as of October 4, 2018 and the other documents entered into in connection therewith.

As of March 31, 2020, the Company had outstanding indebtedness under the Credit Facility of $199,000, of which $100,000 is expected to be repaid within the next twelve months and is included under “current portion of long-term borrowings” and of which $99,000 is included under “long-term borrowings, less current portion” in the unaudited consolidated balance sheets. As of December 31, 2019, the Company had an outstanding indebtedness under the Credit Facility of $99,000, of which $40,000 was included under “current portion of long-term borrowings” and the balance of $59,000 was included under “long-term borrowings, less current portion” in the consolidated balance sheets.

The Company incurred certain debt issuance costs, which are deferred and amortized as an adjustment to interest expense over the term of the credit facility. The unamortized debt issuance costs as of March 31, 2020 and December 31, 2019 was $684 and $748, respectively, and is included under "other current assets" and “other assets” in the consolidated balance sheets.

Convertible Senior Notes

On October 1, 2018, the Company entered into an investment agreement (the “Investment Agreement”) with Orogen Echo LLC (the “Purchaser”), an affiliate of The Orogen Group LLC, relating to the issuance to the Purchaser of $150,000 in an aggregate principal amount of 3.50% Convertible Senior Notes due October 1, 2024 (the “Notes”). The transactions contemplated by the Investment Agreement, including the issuance of the Notes, closed on October 4, 2018. The Notes bear interest at a rate of 3.50% per annum, payable semi-annually in arrears in cash on April 1 and October 1 of each year. During the three months ended March 31, 2020 and 2019, the Company recognized interest expense of $1,313 each on the Notes. The Notes are convertible at an initial conversion rate of 13.3333 shares of the common stock per one thousand dollar principal amount of the Notes (which represents an initial conversion price of approximately $75 per share). With certain exceptions, upon a fundamental change, as defined in the Indenture, the holders of the Notes may require that the Company to repurchase all or part of the principal amount of the Notes at a purchase price equal to the principal amount plus accrued and unpaid interest. The Company may redeem the principal amount of the Notes, at its option, in whole but not in part, at a purchase price equal to the principal amount plus accrued and unpaid interest on or after October 1, 2021, if the closing sale price of the common stock exceeds 150% of the then-current conversion price for 20 or more trading days in the 30 consecutive trading day period preceding the Company’s exercise of this redemption right (including the trading day immediately prior to the date of the notice of redemption). The Company may elect to settle conversions of the Notes by paying or delivering, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. The Company used the proceeds from the issuance of the Notes to repay $150,000 of its outstanding borrowings under the Credit Facility.

The net proceeds from the issuance of the Notes were approximately $149,000, after deducting debt issuance costs of $1,000 and offering expenses of approximately $442 paid by the Company. These transaction and debt issuance costs were allocated between the liability and equity components based on their relative values. The transaction costs and debt issuance costs allocated to the liability and equity components were $1,279 and $163, respectively. The debt issuance costs allocated to the liability component are deferred and amortized as an adjustment to interest expense over the term of the Notes. The unamortized debt

27

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

issuance costs are presented as a direct reduction from the Notes in the consolidated balance sheets. The unamortized debt issuance costs as of March 31, 2020 and December 31, 2019 were $964 and $1,018, respectively.

The Company accounted for the liability and equity components of the Notes separately to reflect its non-convertible debt borrowing rate. The estimated fair value of the liability component at issuance of $133,077 was determined using a discounted cash flow technique, which considered debt issuances with similar features of the Company’s debt, excluding the conversion feature. The resulting effective interest rate for the Notes was 5.75% per annum. The excess of the gross proceeds received over the estimated fair value of the liability component totaling $16,923 was allocated to the conversion feature (equity component, recorded as additional paid-in capital) with a corresponding offset recognized as a discount to reduce the net carrying value of the Notes. The discount is being amortized to interest expense over a six-year period ending October 1, 2024 (the expected life of the liability component) using the effective interest method. During the three months ended March 31, 2020 and March 31, 2019, the Company amortized $635 and $600, of the discount to interest expense, on the Notes. The unamortized debt discount on the Notes as of March 31, 2020 and December 31, 2019 was $13,216 and $13,851, respectively.

Borrowings also includes structured payables which are in the nature of debt, amounting to $666 and $867 as of March 31, 2020 and December 31, 2019, respectively, included under "current portion of long-term borrowings".

Future principal payments/maturities for all of the Company's borrowings as of March 31, 2020 were as follows:

	Notes		Revolver Credit		Structured Payables		Total
2020 (April - December)	$	—	$	100,000	$	666	$	100,666
2021	—		—		—		—
2022	—		99,000		—		99,000
2023	—		—		—		—
2024	150,000		—		—		150,000
Total	$	150,000	$	199,000	$	666	$	349,666

Letters of Credit

In the ordinary course of business, the Company provides standby letters of credit to third parties primarily for facility leases. As of March 31, 2020 and December 31, 2019, the Company had outstanding letters of credit of $461 each that were not recognized in the consolidated balance sheets.

18. Capital Structure

Common Stock

The Company has one class of common stock outstanding.

During the three months ended March 31, 2020 and 2019, the Company purchased 26,601 and 22,666 shares of common stock, respectively, from employees in connection with withholding tax payments related to the vesting of restricted stock for a total consideration of $2,012 and $1,408, respectively. The weighted average purchase price per share of $75.63 and $62.11, respectively, was the closing price of the Company's share of common stock on the Nasdaq Global Select Market on the trading day prior to the vesting date of the shares of restricted stock.

On February 28, 2017, the Company’s Board of Directors authorized an additional common stock repurchase program (the “2017 Repurchase Program”), under which shares may be purchased by the Company from time to time from the open market and through private transactions during each of the fiscal years 2017 through 2019 up to an aggregate additional amount of $100,000. The approval increased the 2017 authorization from $20,000 to $40,000 and authorizes stock repurchases of up to $40,000 in each of 2018 and 2019.

On December 16, 2019, the Company’s Board of Directors authorized a $200,000 common stock repurchase program beginning January 1, 2020 through December 31, 2022 (the “2019 Repurchase Program”). The shares may be purchased by the

28

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Company from time to time from the open market and through private transactions, or otherwise, as determined by the Company’s management as market conditions warrant.

During the three months ended March 31, 2020, the Company purchased 175,765 shares of its common stock, for an aggregate purchase price of $11,983, including commissions, representing an average purchase price per share of $68.18, under the 2019 Repurchase Program.

During the quarter ended March 31, 2020, to enhance the Company’s liquidity position in response to COVID-19, the Company elected to temporarily suspend share repurchases under the 2019 Repurchase Program. The 2019 Repurchase Program remains authorized by the Board of Directors and the Company has the discretion to resume share repurchases in the future at any time, depending upon market conditions, the Company’s capital needs and other factors.

During the three months ended March 31, 2019, the Company purchased 239,865 shares of its common stock, for an aggregate purchase price of $14,000, including commissions, representing an average purchase price per share of $58.37 under the 2017 Repurchase Program.

Repurchased shares have been recorded as treasury shares and will be held until the Company’s Board of Directors designates that these shares be retired or used for other purposes.

19. Employee Benefit Plans

The Company’s Gratuity Plans in India ("Gratuity Plan") provide for lump sum payment to vested employees on retirement or upon termination of employment in an amount based on the respective employee’s salary and years of employment with the Company. Liabilities with regard to the Gratuity Plans are determined by actuarial valuation using the projected unit credit method. Current service costs for the Gratuity Plan are accrued in the year to which they relate. Actuarial gains or losses or prior service costs, if any, resulting from amendments to the plans are recognized and amortized over the remaining period of service of the employees.

In addition, the Company’s subsidiary operating in the Philippines conforms to the minimum regulatory benefit, which provide for lump sum payment to vested employees on retirement from employment in an amount based on the respective employee’s salary and years of employment with the Company (the "Philippines Plan"). The benefit costs of the Philippines Plan for the year are calculated on an actuarial basis.

29

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Components of net periodic benefit cost:

	Three months ended March 31,
	2020			2019
Service cost	$	678		$	487
Interest cost	243			219
Expected return on plan assets	(161		)	(142		)
Amortization of actuarial loss/(gain)	101			(39		)
Net gratuity cost	$	861		$	525

The Gratuity Plan in India is partially funded and the Philippines plan is unfunded. The Company makes annual contributions to the employees' gratuity fund established with Life Insurance Corporation of India and HDFC Standard Life Insurance Company. Fund managers manage these funds and calculate the annual contribution required to be made by the Company and manage the Gratuity Plans, including any required payouts. These funds are managed on a cash accumulation basis and interest is declared retrospectively on March 31 of each year. The Company earned a return of approximately 7.5% per annum on these Gratuity Plans for the three months ended March 31, 2020.

Change in Plan Assets
Plan assets at January 1, 2020	$	8,784
Actual return	147
Employer contribution	—
Benefits paid*	(286		)
Effect of exchange rate changes	(494		)
Plan assets at March 31, 2020	$	8,151

* Benefits payments were substantially made through the plan assets during the three months ended March 31, 2020.

The Company maintains several 401(k) plans (the “401(k) Plans) under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), covering all eligible employees, as defined in the Code as a defined contribution plan. The Company may make discretionary contributions of up to a maximum of 4% of employee compensation within certain limits. The Company accrued for contributions to the 401(k) Plans of $226 and $1,213 for the three months ended March 31, 2020 and 2019, respectively.

During the three months ended March 31, 2020 and 2019, the Company contributed $2,917 and $2,004, respectively, for various defined contribution plans on behalf of its employees in India, the Philippines, Romania, the Czech Republic, South Africa, Colombia, and Singapore.

20. Leases

The Company conducts its operations using facilities leased under operating lease agreements that expire at various dates. The Company finances its use of certain motor vehicles and other equipment under various lease arrangements provided by financial institutions.

The Company had performed an evaluation of its contracts with suppliers in accordance with Topic 842 and had determined that, except for leases for office facilities, motor vehicles and other equipment as described above, none of the Company’s contracts contain a lease.

In assessment of the lease term, the Company considers the extension option as part of its lease term for those lease arrangements where the Company is reasonably certain of availing the extension option.

The lease agreements do not contain any covenant to impose any restrictions except for market-standard practice for similar lease arrangements.

30

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Supplemental balance sheet information

	As of			As of
	March 31, 2020			December 31, 2019
Operating Lease
Operating lease right-of-use assets	$	99,940		$	86,396
Operating lease liabilities - Current	$	18,236		$	24,148
Operating lease liabilities - Non-current	93,707			74,709
Total operating lease liabilities	$	111,943		$	98,857
Finance Lease
Property and equipment, gross	$	1,567		$	1,757
Accumulated depreciation	(973		)	(1,120		)
Property and equipment, net	$	594		$	637
Finance lease liabilities - Current	$	252		$	253
Finance lease liabilities - Non-current	380			430
Total finance lease liabilities	$	632		$	683

The components of lease cost, which are included in the Company's unaudited consolidated statements of income, are as follows:

Lease cost	Three months ended March 31, 2020		Three months ended March 31, 2019
Finance lease:
Amortization of right-of-use assets	$	62	$	95
Interest on lease liabilities	30		25
Operating lease(a)	6,853		7,017
Total lease cost	$	6,945	$	7,137

(a) Includes short-term leases, which are immaterial.

31

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Supplemental cash flow and other information related to leases are as follows:

	Three months ended March 31,
	2020			2019
Cash payments for amounts included in the measurement of lease liabilities :
Operating cash outflows for operating leases	$	6,576		$	5,199
Operating cash outflows for finance leases	$	30		$	20
Financing cash outflows for finance leases	$	67		$	137
Right-of-use assets obtained in exchange for new operating lease liabilities	$	16,366		$	16,614
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—		$	—
Weighted-average remaining lease term
Finance lease	2.3 years			2.9 years
Operating lease	6.8 years			6.4 years
Weighted-average discount rate
Finance lease	10.2		%	8.7		%
Operating lease	7.4		%	7.3		%

The Company determines the incremental borrowing rate by adjusting the benchmark reference rates, applicable to the respective geographies where the leases were entered, with appropriate financing spreads and lease specific adjustments for the effects of collateral.

Maturities of lease liabilities as of March 31, 2020 are as follows:

	Operating Leases		Finance Leases
2020 (April 1 - December 31)	$	19,552	$	304
2021	24,377		239
2022	22,607		131
2023	20,783		86
2024	16,427		10
2025 and thereafter	42,783		—
Total lease payments	$	146,529	$	770
Less: Imputed interest	34,586		138
Present value of lease liabilities	$	111,943	$	632

Maturities of minimum lease payments as of December 31, 2019 are as follows:

During the next twelve months ending December 31,	Operating Leases		Capital Leases
2020	$	26,932	$	325
2021	23,783		251
2022	21,526		157
2023	19,381		86
2024	14,865		22
2025 and thereafter	23,983		—
Total minimum lease payment	$	130,470	$	841
Less: Imputed interest	31,613		158
Present value of minimum lease payments	$	98,857	$	683

32

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

21. Income Taxes

The Company determines the tax provision for interim periods using an estimate of its annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates its estimate of annual effective tax rate, and if its estimated tax rate changes, the Company makes a cumulative adjustment.

The Company recorded income tax expense of $5,855 and $4,200 for the three months ended March 31, 2020 and 2019, respectively. The effective tax rate decreased from 22.1% during the three months ended March 31, 2019 to 20.7% during the three months ended March 31, 2020, primarily as a result of the recording of higher excess tax benefits related to stock awards of $1,799 pursuant to ASU No. 2016-09 during the three months ended March 31, 2020 compared to $1,015 during the three months ended March 31, 2019.

Income taxes recognized in other comprehensive income are as follows:

	Three months ended March 31,
	2020			2019
Deferred taxes benefit/(expense):
Unrealized gain/(loss) on cash flow hedges	$	4,808		$	(1,543	)
Retirement benefits	(9		)	(109		)
Total Income tax benefit/(expense) recognized in other comprehensive income	$	4,799		$	(1,652	)

22. Stock-Based Compensation

The following costs related to the Company’s stock-based compensation plan are included in the unaudited consolidated statements of income:

	Three months ended March 31,
	2020		2019
Cost of revenues	$	1,418	$	1,326
General and administrative expenses	1,568		2,975
Selling and marketing expenses	1,792		2,655
Total	$	4,778	$	6,956

As of March 31, 2020, the Company had 2,308,555 shares available for grant under the 2018 Omnibus Incentive Plan.

33

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Stock Options

Stock option activity under the Company’s stock-based compensation plans is shown below:

	Number of Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life (Years)
Outstanding at December 31, 2019	98,161		$	23.39	$	4,522	1.86
Granted	—		—		—		—
Exercised	(39,832	)	23.11		1,932		—
Forfeited	—		—		—		—
Outstanding at March 31, 2020	58,329		$	23.58	$	1,659	1.80
Vested and exercisable at March 31, 2020	58,329		$	23.58	$	1,659	1.80

The unrecognized compensation cost for unvested options as of March 31, 2020 was $nil.

Restricted Stock and Restricted Stock Units

Restricted stock and restricted stock unit activity under the Company’s stock-based compensation plans is shown below:

	Restricted Stock			Restricted Stock Units
	Number	Weighted Average Fair Value		Number		Weighted Average Fair Value
Outstanding at December 31, 2019*	27,384	$	48.72	913,094		$	59.61
Granted	—	—		368,683		78.19
Vested	—	—		(293,289	)	56.30
Forfeited	—	—		(24,649	)	62.18
Outstanding at March 31, 2020*	27,384	$	48.72	963,839		$	67.66

* As of March 31, 2020 and December 31, 2019 restricted stock units vested for which the underlying common stock is yet to be issued is 167,270 each.

As of March 31, 2020, unrecognized compensation cost of $61,705 is expected to be expensed over a weighted average period of 3.07 years.

Performance Based Stock Awards

Performance based restricted stock unit activity under the Company’s stock plans is shown below:

	Revenue Based PRSUs				Market Condition Based PRSUs
	Number		Weighted Average Fair Value		Number		Weighted Average Fair Value
Outstanding at December 31, 2019	87,685		$	62.54	87,670		$	82.10
Granted	61,368		78.29		61,352		102.10
Vested	—		—		—		—
Forfeited	(1,295	)	62.14		(1,295	)	79.79
Outstanding at March 31, 2020	147,758		$	69.08	147,727		$	90.43

As of March 31, 2020, unrecognized compensation cost of $10,092 is expected to be expensed over a weighted average period of 2.21 years.

34

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

23. Related Party Disclosures

On October 1, 2018, the Company entered into the Investment Agreement with the Purchaser relating to the issuance to the Purchaser of $150,000 aggregate principal amount of the Notes. In connection with the investment, Vikram S. Pandit, Chairman and CEO of The Orogen Group LLC (an affiliate of the Purchaser), was appointed to Company’s Board of Directors.

The Company had outstanding Notes with a principal amount of $150,000 each as of March 31, 2020 and December 31, 2019 and interest accrued of $2,625 and $1,313 as of March 31, 2020 and December 31, 2019, respectively, related to the Investment Agreement. During the three months ended March 31, 2020 and 2019, the Company recognized interest expense of $1,313 each on the Notes. Refer to Note 17 to the unaudited consolidated financial statements for details.

24. Commitments and Contingencies

Capital Commitments

At March 31, 2020, the Company has committed to spend approximately $12,300 under agreements to purchase property and equipment. This amount is net of capital advances paid which are recognized in the unaudited consolidated balance sheets as property and equipment.

Other Commitments

Certain units of the Company’s Indian subsidiaries were established as 100% Export-Oriented units or under the Software Technology Parks of India (“STPI”) or Special Economic Zone (“SEZ”) scheme promulgated by the Government of India. These units are exempt from customs, central excise duties, and levies on imported and indigenous capital goods, stores, and spares. The Company has undertaken to pay custom duties, service taxes, levies, and liquidated damages payable, if any, in respect of imported and indigenous capital goods, stores and spares consumed duty free, in the event that certain terms and conditions are not fulfilled. The Company’s management believes, however, that these units have in the past satisfied and will continue to satisfy the required conditions.

The Company’s operations centers in the Philippines are registered with the Philippine Economic Zone Authority (“PEZA”). The registration provides the Company with certain fiscal incentives on the import of capital goods and local purchase of services and materials and requires ExlService Philippines, Inc. to meet certain performance and investment criteria. The Company’s management believes that these centers have in the past satisfied and will continue to satisfy the required criteria.

Contingencies

U.S. and Indian transfer pricing regulations require that any international transaction involving associated enterprises be at an arm’s-length price. Accordingly, the Company determines the appropriate pricing for the international transactions among its associated enterprises on the basis of a detailed functional and economic analysis involving benchmarking against transactions among entities that are not under common control. The tax authorities have jurisdiction to review this arrangement and in the event that they determine that the transfer price applied was not appropriate, the Company may incur increased tax liability, including accrued interest and penalties. The Company is currently involved in disputes with the Indian tax authorities over the application of some of its transfer pricing policies for some of its subsidiaries. Further, the Company and a U.S. subsidiary are engaged in tax litigation with the income-tax authorities in India on the issue of permanent establishment. The Company is subject to taxation in the United States and various states and foreign jurisdictions. For the U.S., the Philippines and India, tax year 2016 and subsequent tax years remain open for examination by the tax authorities as of March 31, 2020.

The aggregate amount demanded by income tax authorities (net of advance payments, if any) from the Company related to its transfer pricing issues for tax years 2003 to 2015 and its permanent establishment issues for tax years 2003 to 2007 as of March 31, 2020 and December 31, 2019 is $16,104 and $16,220, respectively, of which the Company has made payments and/or provided bank guarantees to the extent $7,858 and $8,108, respectively. Amounts paid as deposits in respect of such assessments aggregating to $6,108 and $6,252 as of March 31, 2020 and December 31, 2019, respectively, are included in “Other assets” and amounts deposited for bank guarantees aggregating to $1,750 and $1,856 as of March 31, 2020 and December 31, 2019, respectively, are included in “Restricted cash” in the non-current assets section of the Company’s unaudited consolidated balance sheets.

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EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2020

(In thousands, except share and per share amounts)

Based on the facts underlying the Company’s position and its experience with these types of assessments, the Company believes that its position will more likely than not be sustained upon final examination by the tax authorities based on its technical merits as of the reporting date and accordingly has not accrued any amount with respect to these matters in its unaudited consolidated financial statements. The Company does not expect any impact from these assessments on its future income tax expense. It is possible that the Company might receive similar orders or assessments from tax authorities for subsequent years. Accordingly, even if these disputes are resolved, the Indian tax authorities may still serve additional orders or assessments.

During the quarter ended March 31, 2019, there was a judicial pronouncement in India with respect to defined contribution benefits payments interpreting certain statutory defined contribution obligations of employees and employers. Currently some of the Company's subsidiaries in India are undergoing assessment with the statutory authorities. As of the reporting date, it is unclear whether the interpretation set out in the pronouncement has retrospective application. If applied retrospectively, the interpretation may result in a significant increase in contributions payable by the Company for past periods for certain of its India-based employees. There are numerous interpretative challenges concerning the retrospective application of the judgment. Due to such challenges and a lack of interpretive guidance, and based on legal advice, the Company believes it is currently impracticable to reliably estimate the timing and amount of any payments the Company may be required to make. Accordingly, the Company will re-evaluate the amount of a potential provision, if any, upon further developments.

From time to time, the Company and/or its present officers or directors, on individual basis, may be or have been, named as a defendant in litigation matters, including employment-related claims. The plaintiffs in those cases seek damages, including, where applicable, compensatory damages, punitive damages and attorney’s fees. With respect to pending litigation matters as of the reporting date, the Company believes that the damages amounts claimed in such cases are not meaningful indicators of the potential liabilities of the Company, that these matters are without merit, and that the Company intends to vigorously defend each of them.

The outcomes of legal actions are unpredictable and subject to significant uncertainties, and thus it is inherently difficult to determine the likelihood of the Company incurring a material loss or quantification of any such loss. With respect to pending litigation matters as of the reporting date, based on information currently available, including the Company’s assessment of the facts underlying each matter and advice of counsel, the amount or range of reasonably possible losses, if any, cannot be reasonably estimated. Based on the Company’s assessment, including the availability of insurance recoveries, the Company’s management does not believe that currently pending litigation, individually or in aggregate, will have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

25. Subsequent Events

There are many uncertainties regarding COVID-19, and the Company is closely monitoring the effects of the pandemic on all aspects of its business, including how it will impact the Company, its customers, employees, contractors, suppliers, business partners and delivery models. While COVID-19 did not have a significant impact on the Company’s financial results during the fiscal quarter ended March 31, 2020, the Company is unable to determine with any degree of accuracy the length and severity of the COVID-19 crisis and what impact it will have on its future financial position and operating results. The COVID-19 crisis is ongoing and dynamic in nature and, to date, the Company has experienced temporary closures in key operations centers, including in the U.S., India, the Philippines, Europe and South Africa. The Company will continue to assess the evolving impact of COVID-19 on its business.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in connection with our unaudited consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Some of the statements in the following discussion are forward looking statements. Dollar amounts within Item 2 are presented as actual, rounded, dollar amounts.

We have described in this Quarterly Report on Form 10-Q, the impact of the global Coronavirus Disease 2019 pandemic (“COVID-19”) on our financial results for the quarter ended March 31, 2020. However, we are not able to predict at this time what impact, the spread of COVID-19 will have on our 2020 financial results. See "Cautionary Note Regarding Forward-Looking Statements" below and in Item 1A-“Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q for further information regarding risks and uncertainties relating to COVID-19.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. You should not place undue reliance on these statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. These statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are based on assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. Many of the following risks, uncertainties and other factors identified below are, and will be, amplified by COVID-19. These factors include but are not limited to:

• our results of operations have been affected and could in the future be adversely impacted by COVID-19;

• our dependence on a limited number of clients in a limited number of industries;

• worldwide political, economic or business conditions;

• negative public reaction in the U.S. or elsewhere to offshore outsourcing;

• fluctuations in our earnings;

• our ability to attract and retain clients including in a timely manner;

• our ability to successfully consummate or integrate strategic acquisitions;

• our ability to accurately estimate and/or manage the costs and/or timing of winding down businesses;

• restrictions on immigration;

• our ability to hire and retain enough sufficiently trained employees to support our operations;

• our ability to grow our business or effectively manage growth and international operations;

• any changes in the senior management team;

• increasing competition in our industry;

• telecommunications or technology disruptions;

• our ability to withstand the loss of a significant customer;

• our ability to realize the entire book value of goodwill and other intangible assets from acquisitions;

• regulatory, legislative and judicial developments, including changes to or the withdrawal of governmental fiscal incentives;

• changes in tax laws or decisions regarding repatriation of funds held abroad;

• ability to service debt or obtain additional financing on favorable terms;

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• legal liability arising out of customer contracts;

• technological innovation;

• political or economic instability in the geographies in which we operate;

• operational and information security failures arising as a result of remote work solutions adopted due to COVID-19;

• cyber security incidents, data breaches, or other unauthorized disclosure of sensitive or confidential client and customer data; and

• adverse outcome of our disputes with the Indian tax authorities

These and other factors are more fully discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. These and other risks could cause actual results to differ materially from those implied by forward-looking statements in this Quarterly Report on Form 10-Q.

The forward-looking statements made by us in this Quarterly Report on Form 10-Q, or elsewhere, speak only as of the date on which they were made. New risks and uncertainties come up from time to time, and it is impossible for us to predict those events or how they may affect us. We have no obligation to update any forward-looking statements in this Quarterly Report on Form 10-Q after the date of this Quarterly Report on Form 10-Q, except as required by federal securities laws.

Executive Overview

We are a leading operations management and analytics company that helps our clients build and grow sustainable businesses. By orchestrating our domain expertise, data, analytics and digital technology, we look deeper to design and manage agile, customer-centric operating models to improve global operations, drive profitability, enhance customer satisfaction, increase data-driven insights, and manage risk and compliance. We serve customers in multiple industries, including insurance, healthcare, banking and financial services, utilities, travel, transportation and logistics, media and retail, among others.

We operate in the business process management (“BPM”) industry and we provide operations management and analytics services. Effective January 1, 2020, we made certain operational and structural changes to more closely integrate our businesses and to simplify our organizational structure. We now manage and report financial information through our four strategic business units, Insurance, Healthcare, Analytics and Emerging Business, which reflects how management will review financial information and make operating decisions. These business units develop client specific solutions, build capabilities, maintain a unified go-to-market approach and are integrally responsible for service delivery, customer satisfaction, growth and profitability. In line with our strategy of vertical integration and focus on domain expertise, we have integrated our Finance & Accounting and Consulting operating segments within each of the Insurance and Healthcare operating segments based on the corresponding industry-specific clients. Finance & Accounting and Consulting services provided to clients outside of the Insurance and Healthcare industries is now the part of our newly formed business unit and reportable segment, Emerging Business. In addition, we integrated our former Travel, Transportation and Logistics, Banking and Financial Services, and Utilities operating segments under Emerging Business to further leverage and optimize the operating scale in providing operations management services.

Our new reportable segments are as follows:

• Insurance,

• Healthcare,

• Analytics, and

• Emerging Business

In conjunction with the new reporting structure, we recasted our segment disclosures for all prior periods presented to conform to the way we internally manage and monitor segment performance.

Our global delivery network, which includes highly trained industry and process specialists across the United States, Latin America, South Africa, Europe and Asia (primarily India and the Philippines), is a key asset. We have operations centers in India, the U.S., the Philippines, Bulgaria, Colombia, South Africa, Romania and the Czech Republic.

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The recent outbreak of COVID-19, which has been declared by the World Health Organization to be a “public health emergency of international concern,” has spread across the globe and is materially impacting worldwide economic activity and levels of business confidence. Through the first fiscal quarter ended March 31, 2020, COVID-19 did not have a significant impact on our business, however COVID-19 is likely to materially impact us and our customers, employees, contractors, suppliers, and other partners, who have been prevented from conducting business activities as usual, including due to shutdowns that have been requested or mandated by governmental authorities. The restrictions have disrupted our ability to provide our services and solutions and resulted in, among other things loss of revenue, increased costs and the possibility of enhanced credit risk on our accounts receivable. The continued spread of COVID-19 and the measures taken by the governments of countries affected has disrupted the continuity of providing services to our customers and adversely impacted our business, financial condition or results of operations. There continues to be significant volatility and economic and geopolitical uncertainty in many markets around the world. Several states in the United States, including New York, where we are headquartered, have declared states of emergency, and several countries around the world, including the United States, have significantly restricted travel. We are actively managing our business to respond to the impact.

Given the unprecedented uncertainty of this situation, including the unknown duration and severity of the pandemic and the unknown overall impact on our services, we are unable to forecast the full impact on our business; however, we expect that the impacts from COVID-19 and the related economic disruption will have an adverse impact on our consolidated results of operations, consolidated financial position and consolidated cash flow in fiscal 2020. Due to the above circumstances and as described generally in this Quarterly Report on Form 10-Q, our results of operations for the three month period ended March 31, 2020 are not necessarily indicative of the results to be expected for the full fiscal year.

As of March 31, 2020, due to the deteriorating macroeconomic conditions arising from the COVID-19 pandemic, we performed a goodwill impairment test for any potential impairment and concluded that there was no impairment. However, there can be no assurances that goodwill will not be impaired in future periods. Estimating the fair value of goodwill requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. These estimates and judgments may not be within the control of us and accordingly it is reasonably possible that the judgments and estimates could change in future periods.

Given the continued uncertainty surrounding COVID-19, we have taken certain precautionary measures to maintain financial flexibility during this time, including drawing $100 million from our line of credit under our existing Credit Agreement on March 12, 2020, the proceeds of which were available for working capital, general corporate or other purposes as needed, and which was repaid in full on April 20, 2020, temporary suspension of our stock repurchase program, and other cost reduction measures related to employee and vendor expenses and capital expenditure plans.

For additional information and risks related to COVID-19, see Item 1A- "Risk Factors" below.

Revenues

For the three months ended March 31, 2020, we had revenues of $246.0 million compared to revenues of $239.6 million for the three months ended March 31, 2019, an increase of $6.4 million, or 2.7%.

We serve clients mainly in the U.S. and the U.K., with these two regions generating 84.5% and 9.5%, respectively, of our total revenues for the three months ended March 31, 2020, and 81.9% and 12.1%, respectively, of our revenues for the three months ended March 31, 2019.

For the three months ended March 31, 2020 and 2019, our total revenues from our top ten clients accounted for 37.3% and 36.6% of our total revenues, respectively. Our revenue concentration with our top clients remains largely consistent year-over-year and we continue to develop relationships with new clients to diversify our client base. We believe that the loss of any of our top ten clients could have a material adverse effect on our financial performance.

Our Business

We provide operations management and analytics services. We market our services to our existing and prospective clients through our sales and client management teams, which are aligned by key industry verticals and cross-industry domains such as finance and accounting. Our sales and client management teams operate from the U.S., Europe and Australia.

Operations Management Services: We provide our clients with a range of operations management services from our Insurance, Healthcare and Emerging Business operating segments, which typically involve the transfer to EXL business

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operations of a client such as claims processing, clinical operations, or financial transaction processing, after which we administer and manage those operations for our client on an ongoing basis. As part of this transfer, we hire and train employees to work at our operations centers on the relevant business operations, implement a process migration to these operations centers and then provide services either to the client or directly to the client’s customers. Each client contract has different terms based on the scope, deliverables and complexity of the engagement. We also provide consulting services related to operations management that include industry-specific digital transformational services as well as cross-industry finance and accounting services as part of the Emerging Business operating segment.

We continue to observe a shift in industry pricing models toward transaction-based pricing, outcome-based pricing and other alternative pricing models. We believe this trend will continue and we use such alternative pricing models with some of our current clients and are seeking to move certain other clients from a billing rate model to a transaction-based or other alternative pricing model. These alternative pricing models place the focus on operating efficiency in order to maintain our gross margins. In addition, we have also observed that prospective larger clients are entering into multi-vendor relationships with regard to their outsourcing needs. We believe that the trend toward multi-vendor relationships will continue. A multi-vendor relationship allows a client to seek more favorable pricing and other contract terms from each vendor, which can result in significantly reduced gross margins from the provision of services to such client for each vendor. To the extent our large clients expand their use of multi-vendor relationships and are able to extract more favorable contract terms from other vendors, our gross margins and revenues may be reduced with regard to such clients if we are required to modify the terms of our relationships with such clients to meet competition.

Our existing agreements with original terms of three or more years provide us with a relatively predictable revenue base for a substantial portion of our operations management business, however, we have a long selling cycle for our services and the budget and approval processes of prospective clients make it difficult to predict the timing of entering into definitive agreements with new clients. Similarly, new license sales and implementation projects for our technology service platforms and other software-based services have a long selling cycle, however ongoing annual maintenance and support contracts for existing arrangements provide us with a relatively predictable revenue base.

Analytics: Our analytics services focus on driving improved business outcomes for our customers by generating data-driven insights across all parts of our customers’ business. We also provide care optimization and reimbursement optimization services, for our clients through our healthcare analytics solutions and services. We also offer integrated solutions to help our clients in cost containment by leveraging technology platforms, customizable and configurable analytics and expertise in healthcare reimbursements to help clients enhance their claim payment accuracy. Our teams deliver predictive and prescriptive analytics in the areas of customer acquisition and lifecycle management, risk underwriting and pricing, operational effectiveness, credit and operational risk monitoring and governance, regulatory reporting, payment integrity and care management and data management. We actively cross-sell and, where appropriate, integrate our Analytics services with other operations management services as part of a comprehensive offering for our clients.

We anticipate that revenues from our analytics services will grow as we expand our service offerings and client base, both organically and through acquisitions.

Critical Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” and Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019

In addition, due to outbreak of COVID-19, we have reassessed those of our accounting policies whose application places the most significant demands on management’s judgment, for instance, revenue recognition, allowance for expected credit losses, business combinations, goodwill, intangibles and long-lived assets, stock-based compensation, derivative instruments and hedging activity, borrowings, assumptions related to ROU assets, lease cost, income taxes and assets and obligations related to employee benefit plans. Such reassessments did not have a significant impact on our results of operations and cash flows for the periods presented.

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Results of Operations

The following table summarizes our results of operations for the three months ended March 31, 2020 and 2019:

	Three months ended March 31,
	2020			2019
	(dollars in millions)
Revenues, net	$	246.0		$	239.6
Cost of revenues(1)	162.7			157.3
Gross profit(1)	83.3			82.3
Operating expenses:
General and administrative expenses	28.9			32.5
Selling and marketing expenses	14.5			18.0
Depreciation and amortization expense	12.4			13.7
Impairment and restructuring charges	—			1.2
Total operating expenses	55.8			65.4
Income from operations	27.5			16.9
Foreign exchange gain, net	1.4			1.3
Interest expense	(3.1		)	(3.6		)
Other income, net	2.5			4.4
Income before income tax expense and earnings from equity affiliates	28.3			19.0
Income tax expense	5.8			4.2
Income before earnings from equity affiliates	22.5			14.8
Loss from equity-method investment	0.1			0.1
Net income attributable to ExlService Holdings, Inc. stockholders	$	22.4		$	14.7

(1) Exclusive of depreciation and amortization expense.

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Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Revenues.

The following table summarizes our revenues by reportable segments for the three months ended March 31, 2020 and 2019:

	Three months ended March 31,							Percentage change
	2020		2019		Change
	(dollars in millions)
Insurance	$	83.7	$	81.3	$	2.4		3.0	%
Healthcare	27.0		22.2		4.8			21.5	%
Emerging Business	42.8		49.1		(6.3		)	(12.8	)%
Analytics	92.5		87.0		5.5			6.3	%
Total revenues, net	$	246.0	$	239.6	$	6.4		2.7	%

Revenues for the three months ended March 31, 2020 were $246.0 million, up $6.4 million, or 2.7%, compared to the three months ended March 31, 2019.

Revenue growth in Insurance of $2.4 million was primarily driven by expansion of business from our existing clients of $3.3 million. This was partially offset by $0.9 million mainly attributable to the depreciation of the Australian dollar, Indian rupee, U.K. pound sterling and South African ZAR against the U.S. dollar during the three months ended March 31, 2020 compared to the three months ended March 31, 2019. Insurance revenues were 34.0% and 33.9% of our total revenues in the three months ended March 31, 2020 and March 31, 2019, respectively.

Revenue growth in Healthcare of $4.8 million was primarily driven by expansion of business from our existing clients and new wins aggregating to $8.7 million, partially offset by our December 2019 wind-down of Health Integrated business revenues of $3.9 million during the three months ended March 31, 2019, compared to none in the three months ended March 31, 2020. Healthcare revenues were 11.0% and 9.3% of our total revenues in the three months ended March 31, 2020 and March 31, 2019, respectively.

Revenue decline in Emerging Business of $6.3 million was primarily driven by termination of certain existing client contracts of $5.8 million, and $0.5 million attributable to the depreciation of the Indian rupee against the U.S. dollar during the three months ended March 31, 2020 compared to the three months ended March 31, 2019. Emerging Business revenues were 17.4% and 20.5% of our total revenues in the three months ended March 31, 2020 and March 31, 2019, respectively.

Revenue growth in Analytics of $5.5 million was primarily driven by an increase in revenues from our recurring and project-based engagements from our existing and new clients of $5.8 million. This was partially offset by $0.3 million attributable to the depreciation of the U.K. pound sterling and Indian rupee against the U.S. dollar during the three months ended March 31, 2020 compared to the three months ended March 31, 2019. Analytics revenues were 37.6% and 36.3% of our total revenues in the three months ended March 31, 2020 and March 31, 2019, respectively.

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Cost of Revenues and Gross Margin: The following table sets forth cost of revenues and gross margin of our reportable segments.

	Cost of Revenues									Gross Margin
	Three months ended March 31,				Change			Percentage change		Three months ended March 31,				Change
	2020		2019							2020		2019
	(dollars in millions)
Insurance	$	59.0	$	55.2	$	3.8		6.7	%	29.6	%	32.0	%	(2.4	)%
Healthcare	19.6		17.8		1.8			10.1	%	27.5	%	20.0	%	7.5	%
Emerging Business	25.5		27.3		(1.8		)	(6.6	)%	40.5	%	44.4	%	(3.9	)%
Analytics	58.6		57.0		1.6			3.0	%	36.6	%	34.6	%	2.0	%
Total	$	162.7	$	157.3	$	5.4		3.4	%	33.9	%	34.4	%	(0.5	)%

For the three months ended March 31, 2020, cost of revenues was $162.7 million compared to $157.3 million for the three months ended March 31, 2019, an increase of $5.4 million, or 3.4%. Our gross margin for the three months ended March 31, 2020 was 33.9% compared to 34.4% for the three months ended March 31, 2019, a decrease of 50 basis points (“bps”), primarily due to the impact of COVID-19 related expenses of 80 bps.

The increase in cost of revenues in Insurance of $3.8 million was primarily due to an increase in employee-related costs of $3.0 million on account of higher headcount and wage inflation, higher infrastructure and travel costs of $1.1 million and higher technology and other operating costs of $0.3 million. This was partially offset by currency movements, net of hedging of $0.6 million. Gross margin in Insurance decreased by 240 bps during the three months ended March 31, 2020 compared to the three months ended March 31, 2019, primarily due to higher operating expenses.

The increase in cost of revenues in Healthcare of $1.8 million was primarily due to an increase in employee-related costs of $2.1 million. This was partially offset by lower other operating cost of $0.2 million and currency movements, net of hedging of $0.1 million. Gross margin in Healthcare increased by 750 bps during the three months ended March 31, 2020, compared to the three months ended March 31, 2019, primarily due to lower margin in the Heath Integrated business during the three months ended March 31, 2019 and higher revenues during the three months ended March 31, 2020.

The decrease in cost of revenues in Emerging Business of $1.8 million was primarily due to a decrease in employee-related costs of $1.3 million, lower infrastructure and technology cost of $0.5 million and currency movements, net of hedging of $0.2 million. This was partially offset by higher other operating cost of $0.2 million. Gross margin in Emerging Business decreased by 390 bps during the three months ended March 31, 2020, compared to the three months ended March 31, 2019, primarily due to lower revenues and higher operating expenses.

The increase in cost of revenues in Analytics of $1.6 million was primarily due to an increase in employee-related costs of $4.0 million on account of higher headcount and wage inflation and higher infrastructure and travel costs $0.7 million. This was partially offset by lower other operating cost $2.6 million and currency movements, net of hedging of $0.5 million. Gross margin in Analytics increased by 200 bps during the three months ended March 31, 2020, compared to the three months ended March 31, 2019, primarily due to higher volumes in existing clients.

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Selling, General and Administrative (“SG&A”) Expenses.

	Three months ended March 31,						Change			Percentage change
	2020			2019
	(dollars in millions)
General and administrative expenses	$	28.9		$	32.5		$	(3.6	)	(11.0	)%
Selling and marketing expenses	14.5			18.0			(3.5		)	(19.9	)%
Selling, general and administrative expenses	$	43.4		$	50.5		$	(7.1	)	(14.2	)%
As a percentage of revenues	17.6		%	21.1		%

The decrease in SG&A expenses of $7.1 million was primarily due to a decrease in employee-related costs of $2.9 million, a decrease in stock-based compensation expense of $2.3 million mostly due to revision in estimates related to revenue linked performance based restricted stock units due to COVID-19, lower travel costs of $0.8 million, lower other operating costs $0.8 million and currency movements, net of hedging of $0.3 million.

Depreciation and Amortization.

	Three months ended March 31,						Change			Percentage change
	2020			2019
	(dollars in millions)
Depreciation expense	$	8.3		$	8.1		$	0.2		1.9	%
Intangible amortization expense	4.1			5.6			(1.5		)	(24.9	)%
Depreciation and amortization expense	$	12.4		$	13.7		$	(1.3	)	(8.9	)%
As a percentage of revenues	5.1		%	5.7		%

The decrease in intangibles amortization expense of $1.5 million was primarily due to lower weighted average remaining useful lives of intangible assets during the three months ended March 31, 2020 compared to the three months ended March 31, 2019. The increase in depreciation expense of $0.2 million was due to depreciation related to our new operating centers to support our business growth.

Impairment and Restructuring Charges.

	Three months ended March 31,									Percentage change
	2020			2019			Change
	(dollars in millions)
Impairment and restructuring charges	$	—		$	1.2		$	(1.2	)	(100.0	)%
As a percentage of revenues	—		%	0.5		%

During the three months ended March 31, 2019, we recognized an impairment charge of $1.2 million on our long-lived assets related to our Health Integrated business. See Note 8 to our unaudited consolidated financial statements for details.

Income from Operations. Income from operations increased by $10.6 million, or 63.0%, from $16.9 million for the three months ended March 31, 2019 to $27.5 million for the three months ended March 31, 2020. As a percentage of revenues, income from operations increased from 7.0% for the three months ended March 31, 2019 to 11.2% for the three months ended March 31, 2020.

Foreign Exchange Gain/(Loss). Net foreign exchange gains and losses are primarily attributable to movement of the U.S. dollar against the Indian rupee, the U.K. pound sterling and the Philippine peso during the three months ended March 31, 2020. The average exchange rate of the U.S. dollar against the Indian rupee increased from 70.32 during the three months ended March 31, 2019 to 73.08 during the three months ended March 31, 2020. The average exchange rate of the U.K. pound sterling against the U.S. dollar decreased from 1.32 during the three months ended March 31, 2019 to 1.28 during the three months ended March 31, 2020. The average exchange rate of the U.S. dollar against the Philippine peso decreased from 52.11 during the three months ended March 31, 2019 to 50.83 during the three months ended March 31, 2020.

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We recorded a net foreign exchange gain of $1.4 million for the three months ended March 31, 2020 compared to the net foreign exchange gain of $1.3 million for the three months ended March 31, 2019.

Interest expense. Interest expense decreased from $3.6 million for the three months ended March 31, 2019 to $3.1 million for the three months ended March 31, 2020 primarily due lower effective interest rates under our Credit Facility during the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

Other Income, net.

	Three months ended March 31,							Percentage change
	2020		2019		Change
	(dollars in millions)
Gain on sale and mark-to-market of mutual funds	$	2.0	$	3.5	$	(1.5	)	(42.0	)%
Interest and dividend income	0.5		0.8		(0.3		)	(33.0	)%
Other, net	—		0.1		(0.1		)	(158.0	)%
Other income, net	$	2.5	$	4.4	$	(1.9	)	(42.8	)%

Other income, net decreased by $1.9 million, from $4.4 million for the three months ended March 31, 2019 to $2.5 million for the three months ended March 31, 2020, primarily due to lower return on mutual fund investments of $1.5 million and decrease in interest and dividend income of $0.4 million.

Income Tax Expense. We recorded income tax expense of $5.8 million and $4.2 million for the three months ended March 31, 2020 and 2019. The effective tax rate decreased from 22.1% during the three months ended March 31, 2019 to 20.7% during the three months ended March 31, 2020, primarily as a result of recording of higher excess tax benefits related to stock awards of $1.8 million pursuant to ASU No. 2016-09 during the three months ended March 31, 2020 compared to $1.0 million during the three months ended March 31, 2019.

Net Income. Net income increased from $14.7 million for the three months ended March 31, 2019 to $22.4 million for the three months ended March 31, 2020, primarily due to increase in income from operations of $10.6 million, lower interest expense of $0.5 million and higher foreign exchange gain, net of $0.1 million. This was partially offset by lower other income, net of $1.9 million and higher income tax expense of $1.6 million. As a percentage of revenues, net income increased from 6.1% for the three months ended March 31, 2019 to 9.1% for the three months ended March 31, 2020.

Liquidity and Capital Resources

	Three months ended March 31,
	2020			2019
	(dollars in millions)
Opening cash, cash equivalents and restricted cash	$	127.0		$	104.1
Net cash (used for)/provided by operating activities	(13.6		)	8.3
Net cash provided by/(used for) investing activities	36.0			(37.2		)
Net cash provided by financing activities	86.7			19.8
Effect of exchange rate changes	(2.6		)	(0.4		)
Closing cash, cash equivalents and restricted cash	$	233.5		$	94.6

As of March 31, 2020 and 2019, we had $367.4 million and $302.7 million, respectively, in cash, cash equivalents and short-term investments, of which $227.0 million, and $273.9 million, respectively, is located in foreign jurisdictions that upon distribution may be subject to withholding and other taxes and we do not currently intend to distribute such amounts. If, in the future, we change our intention regarding distributions, additional taxes may be required and would be recorded in the period the intention changes.

Operating Activities: Cash flows used for operating activities were $13.6 million for the three months ended March 31, 2020 as compared to cash flows provided by operating activities of $8.3 million during the three months ended March 31, 2019. Generally, factors that affect our earnings-, for instance, pricing, volume of services, costs and productivity, affect our cash flows used or provided from operations in a similar manner. However, while management of working capital, including

45

timing of collections and payments affects operating results only indirectly, the impact on the working capital requirements and cash flows provided by operating activities can be significant.

Cash flows used for operating activities for the three months ended March 31, 2020 was $13.6 million. This comprised of net income plus the net effect of non-cash items, such as depreciation and amortization, expense, stock-based compensation expense, amortization of operating lease right-of-use assets, unrealized gains on short-term investment, deferred income taxes, and others aggregating to $46.1 million. The primary working capital use of net cash of $59.7 million during the three months ended March 31, 2020 was driven by decrease in accrued employee costs and operating lease liabilities, increase in accounts receivables and current and non-current assets.

Investing Activities: Cash flows provided by investing activities were $36.0 million for the three months ended March 31, 2020 as compared to cash flows used for investing activities of $37.2 million for the three months ended March 31, 2019. The increase in cash flows is mainly due to net higher redemption of investments of $49.0 million during the three months ended March 31, 2020 as compared to net purchase of investments of $26.3 million during the three months ended March 31, 2019. This was partially offset by higher capital expenditures of $1.4 million during the three months ended March 31, 2020 compared to the three months ended March 31, 2019 and additional investment in equity affiliate of $0.7 million during the three months ended March 31, 2020.

Financing Activities: Cash flows provided by financing activities were $86.7 million during the three months ended March 31, 2020 as compared to cash flows provided by financing activities of $19.8 million during the three months ended March 31, 2019. The increase in cash flows provided from financing activities was primarily due to higher net borrowings of $99.8 million (net of repayment) under our Credit Facility (as described below in “Financing Arrangements”) during the three months ended March 31, 2020 as compared to net borrowings (net of repayment) of $35.4 million during the three months ended March 31, 2019 and lower purchases of treasury stock by $1.4 million under our share repurchase program during the three months ended March 31, 2020 as compared to the three months ended March 31, 2019.

We expect to use cash from operating activities to maintain and expand our business by making investments primarily related to new facilities and capital expenditures associated with leasehold improvements to build our facilities, and purchase telecommunications equipment and computer hardware and software in connection with managing client operations. We incurred $12.3 million of capital expenditures in the three months ended March 31, 2020. We expect to incur capital expenditures of between $32.0 million and $38.0 million in 2020, primarily to meet our growth requirements, including additions to our facilities as well as investments in technology applications, product development, digital technology, advanced automation, robotics and infrastructure.

In connection with any tax assessment orders that have been issued or may be issued against us or our subsidiaries, we may be required to deposit additional amounts with respect to such assessment orders (see Note 24 to our unaudited consolidated financial statements herein for further details). We anticipate that we will continue to rely upon cash from operating activities to finance our smaller acquisitions, capital expenditures and working capital needs. If we have significant growth through acquisitions, we may need to obtain additional financing.

During the quarter ended March 31, 2020, to enhance our liquidity position in response to COVID-19, management has taken certain precautionary measures, including: drawing $100.0 million from our line of credit under our existing Credit Agreement on March 12, 2020, the proceeds of which were available for working capital, general corporate or other purposes as needed, and which was repaid in full on April 20, 2020; and electing to temporarily suspend share repurchases under our 2019 Repurchase Program, and other cost reduction measures related to employee and vendor expenses and capital expenditure plans. The 2019 Repurchase Program remains authorized by the Board of Directors and management has the discretion to resume share repurchases in the future at any time, depending upon market conditions, our capital needs and other factors.

Financing Arrangements (Debt Facility)

Credit Agreement

On November 21, 2017, we and each of our wholly owned material domestic subsidiaries entered into a credit agreement with certain lenders, and Citibank, N.A. as Administrative Agent (the “Credit Agreement”). The Credit Agreement provides for a $200.0 million revolving credit facility (the “Credit Facility”) with an option to increase the commitments by up to $100.0 million, subject to certain approvals and conditions as set forth in the Credit Agreement. The Credit Agreement also includes a letter of credit sub facility. The Credit Facility has a maturity date of November 21, 2022 and is voluntarily pre-payable from time to time without premium or penalty. Borrowings under the Credit Agreement may be used for working

46

capital and general corporate purposes, including permitted acquisitions. On July 2, 2018, we exercised our option under the Credit Agreement to increase the commitments by $100.0 million thereby utilizing the entire revolver under the Credit Facility of $300.0 million. The incremental commitments were made pursuant to (and constitute part of) the existing commitments and shall be subject to the terms and conditions applicable to the existing commitments as set forth in the Credit Agreement.

As of March 31, 2020, we were in compliance with all financial and non-financial covenants listed under the Credit Agreement.

On October 1, 2018, we entered into a second amendment (the “Amendment”) to our Credit Agreement, as amended, among the Company, as borrower, with certain lenders, and Citibank, N.A. as Administrative Agent to, among other things, permit the issuance by the Company of the Convertible Senior Notes described below, and settlement upon maturity or conversion thereof, in accordance with the Investment Agreement, the indenture dated as of October 4, 2018 and the other documents entered into in connection therewith.

See Note 17 to our unaudited consolidated financial statements herein for further details on our debt facilities.

As of March 31, 2020, we had outstanding indebtedness under the Credit Facility of $199.0 million, of which $100.0 million is expected to be repaid within the next twelve months and is included under “current portion of long-term borrowings” and of which $99.0 million is included under “long-term borrowings”, less current portion” in the unaudited consolidated balance sheets. As of December 31, 2019, we had outstanding indebtedness under the Credit Facility of $99.0 million, of which $40.0 million was included under "current portion of long-term borrowings" and the balance of $59.0 million was included under "long-term borrowings, net of current portion” in the consolidated balance sheets.

Convertible Senior Notes

On October 1, 2018, we entered into an investment agreement (the “Investment Agreement”) with Orogen Echo LLC, an affiliate of The Orogen Group LLC, relating to the issuance to Orogen Echo LLC of $150.0 million in an aggregate principal amount of 3.50% Convertible Senior Notes due October 1, 2024 (the "Notes"). The Notes were issued on October 4, 2018. The Notes bear interest at a rate of 3.50% per annum, payable semi-annually in arrears in cash on April 1 and October 1 of each year. During the three months ended March 31, 2020 and March 31, 2019, we recognized interest expense of $1.3 million and $1.3 million, respectively, on the Notes. The Notes are convertible at an initial conversion rate of 13.3333 shares of the common stock per one thousand dollar principal amount of the Notes (which represents an initial conversion price of approximately $75 per share). With certain exceptions, upon a fundamental change, as defined in the Indenture, the holders of the Notes may require us to repurchase all or part of the principal amount of the Notes at a purchase price equal to the principal amount plus accrued and unpaid interest. We may redeem the principal amount of the Notes, at our option, in whole but not in part, at a purchase price equal to the principal amount plus accrued and unpaid interest on or after October 1, 2021, if the closing sale price of the common stock exceeds 150% of the then-current conversion price for 20 or more trading days in the 30 consecutive trading day period preceding our exercise of this redemption right (including the trading day immediately prior to the date of the notice of redemption). We may elect to settle conversions of the Notes by paying or delivering, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock. We used the proceeds from the issuance of Notes to repay $150.0 million of our outstanding borrowings under the Credit Facility.

We accounted for the liability and equity components of the Notes separately to reflect its non-convertible debt borrowing rate. The estimated fair value of the liability component at issuance of $133.1 million was determined using a discounted cash flow technique, which considered debt issuances with similar features of our debt, excluding the conversion feature. The resulting effective interest rate for the Notes was 5.75% per annum. The excess of the gross proceeds received over the estimated fair value of the liability component totaling $16.9 million, was allocated to the conversion feature (equity component, recorded as additional paid-in capital) with a corresponding offset recognized as a discount to reduce the net carrying value of the Notes. The discount is being amortized to interest expense over a six-year period ending October 1, 2024 (the expected life of the liability component) using the effective interest method.

Under the terms of the Notes, we are not prohibited from paying cash dividends unless payment would trigger an event of default or if one currently exists. We do not anticipate paying any cash dividends in the foreseeable future.

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Off-Balance Sheet Arrangements

In the ordinary course of business, we provide standby letters of credit to third parties primarily for facility leases. As of March 31, 2020 and December 31, 2019, we had outstanding letters of credit of $0.5 million each, respectively, that were not recognized in our unaudited and audited consolidated balance sheets, respectively. These are not reasonably likely to have, a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We had no other off balance sheet arrangements or obligations.

Contractual Obligations

The following table sets forth our contractual obligations as of March 31, 2020:

	Payment Due by Period
	Less than		1-3		4-5		After
	1 year		years		years		5 years		Total
	(dollars in millions)
Finance leases	$	0.3	$	0.4	$	0.1	$	—	$	0.8
Operating leases(a)	25.8		45.9		34.5		40.3		146.5
Purchase obligations	12.3		—		—		—		12.3
Other obligations(b)	2.4		4.2		3.4		5.7		15.7
Borrowings:
Principal payments	100.7		99.0		150.0		—		349.7
Interest payments(c)	7.0		13.2		10.5		—		30.7
Total contractual cash obligations(d)	$	148.5	$	162.7	$	198.5	$	46.0	$	555.7

(a) Represents lease liabilities payable for the expected lease term.

(b) Represents estimated payments under the Gratuity Plan.

(c) Interest on borrowings is calculated based on the interest rate on the outstanding borrowings as of March 31, 2020.

(d) Excludes $1.0 million related to uncertain tax positions, since the extent of the amount and timing of payment is currently not reliably estimable or determinable.

Certain units of our Indian subsidiaries were established as 100% Export-Oriented units under the Software Technology Parks of India (“STPI”) or Special Economic Zone ("SEZ") scheme promulgated by the Government of India. These units are exempt from customs, central excise duties, and levies on imported and indigenous capital goods, stores, and spares. We have undertaken to pay custom duties, service taxes, levies, and liquidated damages payable, if any, in respect of imported and indigenous capital goods, stores, and spares consumed duty free, in the event that certain terms and conditions are not fulfilled. We believe, however, that these units have in the past satisfied and will continue to satisfy the required conditions.

Our operations centers in the Philippines are registered with the Philippine Economic Zone Authority (“PEZA”). The registration provides us with certain fiscal incentives on the import of capital goods and local purchase of services and materials and requires that ExlService Philippines, Inc. to meet certain performance and investment criteria. We believe that these centers have in the past satisfied and will continue to satisfy the required criteria.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, see Note 2—“Recent Accounting Pronouncements” to the unaudited consolidated financial statements contained herein.

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ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk

During the three months ended March 31, 2020, there were no material changes in our market risk exposure. For a discussion of our market risk associated with exchange rate risk and interest rate risk, see Item 7A “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

ITEM 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosure. In connection with the preparation of this Quarterly Report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of the CEO and CFO, of the effectiveness and operation of our disclosure controls and procedures as of March 31, 2020. Based upon that evaluation, the CEO and CFO have concluded that our disclosure controls and procedures, as of March 31, 2020, were effective.

Changes in Internal Control over Financial Reporting

During the three months ended March 31, 2020, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.     Other Information

ITEM 1.    Legal Proceedings

In the course of our normal business activities, various lawsuits, claims and proceedings may be instituted or asserted against us. Although there can be no assurance, we believe that the disposition of matters currently instituted or asserted will not

have a material adverse effect on our consolidated financial position, results of operations or cash flows. See Note 24 to our unaudited consolidated financial statements contained herein for details regarding our tax proceedings.

ITEM 1A.    Risk Factors

We have disclosed below, as well as under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 a number of risks which may materially affect our business, financial condition or results of operations. You should carefully consider these Risk Factors and the other information set forth elsewhere in this Quarterly Report on Form 10-Q. You should be aware that these risk factors and other information may not describe every risk facing our Company. Additional risks and uncertainties not currently known to us may also materially adversely affect our business, financial condition and/or results of operations.

Our results of operations have been adversely affected, and could in the future be materially adversely affected, by the coronavirus pandemic.

The recent outbreak of the Coronavirus Disease 2019 pandemic (“COVID-19”), which has been declared by the World Health Organization to be a “public health emergency of international concern,” has spread across the globe and is materially impacting worldwide economic activity and levels of business confidence. COVID-19 has affected us, our customers, employees, contractors, suppliers and business partners, who have been prevented from conducting business activities as usual, including due to shutdowns that have been requested or mandated by governmental authorities. The continued spread of COVID-19 and the measures taken by the governments of countries affected disrupted the continuity of providing services to our customers and adversely impacted our business, financial condition or results of operations, see Part 1, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q.

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The global spread of COVID-19 has created significant volatility and uncertainty and economic disruption. The extent to which COVID-19 impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals' actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; the effect on our clients and client demand for our services and our solutions; our ability to sell and provide our services and solutions, including as a result of travel restrictions and people working from home; the ability of our clients to pay for our services and solutions; and any closures of our and our clients' offices and facilities. In the U.S., India, the Philippines, Europe and South Africa, we have large concentrations of employees performing critical operations. Governmental restrictions inhibiting our employees’ ability to access those facilities have disrupted our ability to provide our services and solutions and has resulted in, among other things, losses of revenue, increased costs to implement remote work solutions and possible terminations of client contracts. Clients may also slow down decision making for procuring new services from us, delay planned work, and consider modifying or seek to terminate existing agreements based on force majeure or other provisions. Remote work solutions are limited in their ability to replicate the operational oversight and physical security controls of our office environments and we may suffer operational and information security failures as a result of the changed controls. The extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. Any of these events could cause or contribute to risks and uncertainties enumerated in this Quarterly Report on Form 10-Q or our other filings with the SEC, and could materially adversely affect our business, financial condition, results of operations and/or stock price.

ITEM 2.     Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Use of Proceeds

None.

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Purchases of Equity Securities by the Issuer

During the three months ended March 31, 2020, purchases of common stock were as follows:

Period	Total Number of Shares Purchased	Average Price Paid per share(1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
Jan 1, 2020 through Jan 31, 2020(1)	83,430	$	72.68	70,210	$	194,909,939
Feb 1, 2020 through Feb 29, 2020(1)	78,336	$	75.94	64,955	$	190,000,065
Mar 1, 2020 through Mar 31, 2020	40,600	$	48.85	40,600	$	188,016,828
Total	202,366	$	69.16	175,765	$	—

(1) Average of high and low price of common stock on the trading day prior to the vesting date of the shares of restricted stock.

On December 16, 2019, our Board of Directors authorized a $200.0 million common stock repurchase program beginning January 1, 2020 through December 31, 2022 (the “2019 Repurchase Program”). The shares may be purchased by us from time to time from the open market and through private transactions, or otherwise, as determined by us as market conditions warrant.

During the quarter ended March 31, 2020, to enhance our liquidity position in response to COVID-19, management elected to temporarily suspend share repurchases under the 2019 Repurchase Program. The 2019 Repurchase Program remains authorized by the Board of Directors and management has the discretion to resume share repurchases in the future at any time, depending upon market conditions, our capital needs and other factors.

ITEM 3.    Defaults Upon Senior Securities

None.

ITEM 4.    Mine Safety Disclosures

Not applicable.

ITEM 5.    Other Information

None.

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ITEM 6.    Exhibits

The following exhibits are being filed as part of this Quarterly Report on Form 10-Q:

3.1	Amended and Restated Certificate of Incorporation of the Company, as in effect on the date hereof (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K (File No. 1-33089) filed on October 25, 2006).
3.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Annex A to the Company’s Definitive Proxy Statement on Schedule 14A (File No. 1-33089) filed on April 26, 2019).
3.3	Fifth Amended and Restated By-laws of ExlService Holdings, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K (File No. 1-33089) filed on June 19, 2019)
31.1	Certification of the Chief Executive Officer of ExlService Holdings, pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer of ExlService Holdings, pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Scheme
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Extension Presentation Linkbase
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 7, 2020	EXLSERVICE HOLDINGS, INC.
	By:	/S/ MAURIZIO NICOLELLI
		MAURIZIO NICOLELLI Chief Financial Officer (Duly Authorized Signatory, Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Rohit Kapoor, certify that:

1. I have reviewed this Quarterly Report of ExlService Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2020	/s/ Rohit Kapoor
	Rohit Kapoor
	Vice-Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Maurizio Nicolelli, certify that:

1. I have reviewed this Quarterly Report of ExlService Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2020	/s/ Maurizio Nicolelli
	Maurizio Nicolelli
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ExlService Holdings, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rohit Kapoor, Vice-Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(a) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Rohit Kapoor

Rohit Kapoor

Vice-Chairman and Chief Executive Officer

May 7, 2020

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of ExlService Holdings, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Maurizio Nicolelli, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(a) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Maurizio Nicolelli

Maurizio Nicolelli

Chief Financial Officer

May 7, 2020

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Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2020

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Accumulated Other Comprehensive Loss

The balances as of March 31, 2020 and December 31, 2019 are as follows:

	As of
	March 31, 2020			December 31, 2019
Cumulative foreign currency translation loss	$	(104,928	)	$	(87,591	)
Unrealized (loss)/gain on cash flow hedges	(11,171		)	4,604
Retirement benefits	(1,679		)	(1,780		)
Income tax benefit/(expense) relating to above (1)	4,674			(125		)
Accumulated other comprehensive loss	$	(113,104	)	$	(84,892	)

(1) These are income tax benefits/(expenses) recognized on cash flow hedges and retirement benefits. Refer to Note 21 to the unaudited consolidated financial statements.

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Other Current Assets (Tables)

3 Months Ended

Mar. 31, 2020

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Other Current Assets

Other current assets consist of the following:

	As of
	March 31, 2020		December 31, 2019
Derivative instruments	$	3,671	$	4,076
Advances to suppliers	2,477		1,581
Receivables from statutory authorities	12,334		12,608
Contract assets	1,650		1,414
Deferred contract fulfillment costs	2,143		1,673
Others	3,898		3,242
Other current assets	$	26,173	$	24,594

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Employee Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2020

Retirement Benefits [Abstract]

Components of Net Periodic Benefit Cost

Components of net periodic benefit cost:

	Three months ended March 31,
	2020			2019
Service cost	$	678		$	487
Interest cost	243			219
Expected return on plan assets	(161		)	(142		)
Amortization of actuarial loss/(gain)	101			(39		)
Net gratuity cost	$	861		$	525

Change in Plan Assets

Change in Plan Assets
Plan assets at January 1, 2020	$	8,784
Actual return	147
Employer contribution	—
Benefits paid*	(286		)
Effect of exchange rate changes	(494		)
Plan assets at March 31, 2020	$	8,151

* Benefits payments were substantially made through the plan assets during the three months ended March 31, 2020.

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Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized (in shares)	15,000,000	15,000,000
Preferred stock, issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	100,000,000	100,000,000
Common stock, issued (in shares)	38,813,775	38,480,654
Common stock, outstanding (in shares)	34,315,996	34,185,241
Treasury stock (in shares)	4,497,779	4,295,413

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Net income	$ 22,411	$ 14,695
Adjustments to reconcile net income to net cash (used for)/provided by operating activities:
Depreciation and amortization expense	12,472	13,724
Stock-based compensation expense	4,778	6,956
Amortization of operating lease right-of-use assets	6,853	7,017
Unrealized gain on short term investments	267	(3,185)
Unrealized foreign exchange (gain)/loss, net	(5,112)	127
Deferred income tax expense	3,539	1,049
Allowance for expected credit losses	195	298
Loss from equity-method investment	55	67
Amortization of non-cash interest expense related to convertible senior notes	635	600
Impairment charges	0	1,227
Others, net	(26)	(1,401)
Change in operating assets and liabilities:
Accounts receivable	(17,518)	(12,016)
Prepaid expenses and other current assets	(3,249)	591
Advance income tax, net	(1,109)	(2,099)
Other assets	925	388
Accounts payable	1,400	(1,159)
Deferred revenue	2,579	3,262
Accrued employee costs	(37,046)	(22,436)
Accrued expenses and other liabilities	972	5,837
Operating lease liabilities	(6,576)	(5,199)
Net cash (used for)/provided by operating activities	(13,555)	8,343
Cash flows from investing activities:
Purchases of property and equipment	(12,274)	(10,878)
Investment in equity affiliate	(700)	0
Purchase of investments	(23,830)	(47,683)
Proceeds from redemption of investments	72,844	21,361
Net cash provided by/(used for) investing activities	36,040	(37,200)
Cash flows from financing activities:
Principal payments of finance lease liabilities	(67)	(137)
Proceeds from borrowings	110,000	46,000
Repayments of borrowings	(10,201)	(10,572)
Payment of debt issuance costs	0	(97)
Acquisition of treasury stock	(13,995)	(15,408)
Proceeds from exercise of stock options	921	22
Net cash provided by financing activities	86,658	19,808
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,653)	(455)
Net increase/(decrease) in cash, cash equivalents and restricted cash	106,490	(9,504)
Cash, cash equivalents and restricted cash at the beginning of the period	127,044	104,131
Cash, cash equivalents and restricted cash at the end of the period	$ 233,534	$ 94,627

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Leases - Balance Sheet Information (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Operating Lease
Operating lease right-of-use assets	$ 99,940	$ 86,396
Operating lease liabilities - Current	18,236	24,148
Operating lease liabilities - Non-current	93,707	74,709
Total operating lease liabilities	111,943	98,857
Finance Lease
Property and equipment, gross	1,567	1,757
Accumulated depreciation	(973)	(1,120)
Property and equipment, net	594	637
Finance lease liabilities - Current	252	253
Finance lease liabilities - Non-current	380	430
Total finance lease liabilities	$ 632	$ 683

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Revenues, net - Allowance for Credit Loss (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance at the beginning of the period	$ 1,163	$ 1,113	$ 1,113
Additions during the period, net	195	$ 298	184
Charged against allowance	0		(139)
Translation adjustment, if any	(12)		5
Balance at the end of the period	$ 1,346		$ 1,163

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Property and Equipment, net - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Owned Assets:
Owned assets, gross	$ 267,111	$ 257,836
Less: Accumulated depreciation and amortization	(177,192)	(179,331)
Owned assets, net	89,919	78,505
Right-of-use assets under finance leases:
Finance lease, right of use asset, gross	1,567	1,757
Less: Accumulated depreciation and amortization	(973)	(1,120)
Property and equipment, net	594	637
Property and equipment, net	90,513	79,142
Network equipment and computers
Owned Assets:
Owned assets, gross	96,669	98,309
Software
Owned Assets:
Owned assets, gross	88,813	79,746
Leasehold improvements
Owned Assets:
Owned assets, gross	43,896	44,982
Right-of-use assets under finance leases:
Finance lease, right of use asset, gross	640	738
Office furniture and equipment
Owned Assets:
Owned assets, gross	21,038	22,046
Right-of-use assets under finance leases:
Finance lease, right of use asset, gross	238	308
Motor vehicles
Owned Assets:
Owned assets, gross	575	601
Right-of-use assets under finance leases:
Finance lease, right of use asset, gross	$ 689	711
Buildings
Owned Assets:
Estimated useful lives	30 years
Owned assets, gross	$ 1,051	1,114
Land
Owned Assets:
Owned assets, gross	688	729
Capital work in progress
Owned Assets:
Owned assets, gross	$ 14,381	$ 10,309
Minimum | Network equipment and computers
Owned Assets:
Estimated useful lives	3 years
Minimum | Software
Owned Assets:
Estimated useful lives	3 years
Minimum | Leasehold improvements
Owned Assets:
Estimated useful lives	3 years
Minimum | Office furniture and equipment
Owned Assets:
Estimated useful lives	3 years
Minimum | Motor vehicles
Owned Assets:
Estimated useful lives	2 years
Maximum | Network equipment and computers
Owned Assets:
Estimated useful lives	5 years
Maximum | Software
Owned Assets:
Estimated useful lives	5 years
Maximum | Leasehold improvements
Owned Assets:
Estimated useful lives	8 years
Maximum | Office furniture and equipment
Owned Assets:
Estimated useful lives	8 years
Maximum | Motor vehicles
Owned Assets:
Estimated useful lives	5 years

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Income Taxes - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Tax Disclosure [Abstract]
Income tax expense	$ 5,855	$ 4,200
Effective tax rate, current income tax expense (benefit)	20.70%	22.10%
Excess tax benefits related to stock awards	$ 1,799	$ 1,015

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Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company determines the tax provision for interim periods using an estimate of its annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates its estimate of annual effective tax rate, and if its estimated tax rate changes, the Company makes a cumulative adjustment.

The Company recorded income tax expense of $5,855 and $4,200 for the three months ended March 31, 2020 and 2019, respectively. The effective tax rate decreased from 22.1% during the three months ended March 31, 2019 to 20.7% during the three months ended March 31, 2020, primarily as a result of the recording of higher excess tax benefits related to stock awards of $1,799 pursuant to ASU No. 2016-09 during the three months ended March 31, 2020 compared to $1,015 during the three months ended March 31, 2019.

Income taxes recognized in other comprehensive income are as follows:

	Three months ended March 31,
	2020			2019
Deferred taxes benefit/(expense):
Unrealized gain/(loss) on cash flow hedges	$	4,808		$	(1,543	)
Retirement benefits	(9		)	(109		)
Total Income tax benefit/(expense) recognized in other comprehensive income	$	4,799		$	(1,652	)

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Stock Based Compensation - Restricted Stock and Restricted Stock Units Activity Under Company's Stock Plans (Details) - $ / shares	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding [Roll Forward]
Number, Outstanding, at Beginning Balance (in shares)	27,384
Number, Granted (in shares)	0
Number, Vested (in shares)	0
Number, Forfeited (in shares)	0
Number, Outstanding, at Ending Balance (in shares)	27,384
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Weighted-Average Fair Value, Outstanding, at Beginning Balance (in dollars per share)	$ 48.72
Weighted-Average Fair Value, Granted (in dollars per share)	0
Weighted-Average Fair Value, Vested (in dollars per share)	0
Weighted-Average Fair Value, Forfeited (in dollars per share)	0
Weighted-Average Fair Value, Outstanding, at Ending Balance (in dollars per share)	$ 48.72
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding [Roll Forward]
Number, Outstanding, at Beginning Balance (in shares)	913,094
Number, Granted (in shares)	368,683
Number, Vested (in shares)	(293,289)
Number, Forfeited (in shares)	(24,649)
Number, Outstanding, at Ending Balance (in shares)	963,839
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Weighted-Average Fair Value, Outstanding, at Beginning Balance (in dollars per share)	$ 59.61
Weighted-Average Fair Value, Granted (in dollars per share)	78.19
Weighted-Average Fair Value, Vested (in dollars per share)	56.30
Weighted-Average Fair Value, Forfeited (in dollars per share)	62.18
Weighted-Average Fair Value, Outstanding, at Ending Balance (in dollars per share)	$ 67.66
Units vested for which the underlying common stock is yet to be issued (in shares)	167,270	167,270

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Other Non-Current Liabilities

3 Months Ended

Mar. 31, 2020

Liabilities, Noncurrent [Abstract]

Other Non-Current Liabilities

Other Non-Current Liabilities

Other non-current liabilities consist of the following:

	As of
	March 31, 2020		December 31, 2019
Derivative instruments	$	7,766	$	1,250
Unrecognized tax benefits	1,047		1,047
Retirement benefits	6,519		6,517
Deferred transition revenue	1,797		1,911
Others	4,392		987
Other non-current liabilities	$	21,521	$	11,712

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Borrowings

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Borrowings

Borrowings

Revolver Credit Agreement

On November 21, 2017, the Company and each of the Company’s wholly owned material domestic subsidiaries entered into a credit agreement with certain lenders and Citibank, N.A. as Administrative Agent (the “Credit Agreement”). The Credit Agreement provides for a $200,000 revolving credit facility (the “Credit Facility”) with an option to increase the commitments by up to $100,000, subject to certain approvals and conditions as set forth in the Credit Agreement. The Credit Agreement also includes a letter of credit sub-facility. The Credit Facility has a maturity date of November 21, 2022 and is voluntarily pre-payable from time to time without premium or penalty. Borrowings under the Credit Facility may be used for working capital and general corporate purposes, including permitted acquisitions. On July 2, 2018, the Company exercised its option under the Credit Agreement to increase the commitments by $100,000 thereby utilizing the entire revolver under the Credit Facility of $300,000. The incremental commitments were made pursuant to (and constitute part of) the existing commitments and are subject to the terms and conditions applicable to the existing commitments as set forth in the Credit Agreement.

Depending on the type of borrowing, borrowings under the Credit Agreement bear interest at a rate equal to the specified prime rate (alternate base rate) or adjusted LIBOR rate, plus, in each case, an applicable margin. The applicable margin is tied to the Company’s total net leverage ratio and ranges from 0% to 0.75% per annum with respect to loans pegged to the specified prime rate, and 1.00% to 1.75% per annum on loans pegged to the adjusted LIBOR rate. The revolving credit commitments under the Credit Agreement are subject to a commitment fee, which is also tied to the Company’s total net leverage ratio, and ranges from

0.15% to 0.30% per annum on the average daily amount by which the aggregate revolving commitments exceed the sum of outstanding revolving loans and letter of credit obligations. The Credit Facility carried an effective interest rate of 3.0% per annum and 3.9% per annum during the three months ended March 31, 2020, and 2019, respectively.

Obligations under the Credit Agreement are guaranteed by the Company’s material domestic subsidiaries and are secured by all or substantially all of the assets of the Company and its material domestic subsidiaries. The Credit Agreement contains customary affirmative and negative covenants, including, but not limited to, restrictions on the ability to incur indebtedness, create liens, make certain investments, make certain dividends and related distributions, enter into, or undertake, certain liquidations, mergers, consolidations or acquisitions and dispose of assets or subsidiaries. In addition, the Credit Agreement contains a covenant to not permit the interest coverage ratio (the ratio of EBITDA to cash interest expense) or the total net leverage ratio (total funded indebtedness, less unrestricted domestic cash and cash equivalents not to exceed $50,000 to EBITDA) for the four consecutive quarter period ending on the last day of each fiscal quarter, to be less than 3.5 to 1.0 or more than 3.0 to 1.0, respectively. As of March 31, 2020, the Company was in compliance with all financial and non-financial covenants listed under the Credit Agreement.

The Company entered into a second amendment (the “Amendment”) to its Credit Agreement, as amended, among the Company, as borrower, with certain lenders, and Citibank, N.A. as Administrative Agent to, among other things, permit the issuance by the Company of the convertible notes, and settlement upon maturity or conversion thereof, in accordance with the Investment Agreement, the indenture dated as of October 4, 2018 and the other documents entered into in connection therewith.

As of March 31, 2020, the Company had outstanding indebtedness under the Credit Facility of $199,000, of which $100,000 is expected to be repaid within the next twelve months and is included under “current portion of long-term borrowings” and of which $99,000 is included under “long-term borrowings, less current portion” in the unaudited consolidated balance sheets. As of December 31, 2019, the Company had an outstanding indebtedness under the Credit Facility of $99,000, of which $40,000 was included under “current portion of long-term borrowings” and the balance of $59,000 was included under “long-term borrowings, less current portion” in the consolidated balance sheets.

The Company incurred certain debt issuance costs, which are deferred and amortized as an adjustment to interest expense over the term of the credit facility. The unamortized debt issuance costs as of March 31, 2020 and December 31, 2019 was $684 and $748, respectively, and is included under "other current assets" and “other assets” in the consolidated balance sheets.

Convertible Senior Notes

On October 1, 2018, the Company entered into an investment agreement (the “Investment Agreement”) with Orogen Echo LLC (the “Purchaser”), an affiliate of The Orogen Group LLC, relating to the issuance to the Purchaser of $150,000 in an aggregate principal amount of 3.50% Convertible Senior Notes due October 1, 2024 (the “Notes”). The transactions contemplated by the Investment Agreement, including the issuance of the Notes, closed on October 4, 2018. The Notes bear interest at a rate of 3.50% per annum, payable semi-annually in arrears in cash on April 1 and October 1 of each year. During the three months ended March 31, 2020 and 2019, the Company recognized interest expense of $1,313 each on the Notes. The Notes are convertible at an initial conversion rate of 13.3333 shares of the common stock per one thousand dollar principal amount of the Notes (which represents an initial conversion price of approximately $75 per share). With certain exceptions, upon a fundamental change, as defined in the Indenture, the holders of the Notes may require that the Company to repurchase all or part of the principal amount of the Notes at a purchase price equal to the principal amount plus accrued and unpaid interest. The Company may redeem the principal amount of the Notes, at its option, in whole but not in part, at a purchase price equal to the principal amount plus accrued and unpaid interest on or after October 1, 2021, if the closing sale price of the common stock exceeds 150% of the then-current conversion price for 20 or more trading days in the 30 consecutive trading day period preceding the Company’s exercise of this redemption right (including the trading day immediately prior to the date of the notice of redemption). The Company may elect to settle conversions of the Notes by paying or delivering, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. The Company used the proceeds from the issuance of the Notes to repay $150,000 of its outstanding borrowings under the Credit Facility.

The net proceeds from the issuance of the Notes were approximately $149,000, after deducting debt issuance costs of $1,000 and offering expenses of approximately $442 paid by the Company. These transaction and debt issuance costs were allocated between the liability and equity components based on their relative values. The transaction costs and debt issuance costs allocated to the liability and equity components were $1,279 and $163, respectively. The debt issuance costs allocated to the liability component are deferred and amortized as an adjustment to interest expense over the term of the Notes. The unamortized debt

issuance costs are presented as a direct reduction from the Notes in the consolidated balance sheets. The unamortized debt issuance costs as of March 31, 2020 and December 31, 2019 were $964 and $1,018, respectively.

The Company accounted for the liability and equity components of the Notes separately to reflect its non-convertible debt borrowing rate. The estimated fair value of the liability component at issuance of $133,077 was determined using a discounted cash flow technique, which considered debt issuances with similar features of the Company’s debt, excluding the conversion feature. The resulting effective interest rate for the Notes was 5.75% per annum. The excess of the gross proceeds received over the estimated fair value of the liability component totaling $16,923 was allocated to the conversion feature (equity component, recorded as additional paid-in capital) with a corresponding offset recognized as a discount to reduce the net carrying value of the Notes. The discount is being amortized to interest expense over a six-year period ending October 1, 2024 (the expected life of the liability component) using the effective interest method. During the three months ended March 31, 2020 and March 31, 2019, the Company amortized $635 and $600, of the discount to interest expense, on the Notes. The unamortized debt discount on the Notes as of March 31, 2020 and December 31, 2019 was $13,216 and $13,851, respectively.

Borrowings also includes structured payables which are in the nature of debt, amounting to $666 and $867 as of March 31, 2020 and December 31, 2019, respectively, included under "current portion of long-term borrowings".

Future principal payments/maturities for all of the Company's borrowings as of March 31, 2020 were as follows:

	Notes		Revolver Credit		Structured Payables		Total
2020 (April - December)	$	—	$	100,000	$	666	$	100,666
2021	—		—		—		—
2022	—		99,000		—		99,000
2023	—		—		—		—
2024	150,000		—		—		150,000
Total	$	150,000	$	199,000	$	666	$	349,666

Letters of Credit

In the ordinary course of business, the Company provides standby letters of credit to third parties primarily for facility leases. As of March 31, 2020 and December 31, 2019, the Company had outstanding letters of credit of $461 each that were not recognized in the consolidated balance sheets.

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Earnings Per Share

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding, adjusted for outstanding shares that are subject to repurchase during each period. Diluted earnings per share is computed using the weighted average number of common shares plus the potentially dilutive effect of common stock equivalents (outstanding stock options, restricted stock and restricted stock units) issued and outstanding at the reporting date, using the treasury stock method. Common stock equivalents that are anti-dilutive are excluded from the computation of weighted average shares outstanding. The Company includes performance stock unit awards in dilutive potential common shares when they become contingently issuable and have a dilutive impact per authoritative guidance and excludes such awards when they are not contingently issuable.

The following table sets forth the computation of basic and diluted earnings per share:

	Three months ended March 31,
	2020		2019
Numerators:
Net income	$	22,411	$	14,695
Denominators:
Basic weighted average common shares outstanding	34,401,565		34,374,815
Dilutive effect of share-based awards	319,038		458,620
Diluted weighted average common shares outstanding	34,720,603		34,833,435
Earnings per share attributable to ExlService Holdings Inc. stockholders:
Basic	$	0.65	$	0.43
Diluted	$	0.65	$	0.42
Weighted average potentially dilutive shares considered anti-dilutive and not included in computing diluted earnings per share	170,313		425,432

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Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill

The Company transitioned to new segment reporting structure effective January 1, 2020, which resulted in certain changes to its operating segments and reporting units. The Company reallocated goodwill to its reporting units using a relative fair value approach. In addition, the Company completed an assessment of any potential goodwill impairment for all its reporting units immediately prior to the reallocation and determined that no impairment existed.

The following table sets forth details of changes in goodwill by reportable segment of the Company:

	Insurance			Healthcare			Emerging Business			TT&L			F&A			All Other			Analytics			Total
Balance at January 1, 2019	$	38,203		$	19,276		$	—		$	12,697		$	47,193		$	5,326		$	227,289		$	349,984
Currency translation adjustments	73			—			—			(240		)	(288		)	—			—			(455		)
Balance at December 31, 2019	$	38,276		$	19,276		$	—		$	12,457		$	46,905		$	5,326		$	227,289		$	349,529
Goodwill reallocation(1)	12,192			2,693			49,803			(12,457		)	(46,905		)	(5,326		)	—			—
Currency translation adjustments	(293		)	(39		)	(1,119		)	—			—			—			(2		)	(1,453		)
Balance at March 31, 2020	$	50,175		$	21,930		$	48,684		$	—		$	—		$	—		$	227,287		$	348,076

⁽¹⁾ Represents the reallocation of goodwill as a result of the Company reorganizing its operating segments as described in Note 3 to the unaudited consolidated financial statements.

As of March 31, 2020, due to the deteriorating macroeconomic conditions arising from the COVID-19 pandemic, the Company performed a goodwill impairment test for its reporting units. The Company considered the effects of the COVID-19 pandemic on its significant inputs used in determining the fair value of the Company’s reporting units. Key assumptions used in determining the fair value of the Company’s reporting units were a long-term debt-free net cash flow growth rate in the terminal year of 3.0% and discount rates ranging from 9.0% to 10.0%. Based on the results, the fair value of each of the Company’s reporting units exceeded their carrying value and the Company’s goodwill was not impaired. However, for the Healthcare Analytics reporting unit within the Analytics reportable segment, the fair value was not substantially in excess of its carrying value. The Healthcare Analytics reporting unit was formed as a result of the Company’s transition to a new organization structure effective January 1, 2020 and the integration of the SCIOinspire Holdings Inc. acquisition in July 2018 with other analytics services offered to clients in the Healthcare industry. As of March 31, 2020, the goodwill associated with the Healthcare Analytics reporting unit was $181,217, representing approximately 52.0% of the Company’s total goodwill, and the percentage by which the fair value of the Healthcare Analytics reporting unit exceeded the carrying value as of the date of the most recent annual impairment test was approximately 15.0%. While the goodwill of this reporting unit is not currently impaired, there could be an impairment in the future as a result of changes in certain assumptions, including those related to the pandemic. For example, the fair value could be adversely affected and may result in an impairment of goodwill if this reporting unit is not able to expand its existing customer relationships, win new clients, improve profitability, the estimated cash flows are discounted at a higher risk-adjusted rate, or the market multiples decreases. The Company also believes that it is possible that its actual revenue growth rates could be higher than the long-term revenue growth rates used in the impairment test due to a number of factors, including (i) increased demand for the Company’s reimbursement and care optimization services to help clients identify overpayments and enhance their claims payment accuracy, (ii) the Company's ability to improve business outcomes for its healthcare customers through data-driven insights thereby generating more demand for its analytics services, and (iii) the Company’s ability to offer integrated solutions by leveraging technology platforms, digital, customizable and configurable analytics for its clients. The Company believes that its discount rate utilized is appropriate to use for its future cash flow assumptions considering current market conditions. However, keeping all other variables constant, a further 50 basis point increase in discount rate will decrease the percentage by which the fair value exceeds the carrying value of the Healthcare Analytics reporting unit to approximately 10.0%. The Company continues to monitor the cash flows of the Healthcare Analytics reporting unit for changes in the business environment that could impact recoverability.

The recoverability of goodwill is dependent upon the continued growth of cash flows from our business activities. There can be no assurances that goodwill will not be impaired in future periods. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. These estimates and judgements may not be within the control of the Company and accordingly it is reasonably possible that the judgments and estimates described above could change in future periods.

Intangible Assets

Information regarding the Company’s intangible assets is set forth below:

	As of March 31, 2020
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	97,483	$	(45,819	)	$	51,664
Developed technology	26,878		(11,889		)	14,989
Trade names and trademarks	5,100		(2,919		)	2,181
	$	129,461	$	(60,627	)	$	68,834
Indefinite-lived intangible assets:
Trade names and trademarks	900		—			900
Total intangible assets	$	130,361	$	(60,627	)	$	69,734

	As of December 31, 2019
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	97,602	$	(43,330	)	$	54,272
Developed technology	26,976		(10,687		)	16,289
Trade names and trademarks	5,100		(2,579		)	2,521
	$	129,678	$	(56,596	)	$	73,082
Indefinite-lived intangible assets:
Trade names and trademarks	900		—			900
Total intangible assets	$	130,578	$	(56,596	)	$	73,982

The amortization expense for the period is as follows:

	Three months ended March 31,
	2020		2019
Amortization expense	$	4,153	$	5,528

The remaining weighted average life of intangible assets is as follows:

	(in years)
Customer relationships	7.54
Developed technology	3.41
Trade names and trademarks (Finite lived)	2.22

Estimated future amortization expense related to intangible assets as of March 31, 2020 is as follows:
2020 (April 1 - December 31)	$	10,262
2021	12,732
2022	11,326
2023	9,037
2024	6,695
2025 and thereafter	18,782
Total	$	68,834

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Revenues, net (Tables)

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Contracts with Customer, Receivables and Liabilities

The following table provides information about accounts receivable, contract assets and contract liabilities from contracts with customers:

	As of
	March 31, 2020		December 31, 2019
Accounts receivable, net	$	187,137	$	171,864
Contract assets	$	5,518	$	5,391
Contract liabilities
Deferred revenue (consideration received in advance)	$	14,136	$	11,259
Consideration received for process transition activities	$	2,877	$	3,036

Contract Acquisition and Fulfillment Costs

	Contract Acquisition Costs									Contract Fulfillment Costs
	Quarter Ended						Year Ended			Quarter Ended						Year Ended
	March 31, 2020			March 31, 2019			December 31, 2019			March 31, 2020			March 31, 2019			December 31, 2019
							(Audited)									(Audited)
Opening Balance	$	1,307		$	713		$	713		$	7,255		$	4,051		$	4,051
Addition	—			—			1,222			284			726			4,652
Amortization	(92		)	(200		)	(628		)	(623		)	(305		)	(1,448		)
Closing Balance	$	1,215		$	513		$	1,307		$	6,916		$	4,472		$	7,255

Movement in Allowance for Expected Credit Loss

	As of
	March 31, 2020			January 1, 2020
Accounts receivable, including unbilled receivables	$	188,483		$	173,027
Less: Allowance for lifetime expected credit loss	(1,346		)	(1,163		)
Accounts receivable, net	$	187,137		$	171,864

The movement in allowance for lifetime expected credit loss on customer balances for the quarters ended March 31, 2020 and December 31, 2019 was as follows:

	As of
	March 31, 2020			December 31, 2019
Balance at the beginning of the period	$	1,163		$	1,113
Additions during the period, net	195			184
Charged against allowance	—			(139		)
Translation adjustment, if any	(12		)	5
Balance at the end of the period	$	1,346		$	1,163

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Capital Commitments

At March 31, 2020, the Company has committed to spend approximately $12,300 under agreements to purchase property and equipment. This amount is net of capital advances paid which are recognized in the unaudited consolidated balance sheets as property and equipment.

Other Commitments

Certain units of the Company’s Indian subsidiaries were established as 100% Export-Oriented units or under the Software Technology Parks of India (“STPI”) or Special Economic Zone (“SEZ”) scheme promulgated by the Government of India. These units are exempt from customs, central excise duties, and levies on imported and indigenous capital goods, stores, and spares. The Company has undertaken to pay custom duties, service taxes, levies, and liquidated damages payable, if any, in respect of imported and indigenous capital goods, stores and spares consumed duty free, in the event that certain terms and conditions are not fulfilled. The Company’s management believes, however, that these units have in the past satisfied and will continue to satisfy the required conditions.

The Company’s operations centers in the Philippines are registered with the Philippine Economic Zone Authority (“PEZA”). The registration provides the Company with certain fiscal incentives on the import of capital goods and local purchase of services and materials and requires ExlService Philippines, Inc. to meet certain performance and investment criteria. The Company’s management believes that these centers have in the past satisfied and will continue to satisfy the required criteria.

Contingencies

U.S. and Indian transfer pricing regulations require that any international transaction involving associated enterprises be at an arm’s-length price. Accordingly, the Company determines the appropriate pricing for the international transactions among its associated enterprises on the basis of a detailed functional and economic analysis involving benchmarking against transactions among entities that are not under common control. The tax authorities have jurisdiction to review this arrangement and in the event that they determine that the transfer price applied was not appropriate, the Company may incur increased tax liability, including accrued interest and penalties. The Company is currently involved in disputes with the Indian tax authorities over the application of some of its transfer pricing policies for some of its subsidiaries. Further, the Company and a U.S. subsidiary are engaged in tax litigation with the income-tax authorities in India on the issue of permanent establishment. The Company is subject to taxation in the United States and various states and foreign jurisdictions. For the U.S., the Philippines and India, tax year 2016 and subsequent tax years remain open for examination by the tax authorities as of March 31, 2020.

The aggregate amount demanded by income tax authorities (net of advance payments, if any) from the Company related to its transfer pricing issues for tax years 2003 to 2015 and its permanent establishment issues for tax years 2003 to 2007 as of March 31, 2020 and December 31, 2019 is $16,104 and $16,220, respectively, of which the Company has made payments and/or provided bank guarantees to the extent $7,858 and $8,108, respectively. Amounts paid as deposits in respect of such assessments aggregating to $6,108 and $6,252 as of March 31, 2020 and December 31, 2019, respectively, are included in “Other assets” and amounts deposited for bank guarantees aggregating to $1,750 and $1,856 as of March 31, 2020 and December 31, 2019, respectively, are included in “Restricted cash” in the non-current assets section of the Company’s unaudited consolidated balance sheets.

Based on the facts underlying the Company’s position and its experience with these types of assessments, the Company believes that its position will more likely than not be sustained upon final examination by the tax authorities based on its technical merits as of the reporting date and accordingly has not accrued any amount with respect to these matters in its unaudited consolidated financial statements. The Company does not expect any impact from these assessments on its future income tax expense. It is possible that the Company might receive similar orders or assessments from tax authorities for subsequent years. Accordingly, even if these disputes are resolved, the Indian tax authorities may still serve additional orders or assessments.

During the quarter ended March 31, 2019, there was a judicial pronouncement in India with respect to defined contribution benefits payments interpreting certain statutory defined contribution obligations of employees and employers. Currently some of the Company's subsidiaries in India are undergoing assessment with the statutory authorities. As of the reporting date, it is unclear whether the interpretation set out in the pronouncement has retrospective application. If applied retrospectively, the interpretation may result in a significant increase in contributions payable by the Company for past periods for certain of its India-based employees. There are numerous interpretative challenges concerning the retrospective application of the judgment. Due to such challenges and a lack of interpretive guidance, and based on legal advice, the Company believes it is currently impracticable to reliably estimate the timing and amount of any payments the Company may be required to make. Accordingly, the Company will re-evaluate the amount of a potential provision, if any, upon further developments.

From time to time, the Company and/or its present officers or directors, on individual basis, may be or have been, named as a defendant in litigation matters, including employment-related claims. The plaintiffs in those cases seek damages, including, where applicable, compensatory damages, punitive damages and attorney’s fees. With respect to pending litigation matters as of the reporting date, the Company believes that the damages amounts claimed in such cases are not meaningful indicators of the potential liabilities of the Company, that these matters are without merit, and that the Company intends to vigorously defend each of them.

The outcomes of legal actions are unpredictable and subject to significant uncertainties, and thus it is inherently difficult to determine the likelihood of the Company incurring a material loss or quantification of any such loss. With respect to pending litigation matters as of the reporting date, based on information currently available, including the Company’s assessment of the facts underlying each matter and advice of counsel, the amount or range of reasonably possible losses, if any, cannot be reasonably estimated. Based on the Company’s assessment, including the availability of insurance recoveries, the Company’s management does not believe that currently pending litigation, individually or in aggregate, will have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

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Property and Equipment, net (Tables)

3 Months Ended

Mar. 31, 2020

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

The amortization expense on internally developed software recognized in the unaudited consolidated statements of income was as follows:

	Three months ended March 31
	2020		2019
Amortization expense	$	831	$	647

Property and equipment, net consists of the following:

	Estimated useful lives	As of
	(Years)	March 31, 2020			December 31, 2019
Owned Assets:
Network equipment and computers	3-5	$	96,669		$	98,309
Software	3-5	88,813			79,746
Leasehold improvements	3-8	43,896			44,982
Office furniture and equipment	3-8	21,038			22,046
Motor vehicles	2-5	575			601
Buildings	30	1,051			1,114
Land	—	688			729
Capital work in progress	—	14,381			10,309
		267,111			257,836
Less: Accumulated depreciation and amortization		(177,192		)	(179,331		)
		$	89,919		$	78,505
Right-of-use assets under finance leases:
Leasehold improvements		$	640		$	738
Office furniture and equipment		238			308
Motor vehicles		689			711
		1,567			1,757
Less: Accumulated depreciation and amortization		(973		)	(1,120		)
		$	594		$	637
Property and equipment, net		$	90,513		$	79,142

The depreciation and amortization expense, excluding amortization of acquisition-related intangibles, recognized in the unaudited consolidated statements of income was as follows:

	Three months ended March 31,
	2020		2019
Depreciation and amortization expense	$	8,297	$	8,139

Internally developed software costs, included under Software, was as follows:

	As of
	March 31, 2020			December 31, 2019
Cost	$	16,147		$	15,784
Less : Accumulated amortization	(5,812		)	(4,989		)
Internally developed software, net	$	10,335		$	10,795

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Revenues, net - Contracts with Customer, Receivables, Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Jan. 01, 2020	Dec. 31, 2019
Revenue from Contract with Customer [Abstract]
Accounts receivable, net	$ 187,137	$ 171,864	$ 171,864
Contract assets	5,518		5,391
Contract liabilities:
Deferred revenue (consideration received in advance)	14,136		11,259
Consideration received for process transition activities	$ 2,877		$ 3,036

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Leases (Tables)

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Schedule of supplemental balance sheet information

	As of			As of
	March 31, 2020			December 31, 2019
Operating Lease
Operating lease right-of-use assets	$	99,940		$	86,396
Operating lease liabilities - Current	$	18,236		$	24,148
Operating lease liabilities - Non-current	93,707			74,709
Total operating lease liabilities	$	111,943		$	98,857
Finance Lease
Property and equipment, gross	$	1,567		$	1,757
Accumulated depreciation	(973		)	(1,120		)
Property and equipment, net	$	594		$	637
Finance lease liabilities - Current	$	252		$	253
Finance lease liabilities - Non-current	380			430
Total finance lease liabilities	$	632		$	683

Schedule of components of lease cost

The components of lease cost, which are included in the Company's unaudited consolidated statements of income, are as follows:

Lease cost	Three months ended March 31, 2020		Three months ended March 31, 2019
Finance lease:
Amortization of right-of-use assets	$	62	$	95
Interest on lease liabilities	30		25
Operating lease(a)	6,853		7,017
Total lease cost	$	6,945	$	7,137

(a) Includes short-term leases, which are immaterial.

Schedule of supplemental cash flow informaton related to leases

Supplemental cash flow and other information related to leases are as follows:

	Three months ended March 31,
	2020			2019
Cash payments for amounts included in the measurement of lease liabilities :
Operating cash outflows for operating leases	$	6,576		$	5,199
Operating cash outflows for finance leases	$	30		$	20
Financing cash outflows for finance leases	$	67		$	137
Right-of-use assets obtained in exchange for new operating lease liabilities	$	16,366		$	16,614
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—		$	—
Weighted-average remaining lease term
Finance lease	2.3 years			2.9 years
Operating lease	6.8 years			6.4 years
Weighted-average discount rate
Finance lease	10.2		%	8.7		%
Operating lease	7.4		%	7.3		%

Schedule of maturities of lease liabilities

Maturities of lease liabilities as of March 31, 2020 are as follows:

	Operating Leases		Finance Leases
2020 (April 1 - December 31)	$	19,552	$	304
2021	24,377		239
2022	22,607		131
2023	20,783		86
2024	16,427		10
2025 and thereafter	42,783		—
Total lease payments	$	146,529	$	770
Less: Imputed interest	34,586		138
Present value of lease liabilities	$	111,943	$	632

Schedule of maturities of lease liabilities

Maturities of lease liabilities as of March 31, 2020 are as follows:

	Operating Leases		Finance Leases
2020 (April 1 - December 31)	$	19,552	$	304
2021	24,377		239
2022	22,607		131
2023	20,783		86
2024	16,427		10
2025 and thereafter	42,783		—
Total lease payments	$	146,529	$	770
Less: Imputed interest	34,586		138
Present value of lease liabilities	$	111,943	$	632

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Segment and Geographical Information - Additional Information (Details)	3 Months Ended
	Mar. 31, 2020 operating_segment
Segment Reporting [Abstract]
Number of operating segments	4

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Borrowings - Principle Maturities of Borrowings and Credit Arrangements (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
2020 (April - December)	$ 100,666
2021	0
2022	99,000
2023	0
2024	150,000
Total	349,666
Notes | 3.50% Convertible Senior Notes due October 1, 2024
Debt Instrument [Line Items]
2020 (April - December)	0
2021	0
2022	0
2023	0
2024	150,000
Total	150,000	$ 150,000
Structured Payables
Debt Instrument [Line Items]
2020 (April - December)	666
2021	0
2022	0
2023	0
2024	0
Total	666	$ 867
Revolver Credit
Debt Instrument [Line Items]
2020 (April - December)	100,000
2021	0
2022	99,000
2023	0
2024	0
Total	$ 199,000

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Accrued Expenses and Other Current Liabilities - Summary of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Accrued expenses	$ 51,449	$ 53,133
Payable to statutory authorities	15,718	6,506
Derivative instruments	6,904	1,783
Client liabilities	6,565	6,378
Interest payable	2,843	1,492
Other current liabilities	1,016	1,731
Accrued expenses and other current liabilities	$ 84,495	$ 71,023

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Goodwill and Intangible Assets - Weighted Average Life of Intangible Assets (Details)	3 Months Ended
	Mar. 31, 2020
Customer relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average life of intangible assets	7 years 6 months 14 days
Developed technology
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average life of intangible assets	3 years 4 months 28 days
Trade names and trademarks (Finite lived)
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average life of intangible assets	2 years 2 months 19 days

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Derivatives and Hedge Accounting - Summary of Fair Value of Foreign Currency Exchange Contracts (Details) - Foreign currency exchange contracts - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Derivatives in hedging relationships | Other current assets
Derivatives, Fair Value [Line Items]
Foreign currency exchange contracts, asset	$ 2,403	$ 3,945
Derivatives in hedging relationships | Other assets
Derivatives, Fair Value [Line Items]
Foreign currency exchange contracts, asset	1,075	3,433
Derivatives in hedging relationships | Accrued expenses and other current liabilities
Derivatives, Fair Value [Line Items]
Foreign currency exchange contracts, liability	6,883	1,524
Derivatives in hedging relationships | Other non-current liabilities
Derivatives, Fair Value [Line Items]
Foreign currency exchange contracts, liability	7,766	1,250
Derivatives not designated as hedging instruments | Other current assets
Derivatives, Fair Value [Line Items]
Foreign currency exchange contracts, asset	1,268	131
Derivatives not designated as hedging instruments | Accrued expenses and other current liabilities
Derivatives, Fair Value [Line Items]
Foreign currency exchange contracts, liability	$ 21	$ 259

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Cash, Cash Equivalents and Restricted Cash

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

For the purpose of unaudited statements of cash flows, cash, cash equivalents and restricted cash comprise of the following:

	As of
	March 31, 2020		March 31, 2019
Cash and cash equivalents	$	224,874	$	86,688
Restricted cash (current)	6,369		5,364
Restricted cash (non-current)	2,291		2,575
Cash, cash equivalents and restricted cash	$	233,534	$	94,627

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Other Current Assets

3 Months Ended

Mar. 31, 2020

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Current Assets

Other Current Assets

Other current assets consist of the following:

	As of
	March 31, 2020		December 31, 2019
Derivative instruments	$	3,671	$	4,076
Advances to suppliers	2,477		1,581
Receivables from statutory authorities	12,334		12,608
Contract assets	1,650		1,414
Deferred contract fulfillment costs	2,143		1,673
Others	3,898		3,242
Other current assets	$	26,173	$	24,594

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Other Income, net (Tables)

3 Months Ended

Mar. 31, 2020

Other Income and Expenses [Abstract]

Summary of Other Income, net

Other income, net consists of the following:

	Three months ended March 31,
	2020			2019
Gain on sale and mark-to-market of mutual funds, net	$	2,056		$	3,526
Interest income	532			796
Others, net	(59		)	101
Other income, net	$	2,529		$	4,423

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Segment and Geographical Information (Tables)

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Revenues and Cost of Revenues for Company's Reportable Segments

	Three months ended March 31, 2020
	Insurance		Healthcare		Emerging Business		Analytics		Total
Revenues, net	$	83,739	$	27,029	$	42,791	$	92,431	$	245,990
Cost of revenues(1)	58,965		19,593		25,482		58,616		162,656
Gross profit(1)	$	24,774	$	7,436	$	17,309	$	33,815	$	83,334
Operating expenses									55,847
Foreign exchange gain, interest expense and other income, net									834
Income tax expense									5,855
Loss from equity-method investment									55
Net income									$	22,411

	Three months ended March 31, 2019
	Insurance		Healthcare		Emerging Business		Analytics		Total
Revenues, net	$	81,286	$	22,248	$	49,078	$	86,961	$	239,573
Cost of revenues(1)	55,243		17,802		27,293		56,902		157,240
Gross profit(1)	$	26,043	$	4,446	$	21,785	$	30,059	$	82,333
Operating expenses									65,472
Foreign exchange gain, interest expense and other income, net									2,101
Income tax expense									4,200
Loss from equity-method investment									67
Net income									$	14,695

⁽¹⁾ Exclusive of depreciation and amortization expense.

Revenues, net by service type, were as follows:

	Three months ended March 31,
	2020		2019
BPM and related services(1)	$	153,559	$	152,612
Analytics services	92,431		86,961
Revenues, net	$	245,990	$	239,573

⁽¹⁾ BPM and related services include revenues of the Company's Insurance, Healthcare and Emerging Business operating segments. Refer to the reportable segment disclosure above.

Revenues Based on Geographical Information

The Company attributes the revenues to regions based upon the location of its customers.

	Three months ended March 31,
	2020		2019
Revenues, net
United States	$	207,880	$	196,104
Non-United States
United Kingdom	23,278		29,101
Rest of World	14,832		14,368
Total Non-United States	38,110		43,469
Revenues, net	$	245,990	$	239,573

Property, Plant and Equipment based on Geographical Information

Long-lived assets by geographic area, which consist of property and equipment, net and operating lease right-of-use assets were as follows:

	As of
	March 31, 2020		December 31, 2019
Long-lived assets
India	$	99,385	$	78,244
United States	52,772		52,375
Philippines	27,350		26,006
Rest of World	10,946		8,913
Long-lived assets	$	190,453	$	165,538

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Related Party Disclosures

3 Months Ended

Mar. 31, 2020

Related Party Transactions [Abstract]

Related Party Disclosures

Related Party Disclosures

On October 1, 2018, the Company entered into the Investment Agreement with the Purchaser relating to the issuance to the Purchaser of $150,000 aggregate principal amount of the Notes. In connection with the investment, Vikram S. Pandit, Chairman and CEO of The Orogen Group LLC (an affiliate of the Purchaser), was appointed to Company’s Board of Directors.

The Company had outstanding Notes with a principal amount of $150,000 each as of March 31, 2020 and December 31, 2019 and interest accrued of $2,625 and $1,313 as of March 31, 2020 and December 31, 2019, respectively, related to the Investment Agreement. During the three months ended March 31, 2020 and 2019, the Company recognized interest expense of $1,313 each on the Notes. Refer to Note 17 to the unaudited consolidated financial statements for details.

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Income Taxes Income Taxes (Tables)

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Tax Recognized in Other Comprehensive Income

Income taxes recognized in other comprehensive income are as follows:

	Three months ended March 31,
	2020			2019
Deferred taxes benefit/(expense):
Unrealized gain/(loss) on cash flow hedges	$	4,808		$	(1,543	)
Retirement benefits	(9		)	(109		)
Total Income tax benefit/(expense) recognized in other comprehensive income	$	4,799		$	(1,652	)

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Segment and Geographical Information - Revenues and Cost of Revenues for Company's Reportable Segments (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2020	Mar. 31, 2019
Revenues and cost of revenues for Company's reportable segments [Line Items]
Revenues, net		$ 245,990	$ 239,573
Cost of revenues	[1]	162,656	157,240
Gross profit	[1]	83,334	82,333
Operating expenses		55,847	65,472
Foreign exchange gain, interest expense and other income, net		834	2,101
Income tax expense		5,855	4,200
Loss from equity-method investment		55	67
Net income attributable to ExlService Holdings, Inc. stockholders		22,411	14,695
BPM and related services
Revenues and cost of revenues for Company's reportable segments [Line Items]
Revenues, net		153,559	152,612
Analytics services
Revenues and cost of revenues for Company's reportable segments [Line Items]
Revenues, net		92,431	86,961
Operating Segments | Insurance
Revenues and cost of revenues for Company's reportable segments [Line Items]
Revenues, net		83,739	81,286
Cost of revenues		58,965	55,243
Gross profit		24,774	26,043
Operating Segments | Healthcare
Revenues and cost of revenues for Company's reportable segments [Line Items]
Revenues, net		27,029	22,248
Cost of revenues		19,593	17,802
Gross profit		7,436	4,446
Operating Segments | Emerging Business
Revenues and cost of revenues for Company's reportable segments [Line Items]
Revenues, net		42,791	49,078
Cost of revenues		25,482	27,293
Gross profit		17,309	21,785
Operating Segments | Analytics
Revenues and cost of revenues for Company's reportable segments [Line Items]
Revenues, net		92,431	86,961
Cost of revenues		58,616	56,902
Gross profit		$ 33,815	$ 30,059

[1] Exclusive of depreciation and amortization expense.

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Revenues, net - Contract Acquisition and Fulfillment Costs (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Contract Acquisition Costs
Increase (Decrease) In Capitalized Contract Costs [Roll Forward]
Opening Balance	$ 1,307	$ 713	$ 713
Addition	0	0	1,222
Amortization	(92)	(200)	(628)
Closing Balance	1,215	513	1,307
Contract Fulfillment Costs
Increase (Decrease) In Capitalized Contract Costs [Roll Forward]
Opening Balance	7,255	4,051	4,051
Addition	284	726	4,652
Amortization	(623)	(305)	(1,448)
Closing Balance	$ 6,916	$ 4,472	$ 7,255

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Borrowings - Additional Information (Details)			3 Months Ended
	Oct. 01, 2018 USD ($) $ / shares	Nov. 21, 2017 USD ($)	Mar. 31, 2020 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)	Jul. 02, 2018 USD ($)
Credit Facilities [Line Items]
Payment of debt issuance costs			$ 0	$ 97,000
Debt discount amortization			635,000	600,000
Structured payable			349,666,000
Current portion of long-term borrowings			100,666,000		$ 40,867,000
Long-term borrowings, less current portion			234,820,000		194,131,000
Outstanding letters of credit			461,000		461,000
Notes Payable, Other Payables
Credit Facilities [Line Items]
Structured payable			666,000		867,000
3.50% Convertible Senior Notes due October 1, 2024 | Convertible Notes Payable
Credit Facilities [Line Items]
Debt instrument face amount	$ 150,000,000
Interest rate	3.50%
Interest expense			1,313,000	1,313,000
Conversion rate	0.0133333000
Debt instrument, conversion price (in dollars per share) | $ / shares	$ 75
Threshold percentage of stock price trigger	150.00%
Net proceeds from convertible notes	$ 149,000,000
Debt issuance costs	1,000,000
Payment of debt issuance costs	442,000
Liability component of debt issuance costs	1,279,000
Equity component of debt issuance costs	163,000
Unamortized debt issuance costs			964,000		$ 1,018,000
Convertible notes, liability component	133,077,000
Convertible senior notes, interest rate					5.75%
Allocation of equity component related to issuance costs on convertible senior notes	$ 16,923,000
Remaining discount amortization period	6 years
Debt discount amortization			635,000	$ 600,000
Unamortized debt discount			13,216,000		$ 13,851,000
Structured payable			150,000,000		150,000,000
Revolving Credit Facility
Credit Facilities [Line Items]
Outstanding debt			199,000,000		99,000,000
Long-term debt, maturities, repayments of principal in next twelve months			100,000,000
Outstanding debt, noncurrent			99,000,000		59,000,000
Outstanding debt, current					40,000,000
Unamortized debt issuance costs			684,000		$ 748,000
Repayments of outstanding borrowings	$ 150,000,000
Structured payable			$ 199,000,000
Revolving Credit Facility | New Credit Agreement
Credit Facilities [Line Items]
Maximum borrowing capacity		$ 200,000,000
Line of credit interest rate during period			3.00%	3.90%
Unrestricted domestic cash and cash equivalents threshold			$ 50,000,000
Interest coverage ratio, minimum			3.5
Leverage ratio, maximum			3.0
Revolving Credit Facility | New Credit Agreement | Maximum
Credit Facilities [Line Items]
Commitment fee percentage range on unused credit facility		0.30%
Revolving Credit Facility | New Credit Agreement | Minimum
Credit Facilities [Line Items]
Commitment fee percentage range on unused credit facility		0.15%
Revolving Credit Facility | New Credit Agreement | Prime Rate | Maximum
Credit Facilities [Line Items]
Basis spread on variable rate		0.75%
Revolving Credit Facility | New Credit Agreement | Prime Rate | Minimum
Credit Facilities [Line Items]
Basis spread on variable rate		0.00%
Revolving Credit Facility | New Credit Agreement | London Interbank Offered Rate (LIBOR) | Maximum
Credit Facilities [Line Items]
Basis spread on variable rate		1.75%
Revolving Credit Facility | New Credit Agreement | London Interbank Offered Rate (LIBOR) | Minimum
Credit Facilities [Line Items]
Basis spread on variable rate		1.00%
SCIO | Revolving Credit Facility | New Credit Agreement
Credit Facilities [Line Items]
Maximum borrowing capacity						$ 300,000,000
SCIO | Revolving Credit Facility | New Credit Agreement | Maximum
Credit Facilities [Line Items]
Option to increase additional credit facility		$ 100,000,000

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Other Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Lease deposits	$ 9,720	$ 9,983
Derivative instruments	1,075	3,433
Deposits with statutory authorities	6,108	6,252
Term deposits	2,098	1,983
Contract assets	3,868	3,977
Deferred contract fulfillment costs	4,773	5,582
Others	4,403	4,806
Other assets	$ 32,045	$ 36,016

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Goodwill and Intangible Assets - Amortization of Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 4,153	$ 5,528

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Derivatives and Hedge Accounting - Additional Information (Details) € in Thousands, £ in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)	Mar. 31, 2020 EUR (€)	Mar. 31, 2020 GBP (£)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 EUR (€)	Dec. 31, 2019 GBP (£)
Derivative Instruments, Gain (Loss) [Line Items]
Net derivative losses to be reclassified within 12 months	$ 4,480
Maximum outstanding term of the cash flow hedges	45 months
Derivatives in hedging relationships | Derivatives in Cash Flow Hedging Relationships | Foreign currency exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Foreign exchange contracts outstanding	$ 449,495			$ 410,390
Derivatives not designated as hedging instruments | Foreign currency exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Foreign exchange contracts outstanding	137,700	€ 1,446	£ 9,590	124,045	€ 1,289	£ 10,843
Forward Contracts | Derivatives in hedging relationships | Derivatives in Cash Flow Hedging Relationships | Foreign currency exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Foreign exchange contracts outstanding	$ 2,550			$ 4,300

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Borrowings (Tables)

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Schedule of Maturities of Long-term Debt

Future principal payments/maturities for all of the Company's borrowings as of March 31, 2020 were as follows:

	Notes		Revolver Credit		Structured Payables		Total
2020 (April - December)	$	—	$	100,000	$	666	$	100,666
2021	—		—		—		—
2022	—		99,000		—		99,000
2023	—		—		—		—
2024	150,000		—		—		150,000
Total	$	150,000	$	199,000	$	666	$	349,666

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Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 224,874	$ 119,165
Short-term investments	142,539	202,238
Restricted cash	6,369	5,453
Accounts receivable, net	187,137	171,864
Prepaid expenses	11,776	13,246
Advance income tax, net	6,024	4,698
Other current assets	26,173	24,594
Total current assets	604,892	541,258
Property and equipment, net	90,513	79,142
Operating lease right-of-use assets	99,940	86,396
Restricted cash	2,291	2,426
Deferred tax assets, net	16,640	11,855
Intangible assets, net	69,734	73,982
Goodwill	348,076	349,529
Other assets	32,045	36,016
Investment in equity affiliate	3,128	2,484
Total assets	1,267,259	1,183,088
Current liabilities:
Accounts payable	8,048	6,564
Current portion of long-term borrowings	100,666	40,867
Deferred revenue	16,038	13,436
Accrued employee costs	28,937	71,626
Accrued expenses and other current liabilities	84,495	71,023
Current portion of operating lease liabilities	18,236	24,148
Income taxes payable, net	1,692	1,432
Current portion of finance lease liabilities	252	253
Total current liabilities	258,364	229,349
Long-term borrowings, less current portion	234,820	194,131
Operating lease liabilities, less current portion	93,707	74,709
Income taxes payable	1,790	1,790
Deferred tax liabilities, net	773	966
Finance lease liabilities, less current portion	380	430
Other non-current liabilities	21,521	11,712
Total liabilities	611,355	513,087
Commitments and Contingencies
Preferred stock, $0.001 par value; 15,000,000 shares authorized, none issued	0	0
ExlService Holdings, Inc. Stockholders’ equity:
Common stock, $0.001 par value; 100,000,000 shares authorized, 38,813,775 shares issued and 34,315,996 shares outstanding as of March 31, 2020 and 38,480,654 shares issued and 34,185,241 shares outstanding as of December 31, 2019	39	39
Additional paid-in capital	396,939	391,240
Retained earnings	574,314	551,903
Accumulated other comprehensive loss	(113,104)	(84,892)
Total including shares held in treasury	858,188	858,290
Less: 4,497,779 shares as of March 31, 2020 and 4,295,413 shares as of December 31, 2019, held in treasury, at cost	(202,284)	(188,289)
Stockholders’ equity	655,904	670,001
Total equity	655,904	670,001
Total liabilities and stockholders’ equity	$ 1,267,259	$ 1,183,088

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Consolidated Statements of Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Non - Controlling Interest
Beginning balance (in shares) at Dec. 31, 2018		37,850,544				(3,628,068)
Beginning balance at Dec. 31, 2018	$ 618,319	$ 38	$ 364,179	$ 484,244	$ (83,467)	$ (146,925)	$ 250
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock issued against stock-based compensation plans (in shares)		405,492
Stock issued against stock-based compensation plans	22		22
Stock-based compensation	6,956		6,956
Acquisition of treasury stock (in shares)						(262,531)
Acquisition of treasury stock	(15,408)					$ (15,408)
Allocation of equity component related to issuance costs on convertible senior notes			(13)
Non-controlling interest	9						9
Other comprehensive loss	6,255				6,255
Net income	14,695			14,695
Ending balance (in shares) at Mar. 31, 2019		38,256,036				(3,890,599)
Ending balance at Mar. 31, 2019	$ 630,835	$ 38	371,144	498,939	(77,212)	$ (162,333)	$ 259
Beginning balance (in shares) at Dec. 31, 2019	34,185,241	38,480,654				(4,295,413)
Beginning balance at Dec. 31, 2019	$ 670,001	$ 39	391,240	551,903	(84,892)	$ (188,289)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock issued against stock-based compensation plans (in shares)		333,121
Stock issued against stock-based compensation plans	921		921
Stock-based compensation	4,778		4,778
Acquisition of treasury stock (in shares)						(202,366)
Acquisition of treasury stock	(13,995)					$ (13,995)
Other comprehensive loss	(28,212)				(28,212)
Net income	$ 22,411			22,411
Ending balance (in shares) at Mar. 31, 2020	34,315,996	38,813,775				(4,497,779)
Ending balance at Mar. 31, 2020	$ 655,904	$ 39	$ 396,939	$ 574,314	$ (113,104)	$ (202,284)

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Other Non-Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Liabilities, Noncurrent [Abstract]

Summary of Other Non-Current Liabilities

Other non-current liabilities consist of the following:

	As of
	March 31, 2020		December 31, 2019
Derivative instruments	$	7,766	$	1,250
Unrecognized tax benefits	1,047		1,047
Retirement benefits	6,519		6,517
Deferred transition revenue	1,797		1,911
Others	4,392		987
Other non-current liabilities	$	21,521	$	11,712

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The following table sets forth details of changes in goodwill by reportable segment of the Company:

	Insurance			Healthcare			Emerging Business			TT&L			F&A			All Other			Analytics			Total
Balance at January 1, 2019	$	38,203		$	19,276		$	—		$	12,697		$	47,193		$	5,326		$	227,289		$	349,984
Currency translation adjustments	73			—			—			(240		)	(288		)	—			—			(455		)
Balance at December 31, 2019	$	38,276		$	19,276		$	—		$	12,457		$	46,905		$	5,326		$	227,289		$	349,529
Goodwill reallocation(1)	12,192			2,693			49,803			(12,457		)	(46,905		)	(5,326		)	—			—
Currency translation adjustments	(293		)	(39		)	(1,119		)	—			—			—			(2		)	(1,453		)
Balance at March 31, 2020	$	50,175		$	21,930		$	48,684		$	—		$	—		$	—		$	227,287		$	348,076

⁽¹⁾ Represents the reallocation of goodwill as a result of the Company reorganizing its operating segments as described in Note 3 to the unaudited consolidated financial statements.

Schedule of indefinite lived Intangible Assets

Information regarding the Company’s intangible assets is set forth below:

	As of March 31, 2020
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	97,483	$	(45,819	)	$	51,664
Developed technology	26,878		(11,889		)	14,989
Trade names and trademarks	5,100		(2,919		)	2,181
	$	129,461	$	(60,627	)	$	68,834
Indefinite-lived intangible assets:
Trade names and trademarks	900		—			900
Total intangible assets	$	130,361	$	(60,627	)	$	69,734

	As of December 31, 2019
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	97,602	$	(43,330	)	$	54,272
Developed technology	26,976		(10,687		)	16,289
Trade names and trademarks	5,100		(2,579		)	2,521
	$	129,678	$	(56,596	)	$	73,082
Indefinite-lived intangible assets:
Trade names and trademarks	900		—			900
Total intangible assets	$	130,578	$	(56,596	)	$	73,982

Schedule of amortization of Intangible Assets

The amortization expense for the period is as follows:

	Three months ended March 31,
	2020		2019
Amortization expense	$	4,153	$	5,528

Schedule of finite lived Intangible Assets useful lives

The remaining weighted average life of intangible assets is as follows:

	(in years)
Customer relationships	7.54
Developed technology	3.41
Trade names and trademarks (Finite lived)	2.22

Schedule of estimated future amortization of Intangible Assets

Estimated future amortization expense related to intangible assets as of March 31, 2020 is as follows:
2020 (April 1 - December 31)	$	10,262
2021	12,732
2022	11,326
2023	9,037
2024	6,695
2025 and thereafter	18,782
Total	$	68,834

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Leases - Components of Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Finance lease:
Amortization of right-of-use assets	$ 62	$ 95
Interest on lease liabilities	30	25
Operating lease	6,853	7,017
Lease cost	$ 6,945	$ 7,137

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Earnings Per Share - Computation of Basic and Diluted Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Numerators:
Net income	$ 22,411	$ 14,695
Denominators:
Basic weighted average common shares outstanding (in shares)	34,401,565	34,374,815
Dilutive effect of share based awards (in shares)	319,038	458,620
Diluted weighted average common shares outstanding (in shares)	34,720,603	34,833,435
Earnings per share attributable to ExlService Holdings Inc. stockholders:
Basic (in dollars per share)	$ 0.65	$ 0.43
Diluted (in dollars per share)	$ 0.65	$ 0.42
Weighted average potentially dilutive considered anti-dilutive and not included in computing diluted earnings per share (in shares)	170,313	425,432

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Property and Equipment, net - Depreciation and Amortization Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Property, Plant and Equipment [Line Items]
Depreciation and amortization expense	$ 8,297	$ 8,139
Depreciation and Amortization
Property, Plant and Equipment [Line Items]
Effect of the foreign exchange gains upon settlement of cash flow hedges	$ 22	$ 57

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Income Taxes - Recognized in Comprehensive Income (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2020	Mar. 31, 2019
Income Tax Disclosure [Abstract]
Unrealized gain/(loss) on cash flow hedges		$ 4,808	$ (1,543)
Retirement benefits		(9)	(109)
Total Income tax benefit/(expense) recognized in other comprehensive income	[1]	$ 4,799	$ (1,652)

[1] These are income tax benefit/(expense) recognized on cash flow hedges and retirement benefits. Refer to Note 21 to the unaudited consolidated financial statements.

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Accumulated Other Comprehensive Loss

3 Months Ended

Mar. 31, 2020

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss (“AOCI”), consists of actuarial gain/(loss) on retirement benefits and changes in the cumulative foreign currency translation adjustments. In addition, the Company enters into foreign currency exchange contracts, which are designated as cash flow hedges in accordance with ASC 815. Changes in the fair values of these foreign currency exchange contracts are recognized in AOCI on the Company's unaudited consolidated balance sheets until the settlement of those contracts. The balances as of March 31, 2020 and December 31, 2019 are as follows:

	As of
	March 31, 2020			December 31, 2019
Cumulative foreign currency translation loss	$	(104,928	)	$	(87,591	)
Unrealized (loss)/gain on cash flow hedges	(11,171		)	4,604
Retirement benefits	(1,679		)	(1,780		)
Income tax benefit/(expense) relating to above (1)	4,674			(125		)
Accumulated other comprehensive loss	$	(113,104	)	$	(84,892	)

(1) These are income tax benefits/(expenses) recognized on cash flow hedges and retirement benefits. Refer to Note 21 to the unaudited consolidated financial statements.

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Capital Structure

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Capital Structure

Capital Structure

Common Stock

The Company has one class of common stock outstanding.

During the three months ended March 31, 2020 and 2019, the Company purchased 26,601 and 22,666 shares of common stock, respectively, from employees in connection with withholding tax payments related to the vesting of restricted stock for a total consideration of $2,012 and $1,408, respectively. The weighted average purchase price per share of $75.63 and $62.11, respectively, was the closing price of the Company's share of common stock on the Nasdaq Global Select Market on the trading day prior to the vesting date of the shares of restricted stock.

On February 28, 2017, the Company’s Board of Directors authorized an additional common stock repurchase program (the “2017 Repurchase Program”), under which shares may be purchased by the Company from time to time from the open market and through private transactions during each of the fiscal years 2017 through 2019 up to an aggregate additional amount of $100,000. The approval increased the 2017 authorization from $20,000 to $40,000 and authorizes stock repurchases of up to $40,000 in each of 2018 and 2019.

On December 16, 2019, the Company’s Board of Directors authorized a $200,000 common stock repurchase program beginning January 1, 2020 through December 31, 2022 (the “2019 Repurchase Program”). The shares may be purchased by the

Company from time to time from the open market and through private transactions, or otherwise, as determined by the Company’s management as market conditions warrant.

During the three months ended March 31, 2020, the Company purchased 175,765 shares of its common stock, for an aggregate purchase price of $11,983, including commissions, representing an average purchase price per share of $68.18, under the 2019 Repurchase Program.

During the quarter ended March 31, 2020, to enhance the Company’s liquidity position in response to COVID-19, the Company elected to temporarily suspend share repurchases under the 2019 Repurchase Program. The 2019 Repurchase Program remains authorized by the Board of Directors and the Company has the discretion to resume share repurchases in the future at any time, depending upon market conditions, the Company’s capital needs and other factors.

During the three months ended March 31, 2019, the Company purchased 239,865 shares of its common stock, for an aggregate purchase price of $14,000, including commissions, representing an average purchase price per share of $58.37 under the 2017 Repurchase Program.

Repurchased shares have been recorded as treasury shares and will be held until the Company’s Board of Directors designates that these shares be retired or used for other purposes.

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Commitments and Contingencies - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
Purchase commitments, net of advances	$ 12,300
Export-oriented units established, percentage	100.00%
Aggregate disputed amount amount related to transfer pricing and permanent establishment	$ 16,104	$ 16,220
Total bank guarantees and deposits in respect of contingencies	7,858	8,108
Amounts paid as deposits in respect of contingencies	6,108	6,252
Bank guarantee issued	$ 1,750	$ 1,856

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock Based Compensation

Stock-Based Compensation

The following costs related to the Company’s stock-based compensation plan are included in the unaudited consolidated statements of income:

	Three months ended March 31,
	2020		2019
Cost of revenues	$	1,418	$	1,326
General and administrative expenses	1,568		2,975
Selling and marketing expenses	1,792		2,655
Total	$	4,778	$	6,956

As of March 31, 2020, the Company had 2,308,555 shares available for grant under the 2018 Omnibus Incentive Plan.

Stock Options

Stock option activity under the Company’s stock-based compensation plans is shown below:

	Number of Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life (Years)
Outstanding at December 31, 2019	98,161		$	23.39	$	4,522	1.86
Granted	—		—		—		—
Exercised	(39,832	)	23.11		1,932		—
Forfeited	—		—		—		—
Outstanding at March 31, 2020	58,329		$	23.58	$	1,659	1.80
Vested and exercisable at March 31, 2020	58,329		$	23.58	$	1,659	1.80

The unrecognized compensation cost for unvested options as of March 31, 2020 was $nil.

Restricted Stock and Restricted Stock Units

Restricted stock and restricted stock unit activity under the Company’s stock-based compensation plans is shown below:

	Restricted Stock			Restricted Stock Units
	Number	Weighted Average Fair Value		Number		Weighted Average Fair Value
Outstanding at December 31, 2019*	27,384	$	48.72	913,094		$	59.61
Granted	—	—		368,683		78.19
Vested	—	—		(293,289	)	56.30
Forfeited	—	—		(24,649	)	62.18
Outstanding at March 31, 2020*	27,384	$	48.72	963,839		$	67.66

* As of March 31, 2020 and December 31, 2019 restricted stock units vested for which the underlying common stock is yet to be issued is 167,270 each.

As of March 31, 2020, unrecognized compensation cost of $61,705 is expected to be expensed over a weighted average period of 3.07 years.

Performance Based Stock Awards

Performance based restricted stock unit activity under the Company’s stock plans is shown below:

	Revenue Based PRSUs				Market Condition Based PRSUs
	Number		Weighted Average Fair Value		Number		Weighted Average Fair Value
Outstanding at December 31, 2019	87,685		$	62.54	87,670		$	82.10
Granted	61,368		78.29		61,352		102.10
Vested	—		—		—		—
Forfeited	(1,295	)	62.14		(1,295	)	79.79
Outstanding at March 31, 2020	147,758		$	69.08	147,727		$	90.43

As of March 31, 2020, unrecognized compensation cost of $10,092 is expected to be expensed over a weighted average period of 2.21 years.

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Stock Based Compensation - Stock Based Compensation Stock Option Activity (Details) - Employee Stock Option - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2018	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of Options, Outstanding, Beginning Balance (in shares)	98,161
Number of Options, Granted (in shares)	0
Number of Options, Exercised (in shares)	(39,832)
Number of Options, Forfeited (in shares)	0
Number of Options, Outstanding, Ending Balance (in shares)	58,329
Number of Options, Vested and exercisable at end of period (in shares)	58,329
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Weighted-Average Exercise Price, Outstanding, Beginning Balance (in dollars per share)	$ 23.39
Weighted-Average Exercise Price, Granted (in dollars per share)	0
Weighted-Average Exercise Price, Exercised (in dollars per share)	23.11
Weighted-Average Exercise Price, Forfeited (in dollars per share)	0
Weighted-Average Exercise Price, Outstanding, Ending Balance (in dollars per share)	23.58
Weighted Average Exercise Price, Vested and exercisable at end of period (in dollars per share)	$ 23.58
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Aggregate Intrinsic Value, Outstanding	$ 1,659		$ 4,522
Aggregate Intrinsic Value, Exercised	1,932
Aggregate Intrinsic Value, Vested and exercisable at end of period	$ 1,659
Weighted-Average Remaining Contractual Life	1 year 9 months 18 days	1 year 10 months 9 days
Weighted-Average Remaining Contractual Life, Vested and exercisable at end of period	1 year 9 months 18 days

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table sets forth the computation of basic and diluted earnings per share:

	Three months ended March 31,
	2020		2019
Numerators:
Net income	$	22,411	$	14,695
Denominators:
Basic weighted average common shares outstanding	34,401,565		34,374,815
Dilutive effect of share-based awards	319,038		458,620
Diluted weighted average common shares outstanding	34,720,603		34,833,435
Earnings per share attributable to ExlService Holdings Inc. stockholders:
Basic	$	0.65	$	0.43
Diluted	$	0.65	$	0.42
Weighted average potentially dilutive shares considered anti-dilutive and not included in computing diluted earnings per share	170,313		425,432

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Subsequent Events

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

There are many uncertainties regarding COVID-19, and the Company is closely monitoring the effects of the pandemic on all aspects of its business, including how it will impact the Company, its customers, employees, contractors, suppliers, business partners and delivery models. While COVID-19 did not have a significant impact on the Company’s financial results during the fiscal quarter ended March 31, 2020, the Company is unable to determine with any degree of accuracy the length and severity of the COVID-19 crisis and what impact it will have on its future financial position and operating results. The COVID-19 crisis is ongoing and dynamic in nature and, to date, the Company has experienced temporary closures in key operations centers, including in the U.S., India, the Philippines, Europe and South Africa. The Company will continue to assess the evolving impact of COVID-19 on its business.

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Accrued Expenses and Other Current Liabilities

3 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

	As of
	March 31, 2020		December 31, 2019
Accrued expenses	$	51,449	$	53,133
Payable to statutory authorities	15,718		6,506
Derivative instruments	6,904		1,783
Client liabilities	6,565		6,378
Interest payable	2,843		1,492
Other current liabilities	1,016		1,731
	$	84,495	$	71,023

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Revenues, net

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Revenues, net

Revenues, net

Refer to Note 3 to the unaudited consolidated financial statements for revenues disaggregated by reportable segments and geography.

Contract balances

The following table provides information about accounts receivable, contract assets and contract liabilities from contracts with customers:

	As of
	March 31, 2020		December 31, 2019
Accounts receivable, net	$	187,137	$	171,864
Contract assets	$	5,518	$	5,391
Contract liabilities
Deferred revenue (consideration received in advance)	$	14,136	$	11,259
Consideration received for process transition activities	$	2,877	$	3,036

Accounts receivable includes $74,386 and $73,920 as of March 31, 2020 and December 31, 2019, respectively, representing unbilled receivables. The Company has accrued the unbilled receivables for work performed in accordance with the terms of contracts with customers and considers no significant performance risk associated with its unbilled receivables.

Contract assets represent upfront payments such as deal signing discounts or deal signing bonuses made to customers. These costs are amortized over the expected period of the benefit and are recorded as an adjustment to transaction price and reduced from revenues. The Company’s assessment did not indicate any impairment losses on its contract assets for the periods presented.

Contract liabilities represent that portion of deferred revenue for which payments have been received in advance from customers. This may also include revenues deferred for certain contracts where services have been rendered but other conditions for revenue recognition have not been met for example, where a legally enforceable contract is not executed. The Company also defers revenues attributable to certain process transition activities for which costs have been capitalized by the Company as contract fulfillment costs. Consideration received from customers, if any, relating to such transition activities are classified under contract liabilities and are included within “Deferred revenues” and “other non-current liabilities” in the unaudited consolidated balance sheets. The revenues are recognized as (or when) the performance obligation is fulfilled under the contract with customer.

Revenue recognized during the three months ended March 31, 2020 and 2019 that was included in the contract liabilities balance at the beginning of the period was $5,968 and $2,777, respectively.

Contract acquisition and fulfillment costs

	Contract Acquisition Costs									Contract Fulfillment Costs
	Quarter Ended						Year Ended			Quarter Ended						Year Ended
	March 31, 2020			March 31, 2019			December 31, 2019			March 31, 2020			March 31, 2019			December 31, 2019
							(Audited)									(Audited)
Opening Balance	$	1,307		$	713		$	713		$	7,255		$	4,051		$	4,051
Addition	—			—			1,222			284			726			4,652
Amortization	(92		)	(200		)	(628		)	(623		)	(305		)	(1,448		)
Closing Balance	$	1,215		$	513		$	1,307		$	6,916		$	4,472		$	7,255

There was no impairment for contract acquisition and contract fulfillment costs as of March 31, 2020 and December 31, 2019. The capitalized costs are amortized on a straight line basis over the life of the contract.

Allowance for expected credit losses

On January 1, 2020, the Company adopted ASC Topic 326, Financial Instruments-Credit Losses. Accounts receivable and contract assets are in the scope for which assessment is made. In compliance with the guidance, the allowance for credit losses recognized based on historical loss experience is adjusted to reflect current and estimated future economic conditions. The Company considered current and anticipated future economic conditions relating to the industries of the Company’s customers and the countries where it operates. In calculating expected credit loss, the Company also considered past payment trends, credit rating and other related credit information for its significant customers to estimate the probability of default in the future and estimates relating to the possible effects resulting from global Coronavirus Disease 2019 pandemic (“COVID-19”).

The Company applied the expected credit loss model to assess any required allowance; and used a provision matrix devised based on historical trends of losses across aging categories to calculate the expected credit loss allowance for trade receivables and unbilled receivables. This matrix takes into account available external and internal credit risk information such as ratings from international credit rating agencies and the Company's historical collection experience from customers.

As of January 1, 2020 the Company’s provision for doubtful receivables was $1,163, which was based on previous U.S. GAAP standards. There was no material impact on provision when calculated by applying Topic ASC 326 guidelines.

	As of
	March 31, 2020			January 1, 2020
Accounts receivable, including unbilled receivables	$	188,483		$	173,027
Less: Allowance for lifetime expected credit loss	(1,346		)	(1,163		)
Accounts receivable, net	$	187,137		$	171,864

The movement in allowance for lifetime expected credit loss on customer balances for the quarters ended March 31, 2020 and December 31, 2019 was as follows:

	As of
	March 31, 2020			December 31, 2019
Balance at the beginning of the period	$	1,163		$	1,113
Additions during the period, net	195			184
Charged against allowance	—			(139		)
Translation adjustment, if any	(12		)	5
Balance at the end of the period	$	1,346		$	1,163

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Property and Equipment, net

3 Months Ended

Mar. 31, 2020

Property, Plant and Equipment [Abstract]

Property and Equipment, net

Property and Equipment, net

Property and equipment, net consists of the following:

	Estimated useful lives	As of
	(Years)	March 31, 2020			December 31, 2019
Owned Assets:
Network equipment and computers	3-5	$	96,669		$	98,309
Software	3-5	88,813			79,746
Leasehold improvements	3-8	43,896			44,982
Office furniture and equipment	3-8	21,038			22,046
Motor vehicles	2-5	575			601
Buildings	30	1,051			1,114
Land	—	688			729
Capital work in progress	—	14,381			10,309
		267,111			257,836
Less: Accumulated depreciation and amortization		(177,192		)	(179,331		)
		$	89,919		$	78,505
Right-of-use assets under finance leases:
Leasehold improvements		$	640		$	738
Office furniture and equipment		238			308
Motor vehicles		689			711
		1,567			1,757
Less: Accumulated depreciation and amortization		(973		)	(1,120		)
		$	594		$	637
Property and equipment, net		$	90,513		$	79,142

Capital work in progress represents advances paid towards acquisition of property and equipment and costs incurred on internally developed software not yet ready to be placed in service.

During the three months ended March 31, 2020, there were no changes in estimated useful lives of property and equipment.

The depreciation and amortization expense, excluding amortization of acquisition-related intangibles, recognized in the unaudited consolidated statements of income was as follows:

	Three months ended March 31,
	2020		2019
Depreciation and amortization expense	$	8,297	$	8,139

The depreciation and amortization set forth above includes the effect of foreign exchange gain upon settlement of cash flow hedges, amounting to $22 and $57 for the three months ended March 31, 2020 and 2019, respectively. Refer to Note 16 to the unaudited consolidated financial statements for further details.

Internally developed software costs, included under Software, was as follows:

	As of
	March 31, 2020			December 31, 2019
Cost	$	16,147		$	15,784
Less : Accumulated amortization	(5,812		)	(4,989		)
Internally developed software, net	$	10,335		$	10,795

The amortization expense on internally developed software recognized in the unaudited consolidated statements of income was as follows:

	Three months ended March 31
	2020		2019
Amortization expense	$	831	$	647

During the three months ended March 31, 2019, the Company performed an impairment test of its long-lived assets related to its Health Integrated business. Based on the results, the long-lived assets carrying value exceeded its fair value. The primary factor contributing to a reduction in the fair value is the wind down of the Health Integrated business, due to reduction to the Company's estimated future cash flows. As a result of this analysis, the Company recognized impairment charges of $1,227 during the three months ended March 31, 2019, to write down the carrying value of internally developed software to its fair value. This impairment charge was recorded in the unaudited consolidated statements of income under "Impairment and restructuring charges".

As of March 31, 2020, the Company believes no impairment exists because the long-lived asset's future undiscounted net cash flows expected to be generated exceeds its carrying value; however, there can be no assurances that long-lived assets will not be impaired in future periods. Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which undiscounted cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount, and the asset’s residual value, if any. It is reasonably possible that the judgments and estimates described above could change in future periods.

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Derivatives and Hedge Accounting - Summary of Effect of Foreign Currency Exchange Contracts (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Derivative Instruments, Gain (Loss) [Line Items]
(Loss)/Gain recognized in consolidated statements of income	$ 1,377	$ 1,260
Derivatives in cash flow hedging relationships | Derivatives in hedging relationships | Foreign currency exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Effect of net investment hedges on accumulated other comprehensive loss	(14,846)	5,937
Reclassification out of Accumulated Other Comprehensive Income | Derivatives not designated as hedging instruments | Foreign currency exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
(Loss)/Gain recognized in consolidated statements of income	$ (4,214)	$ 1,396

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Goodwill and Intangible Assets - Estimated Future Amortization of Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
2020 (April 1 - December 31)	$ 10,262
2021	12,732
2022	11,326
2023	9,037
2024	6,695
2025 and thereafter	18,782
Total	$ 68,834	$ 73,082

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Goodwill and Intangible Assets - Summary of Company's Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Goodwill [Roll Forward]
Beginning Balance	$ 349,529	$ 349,984
Currency translation adjustments	(1,453)	(455)
Goodwill Reallocation	0
Ending Balance	348,076	349,529
Insurance
Goodwill [Roll Forward]
Beginning Balance	38,276	38,203
Currency translation adjustments	(293)	73
Goodwill Reallocation	12,192
Ending Balance	50,175	38,276
Healthcare
Goodwill [Roll Forward]
Beginning Balance	19,276	19,276
Currency translation adjustments	(39)	0
Goodwill Reallocation	2,693
Ending Balance	21,930	19,276
Emerging Business
Goodwill [Roll Forward]
Beginning Balance	0	0
Currency translation adjustments	(1,119)	0
Goodwill Reallocation	49,803
Ending Balance	48,684	0
TT&L
Goodwill [Roll Forward]
Beginning Balance	12,457	12,697
Currency translation adjustments	0	(240)
Goodwill Reallocation	(12,457)
Ending Balance	0	12,457
F&A
Goodwill [Roll Forward]
Beginning Balance	46,905	47,193
Currency translation adjustments	0	(288)
Goodwill Reallocation	(46,905)
Ending Balance	0	46,905
All Other
Goodwill [Roll Forward]
Beginning Balance	5,326	5,326
Currency translation adjustments	0	0
Goodwill Reallocation	(5,326)
Ending Balance	0	5,326
Analytics
Goodwill [Roll Forward]
Beginning Balance	227,289	227,289
Currency translation adjustments	(2)	0
Goodwill Reallocation	0
Ending Balance	$ 227,287	$ 227,289

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Fair Value Measurements - Assets and Liabilities Measured at Fair Value (Details) - Recurring - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Assets
Mutual funds	$ 114,116	$ 166,330
Derivative financial instruments	4,746	7,509
Total	118,862	173,839
Liabilities
Derivative financial instruments	14,670	3,033
Total	14,670	3,033
Level 1
Assets
Mutual funds	114,116	166,330
Derivative financial instruments	0	0
Total	114,116	166,330
Liabilities
Derivative financial instruments	0	0
Total	0	0
Level 2
Assets
Mutual funds	0	0
Derivative financial instruments	4,746	7,509
Total	4,746	7,509
Liabilities
Derivative financial instruments	14,670	3,033
Total	14,670	3,033
Level 3
Assets
Mutual funds	0	0
Derivative financial instruments	0	0
Total	0	0
Liabilities
Derivative financial instruments	0	0
Total	$ 0	$ 0

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Other Non-Current Liabilities - Summary of Other Non-Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Liabilities, Noncurrent [Abstract]
Derivative instruments	$ 7,766	$ 1,250
Unrecognized tax benefits	1,047	1,047
Retirement benefits	6,519	6,517
Deferred transition revenue	1,797	1,911
Others	4,392	987
Other non-current liabilities	$ 21,521	$ 11,712

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Capital Structure - Additional Information (Details)	3 Months Ended
	Mar. 31, 2020 USD ($) class_of_common_stock $ / shares shares	Mar. 31, 2019 USD ($) $ / shares shares	Dec. 16, 2019 USD ($)	Feb. 28, 2017 USD ($)
Equity, Class of Treasury Stock [Line Items]
Number of classes of common stock outstanding | class_of_common_stock	1
Acquisition of restricted stock from employees in connection with withholding tax payments (in shares) | shares	26,601	22,666
Withholding tax payments related to the vesting of restricted stock for total consideration	$ 2,012,000	$ 1,408,000
Weighted average purchase price prior to the vesting date (in dollars per share) | $ / shares	$ 75.63	$ 62.11
2017 Repurchase Program
Equity, Class of Treasury Stock [Line Items]
Additional authorized amount				$ 100,000,000
Authorized increase in repurchase amount, 2018				40,000,000
Authorized increase in repurchase amount, 2019				40,000,000
Common stock purchased under the repurchase program (in shares) | shares	175,765	239,865
Common stock aggregate purchase price including commissions	$ 11,983,000	$ 14,000,000
Common stock average purchase price per share (in dollars per share) | $ / shares	$ 68.18	$ 58.37
2017 Repurchase Program | Minimum
Equity, Class of Treasury Stock [Line Items]
Authorized increase in repurchase amount				20,000,000
2017 Repurchase Program | Maximum
Equity, Class of Treasury Stock [Line Items]
Authorized increase in repurchase amount				$ 40,000,000
2019 Repurchase Program
Equity, Class of Treasury Stock [Line Items]
Repurchase of common stock authorized, maximum			$ 200,000

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Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019	Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets	$ 99,940	$ 86,396
Operating lease liabilities	$ 111,943	$ 98,857
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets			$ 80,328
Deferred rent			8,626
Operating lease liabilities			$ 88,954

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Segment and Geographical Information - Property, Plant and Equipment, Net Based On Geographical Information (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	$ 190,453	$ 165,538
India
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	99,385	78,244
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	52,772	52,375
Philippines
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	27,350	26,006
Rest of World
Revenues from External Customers and Long-Lived Assets [Line Items]
Long-lived assets	$ 10,946	$ 8,913

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Stock-Based Compensation - Narrative (Details)	3 Months Ended
	Mar. 31, 2020 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number available for grant (in shares) | shares	2,308,555
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost	$ 0
Restricted Stock and Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost	$ 61,705,000
Cost not yet recognized, period for recognition	3 years 25 days
Performance Based Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost	$ 10,092,000
Cost not yet recognized, period for recognition	2 years 2 months 15 days

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Goodwill and Intangible Assets - Additional Information (Details) $ in Thousands	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Business Acquisition [Line Items]
Goodwill	$ 348,076	$ 349,529	$ 349,984
Percentage of fair value in excess of carrying amount	15.00%
Long-term revenue growth rate
Business Acquisition [Line Items]
Goodwill, measurement input	0.030
Discount rate | Minimum
Business Acquisition [Line Items]
Goodwill, measurement input	0.090
Discount rate | Maximum
Business Acquisition [Line Items]
Goodwill, measurement input	0.100
Healthcare Analytics
Business Acquisition [Line Items]
Goodwill	$ 181,217
Percent of total goodwill	52.00%
Pro Forma
Business Acquisition [Line Items]
Percentage of fair value in excess of carrying amount	10.00%
Pro Forma | Discount rate
Business Acquisition [Line Items]
Goodwill, measurement input	50

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Employee Benefit Plans - Change in Plan Assets (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Plan assets at January 1, 2020	$ 8,784
Actual return	147
Employer contribution	0
Benefits paid	(286)
Effect of exchange rate changes	(494)
Plan assets at March 31, 2020	$ 8,151

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Revenues, net - Accounts Receivable, Net (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Jan. 01, 2020	Dec. 31, 2019	Dec. 31, 2018
Revenue from Contract with Customer [Abstract]
Accounts receivable, including unbilled receivables	$ 188,483	$ 173,027
Less: Allowance for lifetime expected credit loss	(1,346)	(1,163)	$ (1,163)	$ (1,113)
Accounts receivable, net	$ 187,137	$ 171,864	$ 171,864

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Other Income, net - Summary of Other Income, net (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Other Income and Expenses [Abstract]
Gain on sale and mark-to-market of mutual funds, net	$ 2,056	$ 3,526
Interest income	532	796
Others, net	(59)	101
Other income, net	$ 2,529	$ 4,423

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Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Operating Leases
2020 (April 1 - December 31)	$ 19,552
2020		$ 26,932
2021	24,377	23,783
2022	22,607	21,526
2023	20,783	19,381
2024	16,427	14,865
2025 and thereafter	42,783	23,983
Total lease payments	146,529	130,470
Less: Imputed interest	34,586	31,613
Present value of lease liabilities	111,943	98,857
Finance Leases
2020 (April 1 - December 31)	304
2020		325
2021	239	251
2022	131	157
2023	86	86
2024	10	22
2025 and thereafter	0	0
Total lease payments	770	841
Less: Imputed interest	138	158
Present value of lease liabilities	$ 632	$ 683

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Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Revenues, net		$ 245,990	$ 239,573
Cost of revenues	[1]	162,656	157,240
Gross profit	[1]	83,334	82,333
Operating expenses:
General and administrative expenses		28,941	32,531
Selling and marketing expenses		14,456	18,047
Depreciation and amortization expense		12,450	13,667
Impairment and restructuring charges		0	1,227
Total operating expenses		55,847	65,472
Income from operations		27,487	16,861
Foreign exchange gain, net		1,377	1,260
Interest expense		(3,072)	(3,582)
Other income, net		2,529	4,423
Income before income tax expense and earnings from equity affiliates		28,321	18,962
Income tax expense		5,855	4,200
Income before earnings from equity affiliates		22,466	14,762
Loss from equity-method investment		55	67
Net income attributable to ExlService Holdings, Inc. stockholders		$ 22,411	$ 14,695
Earnings per share attributable to ExlService Holdings, Inc. stockholders:
Basic (in dollars per share)		$ 0.65	$ 0.43
Diluted (in dollars per share)		$ 0.65	$ 0.42
Weighted-average number of shares used in computing earnings per share attributable to ExlService Holdings Inc. stockholders:
Basic (in shares)		34,401,565	34,374,815
Diluted (in shares)		34,720,603	34,833,435

[1] Exclusive of depreciation and amortization expense.

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value

The following table sets forth the Company’s assets and liabilities that were accounted for at fair value as of March 31, 2020 and December 31, 2019.

As of March 31, 2020	Level 1		Level 2		Level 3		Total
Assets
Mutual funds*	$	114,116	$	—	$	—	$	114,116
Derivative financial instruments	—		4,746		—		4,746
Total	$	114,116	$	4,746	$	—	$	118,862
Liabilities
Derivative financial instruments	$	—	$	14,670	$	—	$	14,670
Total	$	—	$	14,670	$	—	$	14,670
As of December 31, 2019	Level 1		Level 2		Level 3		Total
Assets
Mutual funds*	$	166,330	$	—	$	—	$	166,330
Derivative financial instruments	—		7,509		—		7,509
Total	$	166,330	$	7,509	$	—	$	173,839
Liabilities
Derivative financial instruments	$	—	$	3,033	$	—	$	3,033
Total	$	—	$	3,033	$	—	$	3,033

* Represents those short-term investments which are carried at the fair value option under ASC 825 "Financial Instruments” as of March 31, 2020 and December 31, 2019.

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Other Assets (Tables)

3 Months Ended

Mar. 31, 2020

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Other Assets

Other assets consist of the following:

	As of
	March 31, 2020		December 31, 2019
Lease deposits	$	9,720	$	9,983
Derivative instruments	1,075		3,433
Deposits with statutory authorities	6,108		6,252
Term deposits	2,098		1,983
Contract assets	3,868		3,977
Deferred contract fulfillment costs	4,773		5,582
Others	4,403		4,806
Other assets	$	32,045	$	36,016

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Organization

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization

ExlService Holdings, Inc. (“ExlService Holdings”) is organized as a corporation under the laws of the state of Delaware. ExlService Holdings, together with its subsidiaries and affiliates (collectively, the “Company”), operates in the Business Process Management (“BPM”) industry providing operations management services and analytics services that helps its clients build and grow sustainable businesses. By orchestrating its domain expertise, data, analytics and digital technology, the Company looks deeper to design and manage agile, customer-centric operating models to improve global operations, drive profitability, enhance customer satisfaction, increase data-driven insights, and manage risk and compliance. The Company’s clients are located principally in the United States of America (“U.S.”) and the United Kingdom (“U.K”).

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Derivatives and Hedge Accounting

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedge Accounting

Derivatives and Hedge Accounting

The Company uses derivative instruments and hedging transactions to mitigate exposure to foreign currency fluctuation risks associated with forecasted transactions denominated in certain foreign currencies so as to minimize earnings and cash flow volatility associated with changes in foreign currency exchange rates. The Company’s derivative financial instruments are largely forward foreign exchange contracts that are designated as effective hedges and that qualify as cash flow hedges under ASC 815. The Company had outstanding cash flow hedges totaling $449,495 (including $2,550 of range forward contracts) as of March 31, 2020 and $410,390 (including $4,300 of range forward contracts) as of December 31, 2019.

Changes in the fair value of these cash flow hedges are recorded as a component of accumulated other comprehensive income/(loss), net of tax, until the hedged transactions occurs. The resultant foreign exchange gain/(loss) upon settlement of derivative financial instruments are recorded along with the underlying hedged item in the same line of unaudited consolidated statements of income as either a part of “Cost of revenues”, “General and administrative expenses”, “Selling and marketing expenses”, “Depreciation and amortization expense”, as applicable.

The Company evaluates hedge effectiveness at the time a contract is entered into as well as on an ongoing basis. For hedging positions that are discontinued because the forecasted transaction is not expected to occur by the end of the originally specified period, any related amounts recorded in equity are reclassified to earnings.

The Company estimates that approximately $4,480 of net derivative losses, excluding tax effects, included in AOCI, representing changes in the value of cash flow hedges, could be reclassified into earnings within the next twelve months based on exchange rates prevailing as of March 31, 2020. At March 31, 2020, the maximum outstanding term of the cash flow hedges was 45 months.

The Company enters into foreign currency forward contracts to economically hedge its intercompany balances and other monetary assets and liabilities denominated in currencies other than functional currencies, against the risk of foreign currency fluctuations associated with remeasurement of such assets and liabilities to functional currency. These derivatives do not qualify as fair value hedges under ASC 815. Changes in the fair value of these derivatives are recognized in the unaudited consolidated statements of income and are included in foreign exchange gain/(loss). The Company’s primary exchange rate exposure is with the Indian Rupee, the U.K. pound sterling and the Philippine peso. The Company also has exposure to Colombian pesos, Czech Koruna, the Euro, South African ZAR and other local currencies in which it operates. Outstanding foreign currency forward contracts amounted to $137,700, GBP 9,590 and EUR 1,446 as of March 31, 2020 and $124,045, GBP 10,843 and EUR 1,289 as of December 31, 2019.

The following tables set forth the fair value of the foreign currency exchange contracts and their location on the unaudited consolidated financial statements:

Derivatives designated as hedging instruments:	As of
Foreign currency exchange contracts	March 31, 2020		December 31,2019
Other current assets	$	2,403	$	3,945
Other assets	$	1,075	$	3,433
Accrued expenses and other current liabilities	$	6,883	$	1,524
Other non-current liabilities	$	7,766	$	1,250
Derivatives not designated as hedging instruments:	As of
Foreign currency exchange contracts	March 31, 2020		December 31,2019
Other current assets	$	1,268	$	131
Accrued expenses and other current liabilities	$	21	$	259

The following tables set forth the effect of foreign currency exchange contracts on the unaudited consolidated statements of income and accumulated other comprehensive loss for the three months ended March 31, 2020 and 2019:

	Three months ended March 31,
Forward Exchange Contracts:	2020			2019
Unrealized (loss)/gain recognized in AOCI
Derivatives in cash flow hedging relationships	$	(14,846	)	$	5,937
(Loss)/Gain recognized in consolidated statements of income
Derivatives not designated as hedging instruments	$	(4,214	)	$	1,396

Location and amount of gain/(loss) recognized in unaudited consolidated statements of income for cash flow hedging relationships and derivatives not designated as hedging instruments
	Three months ended March 31,
	2020					2019
	As per unaudited consolidated statements of income		Gain/(loss) on foreign currency exchange contracts			As per unaudited consolidated statements of income		Gain on foreign currency exchange contracts
Cash flow hedging relationships
Location in unaudited consolidated statements of income where gain was reclassed from AOCI
Cost of revenues	$	162,656	$	812		$	157,240	$	531
General and administrative expenses	$	28,941	73			$	32,531	80
Selling & marketing expenses	$	14,456	4			$	18,047	7
Depreciation & amortization expense	$	12,450	40			$	13,667	53
			$	929				$	671
Derivatives not designated as hedging instruments
Location in unaudited consolidated statements of income where gain/(loss) was recognized
Foreign exchange gain/(loss), net	$	1,377	$	(4,214	)	$	1,260	$	1,396
	$	1,377	$	(4,214	)	$	1,260	$	1,396

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Leases

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

Leases

The Company conducts its operations using facilities leased under operating lease agreements that expire at various dates. The Company finances its use of certain motor vehicles and other equipment under various lease arrangements provided by financial institutions.

The Company had performed an evaluation of its contracts with suppliers in accordance with Topic 842 and had determined that, except for leases for office facilities, motor vehicles and other equipment as described above, none of the Company’s contracts contain a lease.

In assessment of the lease term, the Company considers the extension option as part of its lease term for those lease arrangements where the Company is reasonably certain of availing the extension option.

The lease agreements do not contain any covenant to impose any restrictions except for market-standard practice for similar lease arrangements.

Supplemental balance sheet information

	As of			As of
	March 31, 2020			December 31, 2019
Operating Lease
Operating lease right-of-use assets	$	99,940		$	86,396
Operating lease liabilities - Current	$	18,236		$	24,148
Operating lease liabilities - Non-current	93,707			74,709
Total operating lease liabilities	$	111,943		$	98,857
Finance Lease
Property and equipment, gross	$	1,567		$	1,757
Accumulated depreciation	(973		)	(1,120		)
Property and equipment, net	$	594		$	637
Finance lease liabilities - Current	$	252		$	253
Finance lease liabilities - Non-current	380			430
Total finance lease liabilities	$	632		$	683

The components of lease cost, which are included in the Company's unaudited consolidated statements of income, are as follows:

Lease cost	Three months ended March 31, 2020		Three months ended March 31, 2019
Finance lease:
Amortization of right-of-use assets	$	62	$	95
Interest on lease liabilities	30		25
Operating lease(a)	6,853		7,017
Total lease cost	$	6,945	$	7,137

(a) Includes short-term leases, which are immaterial.

Supplemental cash flow and other information related to leases are as follows:

	Three months ended March 31,
	2020			2019
Cash payments for amounts included in the measurement of lease liabilities :
Operating cash outflows for operating leases	$	6,576		$	5,199
Operating cash outflows for finance leases	$	30		$	20
Financing cash outflows for finance leases	$	67		$	137
Right-of-use assets obtained in exchange for new operating lease liabilities	$	16,366		$	16,614
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—		$	—
Weighted-average remaining lease term
Finance lease	2.3 years			2.9 years
Operating lease	6.8 years			6.4 years
Weighted-average discount rate
Finance lease	10.2		%	8.7		%
Operating lease	7.4		%	7.3		%

The Company determines the incremental borrowing rate by adjusting the benchmark reference rates, applicable to the respective geographies where the leases were entered, with appropriate financing spreads and lease specific adjustments for the effects of collateral.

Maturities of lease liabilities as of March 31, 2020 are as follows:

	Operating Leases		Finance Leases
2020 (April 1 - December 31)	$	19,552	$	304
2021	24,377		239
2022	22,607		131
2023	20,783		86
2024	16,427		10
2025 and thereafter	42,783		—
Total lease payments	$	146,529	$	770
Less: Imputed interest	34,586		138
Present value of lease liabilities	$	111,943	$	632

Maturities of minimum lease payments as of December 31, 2019 are as follows:

During the next twelve months ending December 31,	Operating Leases		Capital Leases
2020	$	26,932	$	325
2021	23,783		251
2022	21,526		157
2023	19,381		86
2024	14,865		22
2025 and thereafter	23,983		—
Total minimum lease payment	$	130,470	$	841
Less: Imputed interest	31,613		158
Present value of minimum lease payments	$	98,857	$	683

Leases

Leases

The Company conducts its operations using facilities leased under operating lease agreements that expire at various dates. The Company finances its use of certain motor vehicles and other equipment under various lease arrangements provided by financial institutions.

The Company had performed an evaluation of its contracts with suppliers in accordance with Topic 842 and had determined that, except for leases for office facilities, motor vehicles and other equipment as described above, none of the Company’s contracts contain a lease.

In assessment of the lease term, the Company considers the extension option as part of its lease term for those lease arrangements where the Company is reasonably certain of availing the extension option.

The lease agreements do not contain any covenant to impose any restrictions except for market-standard practice for similar lease arrangements.

Supplemental balance sheet information

	As of			As of
	March 31, 2020			December 31, 2019
Operating Lease
Operating lease right-of-use assets	$	99,940		$	86,396
Operating lease liabilities - Current	$	18,236		$	24,148
Operating lease liabilities - Non-current	93,707			74,709
Total operating lease liabilities	$	111,943		$	98,857
Finance Lease
Property and equipment, gross	$	1,567		$	1,757
Accumulated depreciation	(973		)	(1,120		)
Property and equipment, net	$	594		$	637
Finance lease liabilities - Current	$	252		$	253
Finance lease liabilities - Non-current	380			430
Total finance lease liabilities	$	632		$	683

The components of lease cost, which are included in the Company's unaudited consolidated statements of income, are as follows:

Lease cost	Three months ended March 31, 2020		Three months ended March 31, 2019
Finance lease:
Amortization of right-of-use assets	$	62	$	95
Interest on lease liabilities	30		25
Operating lease(a)	6,853		7,017
Total lease cost	$	6,945	$	7,137

(a) Includes short-term leases, which are immaterial.

Supplemental cash flow and other information related to leases are as follows:

	Three months ended March 31,
	2020			2019
Cash payments for amounts included in the measurement of lease liabilities :
Operating cash outflows for operating leases	$	6,576		$	5,199
Operating cash outflows for finance leases	$	30		$	20
Financing cash outflows for finance leases	$	67		$	137
Right-of-use assets obtained in exchange for new operating lease liabilities	$	16,366		$	16,614
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—		$	—
Weighted-average remaining lease term
Finance lease	2.3 years			2.9 years
Operating lease	6.8 years			6.4 years
Weighted-average discount rate
Finance lease	10.2		%	8.7		%
Operating lease	7.4		%	7.3		%

The Company determines the incremental borrowing rate by adjusting the benchmark reference rates, applicable to the respective geographies where the leases were entered, with appropriate financing spreads and lease specific adjustments for the effects of collateral.

Maturities of lease liabilities as of March 31, 2020 are as follows:

	Operating Leases		Finance Leases
2020 (April 1 - December 31)	$	19,552	$	304
2021	24,377		239
2022	22,607		131
2023	20,783		86
2024	16,427		10
2025 and thereafter	42,783		—
Total lease payments	$	146,529	$	770
Less: Imputed interest	34,586		138
Present value of lease liabilities	$	111,943	$	632

Maturities of minimum lease payments as of December 31, 2019 are as follows:

During the next twelve months ending December 31,	Operating Leases		Capital Leases
2020	$	26,932	$	325
2021	23,783		251
2022	21,526		157
2023	19,381		86
2024	14,865		22
2025 and thereafter	23,983		—
Total minimum lease payment	$	130,470	$	841
Less: Imputed interest	31,613		158
Present value of minimum lease payments	$	98,857	$	683

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Stock Based Compensation - Performance Based Stock Awards (Details)	3 Months Ended
	Mar. 31, 2020 $ / shares shares
Revenue Based PRSUs
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding [Roll Forward]
Number, Outstanding, at Beginning Balance (in shares) | shares	87,685
Number, Granted (in shares) | shares	61,368
Number, Vested (in shares) | shares	0
Number, Forfeited (in shares) | shares	(1,295)
Number, Outstanding, at Ending Balance (in shares) | shares	147,758
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Weighted-Average Fair Value, Outstanding, at Beginning Balance (in dollars per share) | $ / shares	$ 62.54
Weighted-Average Fair Value, Granted (in dollars per share) | $ / shares	78.29
Weighted-Average Fair Value, Vested (in dollars per share) | $ / shares	0
Weighted-Average Fair Value, Forfeited (in dollars per share) | $ / shares	62.14
Weighted-Average Fair Value, Outstanding, at Ending Balance (in dollars per share) | $ / shares	$ 69.08
Market Condition Based PRSUs
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding [Roll Forward]
Number, Outstanding, at Beginning Balance (in shares) | shares	87,670
Number, Granted (in shares) | shares	61,352
Number, Vested (in shares) | shares	0
Number, Forfeited (in shares) | shares	(1,295)
Number, Outstanding, at Ending Balance (in shares) | shares	147,727
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Weighted-Average Fair Value, Outstanding, at Beginning Balance (in dollars per share) | $ / shares	$ 82.10
Weighted-Average Fair Value, Granted (in dollars per share) | $ / shares	102.10
Weighted-Average Fair Value, Vested (in dollars per share) | $ / shares	0
Weighted-Average Fair Value, Forfeited (in dollars per share) | $ / shares	79.79
Weighted-Average Fair Value, Outstanding, at Ending Balance (in dollars per share) | $ / shares	$ 90.43

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Employee Benefit Plans - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Retirement Benefits [Abstract]
Expected return on plan assets, percentage	7.50%
Discretionary contributions towards 401(k) plan, maximum percentage	4.00%
Discretionary contributions to 401(k) plans	$ 226	$ 1,213
Defined contribution plan, cost	$ 2,917	$ 2,004

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Revenues, net - Additional Information (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Jan. 01, 2020	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable not billed	$ 74,386,000		$ 73,920,000
Contract liability, revenue recognized	5,968,000	$ 2,777,000
Provision for doubtful receivables	1,346,000		1,163,000	$ 1,163,000	$ 1,113,000
Contract Acquisition Costs
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Impairment loss in relation to costs capitalized	0		0
Contract Fulfillment Costs
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Impairment loss in relation to costs capitalized	$ 0		$ 0
Previous U.S. GAAP Standards
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Provision for doubtful receivables				$ 1,163,000

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Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Cash and cash equivalents	$ 224,874	$ 119,165	$ 86,688
Restricted cash (current)	6,369	5,453	5,364
Restricted cash (non-current)	2,291	2,426	2,575
Cash, cash equivalents and restricted cash	$ 233,534	$ 127,044	$ 94,627	$ 104,131

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Leases - Cash Flow and Other Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash payments for amounts included in the measurement of lease liabilities :
Operating cash outflows for operating leases	$ 6,576	$ 5,199
Operating cash outflows for finance leases	30	20
Financing cash outflows for finance leases	67	137
Right-of-use assets obtained in exchange for new operating lease liabilities	16,366	16,614
Right-of-use assets obtained in exchange for new finance lease liabilities	$ 0	$ 0
Weighted-average remaining lease term
Finance lease	2 years 3 months 18 days	2 years 10 months 24 days
Operating lease	6 years 9 months 18 days	6 years 4 months 24 days
Weighted-average discount rate
Finance lease	10.20%	8.70%
Operating lease	7.40%	7.30%

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Stock-Based Compensation - Costs Related to Company's Stock-Based Compensation Plan (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expenses	$ 4,778	$ 6,956
Cost of revenues
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expenses	1,418	1,326
General and administrative expenses
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expenses	1,568	2,975
Selling and marketing expenses
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expenses	$ 1,792	$ 2,655

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Property and Equipment, net - Internally Developed Software Costs, Included under Software (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Property, Plant and Equipment [Abstract]
Cost	$ 16,147		$ 15,784
Less : Accumulated amortization	(5,812)		(4,989)
Internally developed software, net	10,335		$ 10,795
Amortization expense	$ 831	$ 647
Impairment charges		$ 1,227

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Derivatives and Hedge Accounting (Tables)

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Fair Value of Foreign Currency Exchange Contracts

The following tables set forth the fair value of the foreign currency exchange contracts and their location on the unaudited consolidated financial statements:

Derivatives designated as hedging instruments:	As of
Foreign currency exchange contracts	March 31, 2020		December 31,2019
Other current assets	$	2,403	$	3,945
Other assets	$	1,075	$	3,433
Accrued expenses and other current liabilities	$	6,883	$	1,524
Other non-current liabilities	$	7,766	$	1,250
Derivatives not designated as hedging instruments:	As of
Foreign currency exchange contracts	March 31, 2020		December 31,2019
Other current assets	$	1,268	$	131
Accrued expenses and other current liabilities	$	21	$	259

Summary of Effect of Foreign Currency Exchange Contracts on Consolidated Statements of Income

The following tables set forth the effect of foreign currency exchange contracts on the unaudited consolidated statements of income and accumulated other comprehensive loss for the three months ended March 31, 2020 and 2019:

	Three months ended March 31,
Forward Exchange Contracts:	2020			2019
Unrealized (loss)/gain recognized in AOCI
Derivatives in cash flow hedging relationships	$	(14,846	)	$	5,937
(Loss)/Gain recognized in consolidated statements of income
Derivatives not designated as hedging instruments	$	(4,214	)	$	1,396

Location and amount of gain/(loss) recognized in unaudited consolidated statements of income for cash flow hedging relationships and derivatives not designated as hedging instruments
	Three months ended March 31,
	2020					2019
	As per unaudited consolidated statements of income		Gain/(loss) on foreign currency exchange contracts			As per unaudited consolidated statements of income		Gain on foreign currency exchange contracts
Cash flow hedging relationships
Location in unaudited consolidated statements of income where gain was reclassed from AOCI
Cost of revenues	$	162,656	$	812		$	157,240	$	531
General and administrative expenses	$	28,941	73			$	32,531	80
Selling & marketing expenses	$	14,456	4			$	18,047	7
Depreciation & amortization expense	$	12,450	40			$	13,667	53
			$	929				$	671
Derivatives not designated as hedging instruments
Location in unaudited consolidated statements of income where gain/(loss) was recognized
Foreign exchange gain/(loss), net	$	1,377	$	(4,214	)	$	1,260	$	1,396
	$	1,377	$	(4,214	)	$	1,260	$	1,396

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Accrued Expenses and Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Schedule of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

	As of
	March 31, 2020		December 31, 2019
Accrued expenses	$	51,449	$	53,133
Payable to statutory authorities	15,718		6,506
Derivative instruments	6,904		1,783
Client liabilities	6,565		6,378
Interest payable	2,843		1,492
Other current liabilities	1,016		1,731
	$	84,495	$	71,023

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

(a) Basis of Preparation and Principles of Consolidation

The unaudited consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements and therefore should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The unaudited consolidated financial statements reflect all adjustments (of a normal and recurring nature) that management considers necessary for a fair presentation of such statements for the interim periods presented. The unaudited consolidated statements of income for the interim periods presented are not necessarily indicative of the results for the full year or for any subsequent period.

The accompanying unaudited consolidated financial statements include the financial statements of ExlService Holdings and all of its subsidiaries. The standalone financial statements of subsidiaries are fully consolidated on a line-by-line basis. Intra-group balances and transactions, and gains and losses arising from intra-group transactions, are eliminated while preparing those financial statements.

Accounting policies of the respective individual subsidiary and associate are aligned wherever necessary, so as to ensure consistency with the accounting policies that are adopted by the Company under U.S. GAAP.

The Company’s investments in equity affiliates are initially recorded at cost and any excess cost over proportionate share of the fair value of the net assets of the investee at the acquisition date is recognized as goodwill. The proportionate share of net income or loss of the investee is recognized in the unaudited consolidated statements of income.

Effective January 1, 2020, the Company made certain operational and structural changes to more closely integrate the Company’s businesses and to simplify its organizational structure. Under the new structure, the Company reports its financial performance based on new segments described in Note 3 - Segment and Geographical Information to the unaudited consolidated financial statements. In conjunction with the new reporting structure, the Company has recast certain prior period amounts, wherever applicable, to conform to the way the Company internally manages and monitors segment performance. This change primarily impacted Note 3 - Segment and Geographical Information and Note 9 - Goodwill to the unaudited consolidated financial statements, with no impact on the unaudited consolidated balance sheets, statements of income, comprehensive (loss)/income, equity and cash flows.

(b) Use of Estimates

The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the unaudited consolidated statements of income during the reporting period. Although these estimates are based on management’s best assessment of the current business

environment, actual results may be different from those estimates. The significant estimates and assumptions that affect the unaudited consolidated financial statements include, but are not limited to, allowance for expected credit losses, expected recoverability from customers with contingent fee arrangements, recoverability of dues from statutory authorities, assets and obligations related to employee benefit plans, deferred tax valuation allowances, income-tax uncertainties and other contingencies, valuation of derivative financial instruments, assumptions used to calculate stock-based compensation expense, assumptions used to determine the incremental borrowing rate to calculate lease liabilities and right-of-use (“ROU”) assets, lease term to calculate lease cost, depreciation and amortization periods, purchase price allocation, recoverability of long-lived assets including goodwill and intangibles, and estimated costs to complete fixed price contracts.

(c) Leases

The Company determines if an arrangement is a lease at inception of the contract. Operating leases are recorded in "operating lease right-of-use ("ROU") assets", "current portion of operating lease liabilities" and "operating lease liabilities, less current portion" in the Company's unaudited consolidated balance sheets. Finance leases are recorded in "property and equipment", "current portion of finance lease liabilities" and "finance lease liabilities, less current portion" in the Company's unaudited consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. For leases in which the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date for determining the present value of lease payments. Lease terms includes the effects of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating lease arrangements is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately.

The Company accounts for a modification as a separate contract when it grants an additional right of use not included in the original lease and the increase is commensurate with the standalone price for the additional right of use, adjusted for the circumstances of the particular contract. Modifications which are not accounted for as a separate contract are reassessed as of the effective date of the modification based on its modified terms and conditions and the facts and circumstances as of that date.

On January 1, 2019, the date of initial application, the Company adopted Leases (Topic 842) using the modified retrospective method. The modified retrospective method provides a method of recognizing those leases which had not expired as of the date of adoption of January 1, 2019.

The adoption resulted in the recognition of ROU assets of $80,328 (net of deferred rent of $8,626) and lease liabilities of $88,954 for operating leases as of January 1, 2019. The Company's accounting for finance leases remained substantially unchanged. The adoption had no impact on opening balance of retained earnings. Refer to Note 20 to the unaudited consolidated financial statements for details.

(d) Recent Accounting Pronouncements    

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (("Subtopic 715-20")): Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this ASU remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The adoption of this ASU is not expected to have any material effect on the Company’s consolidated financial statements.

In March 2020, FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as

interbank offered rates and LIBOR. The ASU provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments are elective and are effective upon issuance for all entities through December 31, 2022. The Company is currently evaluating the impact of this ASU.

(e) Recently Adopted Accounting Pronouncements

In June 2016, FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The new guidance replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. These changes will result in earlier recognition of credit losses. The allowance for credit losses is a valuation account that is to be deducted from the amortized cost of the financial asset(s) so as to present the net carrying value at the amount expected to be collected on the financial asset. The Company adopted Topic 326 as of January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to its retained earnings. The adoption of the ASU had no impact to equity as of January 1, 2020 with a corresponding offset to accounts receivable. Further, the impact of adoption of this guidance did not have a material effect on the Company's accounting policies, processes, and systems. Refer to Note 4 to the unaudited consolidated financial statements for details.

In August 2018, FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820, by prescribing new disclosure requirements, and the elimination and modification of disclosure requirements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. An entity was permitted to early adopt either the entire standard or only the provisions that eliminate or modify requirements. The early adoption of this ASU, effective January 1, 2020, did not have any material effect on the Company’s disclosures in the unaudited consolidated financial statements.

In August 2018, FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software ("Subtopic 350-40"): This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the ASU requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in FASB Accounting Standard Codification Subtopic 350-40 on internal-use software to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The ASU 2018-15 also provides guidance on amortization and impairment of any costs capitalized, along with new presentation and disclosure requirements. The new guidance is effective for fiscal years beginning after December 15, 2019 and adoption was allowed prospectively. The adoption of this ASU effective January 1, 2020 did not have any material effect on the Company’s unaudited consolidated financial statements.

In April 2019, FASB issued ASU No. 2019-04, Codification Improvements to Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Financial Instruments: Targeted Transition Relief (Topic 825). The amendments clarify the scope of the credit losses standard and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. With respect to hedge accounting, the amendments address partial-term fair value hedges, fair value hedge basis adjustments, and certain transition requirements, among other things. With respect to recognizing and measuring financial instruments, the amendment in the ASU address the scope of the guidance, the requirement for remeasurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities have to be remeasured at historical exchange rates. This ASU is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption was permitted. The adoption of this ASU did not have any material effect on the Company’s unaudited consolidated financial statements.

In May 2019, FASB issued ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief. This ASU provides entities with the option to irrevocably elect the fair value option, on an instrument-by-instrument

basis in accordance with Subtopic 825-10, for certain financial instruments that are within the scope of Subtopic 326-20, upon adopting Topic 326. The fair value option election does not apply to held-to-maturity debt securities. The amendments in this ASU provide entities with targeted transition relief that is intended to increase comparability of financial statement information for some entities that otherwise would have measured similar financial instruments using different measurement methodologies. The Company adopted Topic 326 as of January 1, 2020, whereby no such fair value election was made, accordingly, the adoption of this ASU did not have any material effect on the Company’s unaudited consolidated financial statements.

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Cover - shares	3 Months Ended
	Mar. 31, 2020	May 04, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2020
Document Transition Report	false
Entity File Number	001-33089
Entity Registrant Name	EXLSERVICE HOLDINGS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	82-0572194
Entity Address, Address Line One	320 Park Avenue,
Entity Address, Address Line Two	29th Floor,
Entity Address, City or Town	New York,
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10022
City Area Code	212
Local Phone Number	277-7100
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	EXLS
Security Exchange Name	NASDAQ
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		34,316,121
Amendment Flag	false
Entity Central Index Key	0001297989
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020

XML

Consolidated Statements of Comprehensive (Loss)/Income (Unaudited) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2020	Mar. 31, 2019
Statement of Comprehensive Income [Abstract]
Net income		$ 22,411	$ 14,695
Other comprehensive (loss)/income:
Unrealized (loss)/gain on cash flow hedges		(14,846)	5,937
Foreign currency translation (loss)/gain		(17,337)	2,680
Reclassification adjustments
Gain on cash flow hedges	[1]	(929)	(671)
Retirement benefits	[2]	101	(39)
Income tax (expense)/benefit relating to above	[3]	4,799	(1,652)
Total other comprehensive (loss)/income		(28,212)	6,255
Total comprehensive (loss)/income		$ (5,801)	$ 20,950

[1] These are reclassified to net income and are included either in cost of revenues or operating expenses, as applicable in the unaudited consolidated statements of income. Refer to Note 16 to the unaudited consolidated financial statements.

[2] These are reclassified to net income and are included in other income, net in the unaudited consolidated statements of income. Refer to Note 19 to the unaudited consolidated financial statements.

[3] These are income tax benefit/(expense) recognized on cash flow hedges and retirement benefits. Refer to Note 21 to the unaudited consolidated financial statements.

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Related Party Disclosures (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Oct. 01, 2018
Related Party Transaction [Line Items]
Debt outstanding	$ 349,666,000
Convertible Notes Payable | 3.50% Convertible Senior Notes due October 1, 2024
Related Party Transaction [Line Items]
Debt instrument face amount				$ 150,000,000
Debt outstanding	150,000,000		$ 150,000,000
Interest accrued	2,625,000		$ 1,313,000
Interest Expense, Related Party	$ 1,313,000	$ 1,313,000

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Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Assets and Liabilities Measured at Fair Value

The following table sets forth the Company’s assets and liabilities that were accounted for at fair value as of March 31, 2020 and December 31, 2019.

As of March 31, 2020	Level 1		Level 2		Level 3		Total
Assets
Mutual funds*	$	114,116	$	—	$	—	$	114,116
Derivative financial instruments	—		4,746		—		4,746
Total	$	114,116	$	4,746	$	—	$	118,862
Liabilities
Derivative financial instruments	$	—	$	14,670	$	—	$	14,670
Total	$	—	$	14,670	$	—	$	14,670
As of December 31, 2019	Level 1		Level 2		Level 3		Total
Assets
Mutual funds*	$	166,330	$	—	$	—	$	166,330
Derivative financial instruments	—		7,509		—		7,509
Total	$	166,330	$	7,509	$	—	$	173,839
Liabilities
Derivative financial instruments	$	—	$	3,033	$	—	$	3,033
Total	$	—	$	3,033	$	—	$	3,033

* Represents those short-term investments which are carried at the fair value option under ASC 825 "Financial Instruments” as of March 31, 2020 and December 31, 2019.

Derivative Financial Instruments: The Company’s derivative financial instruments consist of foreign currency forward exchange contracts. Fair values for derivative financial instruments are based on independent sources including highly rated financial institutions and are classified as Level 2. Refer to Note 16 to the unaudited consolidated financial statements for further details.

Financial instruments not carried at fair value:

The Company’s other financial instruments not carried at fair value consist primarily of cash and cash equivalents, short-term investments (except investment in mutual funds, as disclosed above), restricted cash, and accrued expenses for which fair values approximate their carrying amounts due to their short-term nature. The carrying value of the Company’s outstanding revolving credit facility approximates its fair value because the Company’s interest rate yield is near current market rates for comparable debt instruments.

Convertible Senior Notes:

The total estimated fair value of the convertible senior notes as of March 31, 2020 and December 31, 2019 was $120,033 and $149,934, respectively. The fair value was determined based on the market yields for similar Notes as of the March 31, 2020 and December 31, 2019, respectively. The Company considers the fair value of the Notes to be a Level 2 measurement due to the limited inputs available for its fair valuation.

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Employee Benefit Plans

3 Months Ended

Mar. 31, 2020

Retirement Benefits [Abstract]

Employee Benefit Plans

Employee Benefit Plans

The Company’s Gratuity Plans in India ("Gratuity Plan") provide for lump sum payment to vested employees on retirement or upon termination of employment in an amount based on the respective employee’s salary and years of employment with the Company. Liabilities with regard to the Gratuity Plans are determined by actuarial valuation using the projected unit credit method. Current service costs for the Gratuity Plan are accrued in the year to which they relate. Actuarial gains or losses or prior service costs, if any, resulting from amendments to the plans are recognized and amortized over the remaining period of service of the employees.

In addition, the Company’s subsidiary operating in the Philippines conforms to the minimum regulatory benefit, which provide for lump sum payment to vested employees on retirement from employment in an amount based on the respective employee’s salary and years of employment with the Company (the "Philippines Plan"). The benefit costs of the Philippines Plan for the year are calculated on an actuarial basis.

Components of net periodic benefit cost:

	Three months ended March 31,
	2020			2019
Service cost	$	678		$	487
Interest cost	243			219
Expected return on plan assets	(161		)	(142		)
Amortization of actuarial loss/(gain)	101			(39		)
Net gratuity cost	$	861		$	525

The Gratuity Plan in India is partially funded and the Philippines plan is unfunded. The Company makes annual contributions to the employees' gratuity fund established with Life Insurance Corporation of India and HDFC Standard Life Insurance Company. Fund managers manage these funds and calculate the annual contribution required to be made by the Company and manage the Gratuity Plans, including any required payouts. These funds are managed on a cash accumulation basis and interest is declared retrospectively on March 31 of each year. The Company earned a return of approximately 7.5% per annum on these Gratuity Plans for the three months ended March 31, 2020.

Change in Plan Assets
Plan assets at January 1, 2020	$	8,784
Actual return	147
Employer contribution	—
Benefits paid*	(286		)
Effect of exchange rate changes	(494		)
Plan assets at March 31, 2020	$	8,151

* Benefits payments were substantially made through the plan assets during the three months ended March 31, 2020.

The Company maintains several 401(k) plans (the “401(k) Plans) under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), covering all eligible employees, as defined in the Code as a defined contribution plan. The Company may make discretionary contributions of up to a maximum of 4% of employee compensation within certain limits. The Company accrued for contributions to the 401(k) Plans of $226 and $1,213 for the three months ended March 31, 2020 and 2019, respectively.

During the three months ended March 31, 2020 and 2019, the Company contributed $2,917 and $2,004, respectively, for various defined contribution plans on behalf of its employees in India, the Philippines, Romania, the Czech Republic, South Africa, Colombia, and Singapore.

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Cash, Cash Equivalents and Restricted Cash (Tables)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Schedule of Cash and Cash Equivalents

For the purpose of unaudited statements of cash flows, cash, cash equivalents and restricted cash comprise of the following:

	As of
	March 31, 2020		March 31, 2019
Cash and cash equivalents	$	224,874	$	86,688
Restricted cash (current)	6,369		5,364
Restricted cash (non-current)	2,291		2,575
Cash, cash equivalents and restricted cash	$	233,534	$	94,627

Restrictions on Cash and Cash Equivalents

For the purpose of unaudited statements of cash flows, cash, cash equivalents and restricted cash comprise of the following:

	As of
	March 31, 2020		March 31, 2019
Cash and cash equivalents	$	224,874	$	86,688
Restricted cash (current)	6,369		5,364
Restricted cash (non-current)	2,291		2,575
Cash, cash equivalents and restricted cash	$	233,534	$	94,627

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Basis of Preparation

The unaudited consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements and therefore should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The unaudited consolidated financial statements reflect all adjustments (of a normal and recurring nature) that management considers necessary for a fair presentation of such statements for the interim periods presented. The unaudited consolidated statements of income for the interim periods presented are not necessarily indicative of the results for the full year or for any subsequent period.

Principles of Consolidation

The accompanying unaudited consolidated financial statements include the financial statements of ExlService Holdings and all of its subsidiaries. The standalone financial statements of subsidiaries are fully consolidated on a line-by-line basis. Intra-group balances and transactions, and gains and losses arising from intra-group transactions, are eliminated while preparing those financial statements.

Accounting policies of the respective individual subsidiary and associate are aligned wherever necessary, so as to ensure consistency with the accounting policies that are adopted by the Company under U.S. GAAP.

The Company’s investments in equity affiliates are initially recorded at cost and any excess cost over proportionate share of the fair value of the net assets of the investee at the acquisition date is recognized as goodwill. The proportionate share of net income or loss of the investee is recognized in the unaudited consolidated statements of income.

Use of Estimates

Use of Estimates

The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the unaudited consolidated statements of income during the reporting period. Although these estimates are based on management’s best assessment of the current business

environment, actual results may be different from those estimates. The significant estimates and assumptions that affect the unaudited consolidated financial statements include, but are not limited to, allowance for expected credit losses, expected recoverability from customers with contingent fee arrangements, recoverability of dues from statutory authorities, assets and obligations related to employee benefit plans, deferred tax valuation allowances, income-tax uncertainties and other contingencies, valuation of derivative financial instruments, assumptions used to calculate stock-based compensation expense, assumptions used to determine the incremental borrowing rate to calculate lease liabilities and right-of-use (“ROU”) assets, lease term to calculate lease cost, depreciation and amortization periods, purchase price allocation, recoverability of long-lived assets including goodwill and intangibles, and estimated costs to complete fixed price contracts.

Leases

Leases

The Company determines if an arrangement is a lease at inception of the contract. Operating leases are recorded in "operating lease right-of-use ("ROU") assets", "current portion of operating lease liabilities" and "operating lease liabilities, less current portion" in the Company's unaudited consolidated balance sheets. Finance leases are recorded in "property and equipment", "current portion of finance lease liabilities" and "finance lease liabilities, less current portion" in the Company's unaudited consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. For leases in which the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date for determining the present value of lease payments. Lease terms includes the effects of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating lease arrangements is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately.

The Company accounts for a modification as a separate contract when it grants an additional right of use not included in the original lease and the increase is commensurate with the standalone price for the additional right of use, adjusted for the circumstances of the particular contract. Modifications which are not accounted for as a separate contract are reassessed as of the effective date of the modification based on its modified terms and conditions and the facts and circumstances as of that date.

On January 1, 2019, the date of initial application, the Company adopted Leases (Topic 842) using the modified retrospective method. The modified retrospective method provides a method of recognizing those leases which had not expired as of the date of adoption of January 1, 2019.

Recent Accounting Pronouncements and Recently Adopted Accounting Pronouncements

Recent Accounting Pronouncements    

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (("Subtopic 715-20")): Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this ASU remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The adoption of this ASU is not expected to have any material effect on the Company’s consolidated financial statements.

In March 2020, FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as

interbank offered rates and LIBOR. The ASU provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments are elective and are effective upon issuance for all entities through December 31, 2022. The Company is currently evaluating the impact of this ASU.

(e) Recently Adopted Accounting Pronouncements

In June 2016, FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The new guidance replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. These changes will result in earlier recognition of credit losses. The allowance for credit losses is a valuation account that is to be deducted from the amortized cost of the financial asset(s) so as to present the net carrying value at the amount expected to be collected on the financial asset. The Company adopted Topic 326 as of January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to its retained earnings. The adoption of the ASU had no impact to equity as of January 1, 2020 with a corresponding offset to accounts receivable. Further, the impact of adoption of this guidance did not have a material effect on the Company's accounting policies, processes, and systems. Refer to Note 4 to the unaudited consolidated financial statements for details.

In August 2018, FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820, by prescribing new disclosure requirements, and the elimination and modification of disclosure requirements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. An entity was permitted to early adopt either the entire standard or only the provisions that eliminate or modify requirements. The early adoption of this ASU, effective January 1, 2020, did not have any material effect on the Company’s disclosures in the unaudited consolidated financial statements.

In August 2018, FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software ("Subtopic 350-40"): This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the ASU requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in FASB Accounting Standard Codification Subtopic 350-40 on internal-use software to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. The ASU 2018-15 also provides guidance on amortization and impairment of any costs capitalized, along with new presentation and disclosure requirements. The new guidance is effective for fiscal years beginning after December 15, 2019 and adoption was allowed prospectively. The adoption of this ASU effective January 1, 2020 did not have any material effect on the Company’s unaudited consolidated financial statements.

In April 2019, FASB issued ASU No. 2019-04, Codification Improvements to Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Financial Instruments: Targeted Transition Relief (Topic 825). The amendments clarify the scope of the credit losses standard and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. With respect to hedge accounting, the amendments address partial-term fair value hedges, fair value hedge basis adjustments, and certain transition requirements, among other things. With respect to recognizing and measuring financial instruments, the amendment in the ASU address the scope of the guidance, the requirement for remeasurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities have to be remeasured at historical exchange rates. This ASU is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption was permitted. The adoption of this ASU did not have any material effect on the Company’s unaudited consolidated financial statements.

In May 2019, FASB issued ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief. This ASU provides entities with the option to irrevocably elect the fair value option, on an instrument-by-instrument

basis in accordance with Subtopic 825-10, for certain financial instruments that are within the scope of Subtopic 326-20, upon adopting Topic 326. The fair value option election does not apply to held-to-maturity debt securities. The amendments in this ASU provide entities with targeted transition relief that is intended to increase comparability of financial statement information for some entities that otherwise would have measured similar financial instruments using different measurement methodologies. The Company adopted Topic 326 as of January 1, 2020, whereby no such fair value election was made, accordingly, the adoption of this ASU did not have any material effect on the Company’s unaudited consolidated financial statements.

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Segment and Geographical Information

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Segment and Geographical Information

Segment and Geographical Information

The Company operates in the BPM industry and is a provider of operations management and analytics services.

Effective January 1, 2020, the Company made certain operational and structural changes to more closely integrate its businesses and to simplify its organizational structure. The Company now manages and reports financial information through its four strategic business units: Insurance, Healthcare, Analytics and Emerging Business, which reflects how management will review financial information and make operating decisions. These business units will develop client-specific solutions, build capabilities, maintain a unified go-to-market approach and be integrally responsible for service delivery, customer satisfaction, growth and profitability. In line with the Company’s strategy of vertical integration and focus on domain expertise, the Company has integrated its Finance & Accounting and Consulting operating segments within each of the Insurance and Healthcare operating segments based on the corresponding industry-specific clients to whom those services are provided. Finance & Accounting and Consulting services to clients outside of the Insurance and Healthcare industries will now be part of the Company’s newly formed business unit and reportable segment Emerging Business. In addition, the Company integrated its former Travel, Transportation and Logistics, Banking and Financial Services, and Utilities operating segments under the Emerging Business unit to further leverage and optimize the operating scale in providing operations management services.

The Company’s new reportable segments effective January 1, 2020 are as follows:

• Insurance,

• Healthcare,

• Emerging Business, and

• Analytics

In conjunction with the new reporting structure, the Company has recasted its segment disclosures for prior periods presented to conform to the way the Company internally manages and monitors segment performance.

The chief operating decision maker (“CODM”) generally reviews financial information such as revenues, cost of revenues and gross profit, disaggregated by the operating segments to allocate an overall budget among the operating segments.

The Company does not allocate and therefore the CODM does not evaluate, certain operating expenses, interest expense or income taxes by segment. Many of the Company’s assets are shared by multiple operating segments. The Company manages these assets on a total Company basis, not by operating segment, and therefore asset information and capital expenditures by operating segment are not presented.

Revenues and cost of revenues for the three months ended March 31, 2020 and 2019, respectively, for each of the reportable segments, are as follows:

	Three months ended March 31, 2020
	Insurance		Healthcare		Emerging Business		Analytics		Total
Revenues, net	$	83,739	$	27,029	$	42,791	$	92,431	$	245,990
Cost of revenues(1)	58,965		19,593		25,482		58,616		162,656
Gross profit(1)	$	24,774	$	7,436	$	17,309	$	33,815	$	83,334
Operating expenses									55,847
Foreign exchange gain, interest expense and other income, net									834
Income tax expense									5,855
Loss from equity-method investment									55
Net income									$	22,411

	Three months ended March 31, 2019
	Insurance		Healthcare		Emerging Business		Analytics		Total
Revenues, net	$	81,286	$	22,248	$	49,078	$	86,961	$	239,573
Cost of revenues(1)	55,243		17,802		27,293		56,902		157,240
Gross profit(1)	$	26,043	$	4,446	$	21,785	$	30,059	$	82,333
Operating expenses									65,472
Foreign exchange gain, interest expense and other income, net									2,101
Income tax expense									4,200
Loss from equity-method investment									67
Net income									$	14,695

⁽¹⁾ Exclusive of depreciation and amortization expense.

Revenues, net by service type, were as follows:

	Three months ended March 31,
	2020		2019
BPM and related services(1)	$	153,559	$	152,612
Analytics services	92,431		86,961
Revenues, net	$	245,990	$	239,573

⁽¹⁾ BPM and related services include revenues of the Company's Insurance, Healthcare and Emerging Business operating segments. Refer to the reportable segment disclosure above.

The Company attributes the revenues to regions based upon the location of its customers.

	Three months ended March 31,
	2020		2019
Revenues, net
United States	$	207,880	$	196,104
Non-United States
United Kingdom	23,278		29,101
Rest of World	14,832		14,368
Total Non-United States	38,110		43,469
Revenues, net	$	245,990	$	239,573

Long-lived assets by geographic area, which consist of property and equipment, net and operating lease right-of-use assets were as follows:

	As of
	March 31, 2020		December 31, 2019
Long-lived assets
India	$	99,385	$	78,244
United States	52,772		52,375
Philippines	27,350		26,006
Rest of World	10,946		8,913
Long-lived assets	$	190,453	$	165,538

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Other Income, net

3 Months Ended

Mar. 31, 2020

Other Income and Expenses [Abstract]

Other Income, net

Other Income, net

Other income, net consists of the following:

	Three months ended March 31,
	2020			2019
Gain on sale and mark-to-market of mutual funds, net	$	2,056		$	3,526
Interest income	532			796
Others, net	(59		)	101
Other income, net	$	2,529		$	4,423

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Other Assets

3 Months Ended

Mar. 31, 2020

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets

Other Assets

Other assets consist of the following:

	As of
	March 31, 2020		December 31, 2019
Lease deposits	$	9,720	$	9,983
Derivative instruments	1,075		3,433
Deposits with statutory authorities	6,108		6,252
Term deposits	2,098		1,983
Contract assets	3,868		3,977
Deferred contract fulfillment costs	4,773		5,582
Others	4,403		4,806
Other assets	$	32,045	$	36,016

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Accumulated Other Comprehensive Loss - Summary of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Accumulated Other Comprehensive Income (Loss) [Line Items]
AOCI, tax	$ 4,674	$ (125)
Accumulated other comprehensive loss	(113,104)	(84,892)
Cumulative foreign currency translation loss
Accumulated Other Comprehensive Income (Loss) [Line Items]
AOCL before tax	(104,928)	(87,591)
Unrealized (loss)/gain on cash flow hedges
Accumulated Other Comprehensive Income (Loss) [Line Items]
AOCL before tax	(11,171)	4,604
Retirement benefits
Accumulated Other Comprehensive Income (Loss) [Line Items]
AOCL before tax	$ (1,679)	$ (1,780)

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Employee Benefit Plans - Net Gratuity Cost (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Retirement Benefits [Abstract]
Service cost	$ 678	$ 487
Interest cost	243	219
Expected return on plan assets	(161)	(142)
Amortization of actuarial loss/(gain)	101	(39)
Net gratuity cost	$ 861	$ 525

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Derivatives and Hedge Accounting- Location of Gain or Loss Recognized (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Derivative Instruments, Gain (Loss) [Line Items]
Cost of revenues	$ 162,656	$ 157,240
General and administrative expenses	28,941	32,531
Selling & marketing expenses	14,456	18,047
Depreciation & amortization expense	12,450	13,667
Foreign exchange gain, net	1,377	1,260
Reclassification out of Accumulated Other Comprehensive Income | Derivatives Designated as Hedging Instruments | Derivatives in cash flow hedging relationships | Foreign currency exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Cost of revenues	812	531
General and administrative expenses	73	80
Selling & marketing expenses	4	7
Depreciation & amortization expense	40	53
Reclassification from AOCI, before tax	929	671
Reclassification out of Accumulated Other Comprehensive Income | Derivatives not designated as hedging instruments | Foreign currency exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Foreign exchange gain, net	$ (4,214)	$ 1,396

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Other Current Assets - Schedule of Other Current Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Derivative instruments	$ 3,671	$ 4,076
Advances to suppliers	2,477	1,581
Receivables from statutory authorities	12,334	12,608
Contract assets	1,650	1,414
Deferred contract fulfillment costs	2,143	1,673
Others	3,898	3,242
Other current assets	$ 26,173	$ 24,594

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Goodwill and Intangible Assets - Summary of Company's Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, gross carrying amount	$ 129,461	$ 129,678
Accumulated Amortization	(60,627)	(56,596)
Total	68,834	73,082
Indefinite lived intangible assets [Abstract]
Total intangible assets, gross carrying amount	130,361	130,578
Total intangible assets, net carrying amount	69,734	73,982
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, gross carrying amount	97,483	97,602
Accumulated Amortization	(45,819)	(43,330)
Total	51,664	54,272
Developed technology
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, gross carrying amount	26,878	26,976
Accumulated Amortization	(11,889)	(10,687)
Total	14,989	16,289
Trade names and trademarks
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, gross carrying amount	5,100	5,100
Accumulated Amortization	(2,919)	(2,579)
Total	2,181	2,521
Trade names and trademarks
Indefinite lived intangible assets [Abstract]
Trade names and trademarks	$ 900	$ 900

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Fair Value Measurements - Additional Information (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Level 2
Business Acquisition [Line Items]
Fair value of convertible notes	$ 120,033	$ 149,934

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Schedule of costs related to company's stock-based compensation plan

The following costs related to the Company’s stock-based compensation plan are included in the unaudited consolidated statements of income:

	Three months ended March 31,
	2020		2019
Cost of revenues	$	1,418	$	1,326
General and administrative expenses	1,568		2,975
Selling and marketing expenses	1,792		2,655
Total	$	4,778	$	6,956

Schedule of stock options activity

Stock option activity under the Company’s stock-based compensation plans is shown below:

	Number of Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life (Years)
Outstanding at December 31, 2019	98,161		$	23.39	$	4,522	1.86
Granted	—		—		—		—
Exercised	(39,832	)	23.11		1,932		—
Forfeited	—		—		—		—
Outstanding at March 31, 2020	58,329		$	23.58	$	1,659	1.80
Vested and exercisable at March 31, 2020	58,329		$	23.58	$	1,659	1.80

Schedule of restricted stock and RSU activity

Restricted stock and restricted stock unit activity under the Company’s stock-based compensation plans is shown below:

	Restricted Stock			Restricted Stock Units
	Number	Weighted Average Fair Value		Number		Weighted Average Fair Value
Outstanding at December 31, 2019*	27,384	$	48.72	913,094		$	59.61
Granted	—	—		368,683		78.19
Vested	—	—		(293,289	)	56.30
Forfeited	—	—		(24,649	)	62.18
Outstanding at March 31, 2020*	27,384	$	48.72	963,839		$	67.66

* As of March 31, 2020 and December 31, 2019 restricted stock units vested for which the underlying common stock is yet to be issued is 167,270 each.

Schedule of performance based stock awards activity

Performance based restricted stock unit activity under the Company’s stock plans is shown below:

	Revenue Based PRSUs				Market Condition Based PRSUs
	Number		Weighted Average Fair Value		Number		Weighted Average Fair Value
Outstanding at December 31, 2019	87,685		$	62.54	87,670		$	82.10
Granted	61,368		78.29		61,352		102.10
Vested	—		—		—		—
Forfeited	(1,295	)	62.14		(1,295	)	79.79
Outstanding at March 31, 2020	147,758		$	69.08	147,727		$	90.43

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Segment and Geographical Information - Revenues based on Geographical Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues, net	$ 245,990	$ 239,573
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues, net	207,880	196,104
United Kingdom
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues, net	23,278	29,101
Rest of World
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues, net	14,832	14,368
Total Non-United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues, net	$ 38,110	$ 43,469