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 JUNE 30, 2021

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 July 27, 2021, there were 33,174,613 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 (UNAUDITED)
	Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	3
	Consolidated Statements of Income for the Three and Six months ended June 30, 2021 and 2020	5
	Consolidated Statements of Comprehensive Income/(Loss) for the Three and Six months ended June 30, 2021 and 2020	6
	Consolidated Statements of Equity for the Three and Six months ended June 30, 2021 and 2020	7
	Consolidated Statements of Cash Flows for the Six months ended June 30, 2021 and 2020	9
	Notes to Consolidated Financial Statements	10
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
3.	Quantitative and Qualitative Disclosures About Market Risk	59
4.	Controls and Procedures	59
	Part II. Other Information	59
1.	Legal Proceedings	59
1A.	Risk Factors	59
2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
3.	Defaults Upon Senior Securities	60
4.	Mine Safety Disclosures	60
5.	Other Information	60
6.	Exhibits	61
Signatures		62

2

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share amounts)

	As of
	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	150,211	$	218,530
Short-term investments	144,533		184,286
Restricted cash	5,065		4,690
Accounts receivable, net	182,111		147,635
Prepaid expenses	12,060		11,344
Advance income tax, net	13,567		5,684
Other current assets	33,615		37,109
Total current assets	541,162		609,278
Property and equipment, net	86,511		92,875
Operating lease right-of-use assets	83,280		91,918
Restricted cash	2,260		2,299
Deferred tax assets, net	24,132		7,749
Intangible assets, net	52,853		59,594
Goodwill	348,747		349,088
Other assets	27,472		32,099
Investment in equity affiliate	2,929		2,957
Total assets	$	1,169,346	$	1,247,857
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,877	$	6,992
Current portion of long-term borrowings	15,000		25,000
Deferred revenue	12,017		32,649
Accrued employee costs	70,496		67,645
Accrued expenses and other current liabilities	76,424		66,410
Current portion of operating lease liabilities	18,039		18,894
Income taxes payable, net	11,256		3,488
Total current liabilities	207,109		221,078
Long-term borrowings, less current portion	139,432		201,961
Operating lease liabilities, less current portion	76,518		84,874
Income taxes payable	1,790		1,790
Deferred tax liabilities, net	902		847
Other non-current liabilities	15,581		18,135
Total liabilities	441,332		528,685
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, 39,283,853 shares issued and 33,249,709 shares outstanding as of June 30, 2021 and 38,968,052 shares issued and 33,559,434 shares outstanding as of December 31, 2020	39		39
Additional paid-in capital	439,051		420,976

3

Retained earnings	701,331		641,379
Accumulated other comprehensive loss	(86,745)		(74,984)
Total including shares held in treasury	1,053,676		987,410
Less: 6,034,144 shares as of June 30, 2021 and 5,408,618 shares as of December 31, 2020, held in treasury, at cost	(325,662)		(268,238)
Stockholders’ equity	728,014		719,172
Total equity	728,014		719,172
Total liabilities and stockholders’ equity	$	1,169,346	$	1,247,857

See accompanying notes to unaudited consolidated financial statements.

4

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except share and per share amounts)

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Revenues, net	$	275,064	$	222,473	$	536,479	$	468,463
Cost of revenues(1)	170,701		158,401		329,522		321,057
Gross profit(1)	104,363		64,072		206,957		147,406
Operating expenses:
General and administrative expenses	36,499		28,750		67,202		57,691
Selling and marketing expenses	19,724		13,051		37,959		27,507
Depreciation and amortization expense	12,310		12,405		24,411		24,855
Total operating expenses	68,533		54,206		129,572		110,053
Income from operations	35,830		9,866		77,385		37,353
Foreign exchange gain, net	1,353		1,359		1,787		2,736
Interest expense	(2,520)		(2,883)		(4,994)		(5,955)
Other income, net	2,215		4,225		3,625		6,754
Income before income tax expense and earnings from equity affiliates	36,878		12,567		77,803		40,888
Income tax expense	8,865		4,072		17,823		9,927
Income before earnings from equity affiliates	28,013		8,495		59,980		30,961
Gain / (loss) from equity-method investment	8		(66)		(28)		(121)
Net income attributable to ExlService Holdings, Inc. stockholders	$	28,021	$	8,429	$	59,952	$	30,840
Earnings per share attributable to ExlService Holdings, Inc. stockholders:
Basic	$	0.83	$	0.24	$	1.78	$	0.90
Diluted	$	0.81	$	0.24	$	1.75	$	0.89
Weighted-average number of shares used in computing earnings per share attributable to ExlService Holdings Inc. stockholders:
Basic	33,571,074		34,486,202		33,652,146		34,443,884
Diluted	34,389,768		34,597,688		34,353,593		34,659,146

(1) Exclusive of depreciation and amortization expense.

See accompanying notes to unaudited consolidated financial statements.

5

EXLSERVICE HOLDINGS, INC.

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

(In thousands)

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Net income	$	28,021	$	8,429	$	59,952	$	30,840
Other comprehensive income/(loss):
Unrealized gain/(loss) on cash flow hedges	(871)		7,721		(303)		(7,125)
Loss on net investment hedges	(1,134)		—		(1,134)		—
Foreign currency translation gain/(loss)	(4,775)		2,273		(6,686)		(19,298)
Reclassification adjustments
(Gain)/loss on cash flow hedges(1)	(2,866)		1,127		(5,695)		198
Retirement benefits(2)	176		97		355		198
Income tax effects relating to above(3)	1,478		(2,388)		1,702		6,645
Total other comprehensive income/(loss)	$	(7,992)	$	8,830	$	(11,761)	$	(19,382)
Total comprehensive income/(loss)	$	20,029	$	17,259	$	48,191	$	11,458

(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 - Derivatives and Hedge Accounting 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 - Employee Benefit Plans to the unaudited consolidated financial statements.

(3)These are income tax effects recognized on cash flow hedges, retirement benefits and foreign currency translation gains/(losses). Refer to Note 21 - Income Taxes to the unaudited consolidated financial statements.

See accompanying notes to unaudited consolidated financial statements.

6

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

For the three months ended June 30, 2021 and 2020

(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 March 31, 2021	39,273,989	$	39	$	428,882	$	673,310	$	(78,753)	(5,747,100)	$	(297,253)	$	726,225
Stock issued against stock-based compensation plans	9,864	—		99		—		—		—	—		99
Stock-based compensation	—	—		10,070		—		—		—	—		10,070
Acquisition of treasury stock	—	—		—		—		—		(287,044)	(28,409)		(28,409)
Other comprehensive loss	—	—		—		—		(7,992)		—	—		(7,992)
Net income	—	—		—		28,021		—		—	—		28,021
Balance as of June 30, 2021	39,283,853	$	39	$	439,051	$	701,331	$	(86,745)	(6,034,144)	$	(325,662)	$	728,014

	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock			Total Equity
	Shares	Amount								Shares	Amount
Balance as of March 31, 2020	38,813,775	$	39	$	396,939	$	574,314	$	(113,104)	(4,497,779)	$	(202,284)	$	655,904
Stock issued against stock-based compensation plans	4,590	—		39		—		—		—	—		39
Stock-based compensation	—	—		7,726		—		—		—	—		7,726
Other comprehensive income	—	—		—		—		8,830		—	—		8,830
Net income	—	—		—		8,429		—		—	—		8,429
Balance as of June 30, 2020	38,818,365	$	39	$	404,704	$	582,743	$	(104,274)	(4,497,779)	$	(202,284)	$	680,928

7

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

For the six months ended June 30, 2021 and 2020

(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, 2021	38,968,052	$	39	$	420,976	$	641,379	$	(74,984)	(5,408,618)	$	(268,238)	$	719,172
Stock issued against stock-based compensation plans	315,801	—		173		—		—		—	—		173
Stock-based compensation	—	—		17,902		—		—		—	—		17,902
Acquisition of treasury stock	—	—		—		—		—		(625,526)	(57,424)		(57,424)
Other comprehensive loss	—	—		—		—		(11,761)		—	—		(11,761)
Net income	—	—		—		59,952		—		—	—		59,952
Balance as of June 30, 2021	39,283,853	$	39	$	439,051	$	701,331	$	(86,745)	(6,034,144)	$	(325,662)	$	728,014

	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	337,711	—		960		—		—		—	—		960
Stock-based compensation	—	—		12,504		—		—		—	—		12,504
Acquisition of treasury stock	—	—		—		—		—		(202,366)	(13,995)		(13,995)
Other comprehensive loss	—	—		—		—		(19,382)		—	—		(19,382)
Net income	—	—		—		30,840		—		—	—		30,840
Balance as of June 30, 2020	38,818,365	$	39	$	404,704	$	582,743	$	(104,274)	(4,497,779)	$	(202,284)	$	680,928

See accompanying notes to unaudited consolidated financial statements.

8

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	Six months ended June 30,
	2021		2020
Cash flows from operating activities:
Net income	$	59,952	$	30,840
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	24,734		24,806
Stock-based compensation expense	17,902		12,504
Amortization of operating lease right-of-use assets	13,632		13,703
Unrealized loss / (gain) on short term investments	6,777		(2,842)
Unrealized foreign exchange gain, net	(2,634)		(3,378)
Deferred income tax benefit	(14,737)		(663)
Allowance for expected credit losses	(390)		389
Loss from equity-method investment	28		121
Amortization of non-cash interest expense related to convertible senior notes	1,364		1,289
Others, net	144		(1,204)
Change in operating assets and liabilities:
Accounts receivable	(34,152)		12,380
Prepaid expenses and other current assets	189		(906)
Advance income tax, net	39		4,446
Other assets	1,589		3,046
Accounts payable	(2,458)		1,943
Deferred revenue	(20,832)		3,066
Accrued employee costs	3,833		(23,497)
Accrued expenses and other liabilities	12,290		(4,305)
Operating lease liabilities	(13,327)		(12,831)
Net cash provided by operating activities	53,943		58,907
Cash flows from investing activities:
Purchases of property and equipment	(19,903)		(22,351)
Proceeds from sale of property and equipment	527		300
Investment in equity affiliate	—		(700)
Purchase of investments	(32,987)		(49,027)
Proceeds from redemption of investments	64,031		72,844
Net cash provided by investing activities	11,668		1,066
Cash flows from financing activities:
Principal payments of finance lease liabilities	(107)		(124)
Proceeds from borrowings	25,000		110,000
Repayments of borrowings	(99,000)		(110,210)
Acquisition of treasury stock	(57,424)		(13,995)
Proceeds from exercise of stock options	174		960
Net cash used for financing activities	(131,357)		(13,369)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,237)		(2,873)
Net (decrease)/increase in cash, cash equivalents and restricted cash	(67,983)		43,731
Cash, cash equivalents and restricted cash at the beginning of the period	225,519		127,044
Cash, cash equivalents and restricted cash at the end of the period	$	157,536	$	170,775
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	3,599	$	4,224
Income taxes, net of refunds	$	18,710	$	4,861
Supplemental disclosure of non-cash investing and financing activities:
Assets acquired under finance lease	$	50	$	75

See accompanying notes to unaudited consolidated financial statements.

9

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

(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, 2020.

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 consolidated 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 purchase consideration paid 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 after its acquisition is recognized in the unaudited consolidated statements of income.

(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, the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, and variable consideration in a customer contract, expected recoverability from customers with contingent fee arrangements,

10

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

estimated costs to complete fixed price contracts, 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 amortization of ROU, depreciation and amortization periods, purchase price allocation and recoverability of long-lived assets, goodwill and intangibles.

As of June 30, 2021, the extent to which the global Coronavirus Disease 2019 pandemic (“COVID-19”) will ultimately impact the Company's business depends on numerous dynamic factors, which the Company still cannot reliably predict. As a result, many of the Company's estimates and assumptions herein required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve with respect to COVID-19, the Company’s estimates may materially change in future periods. Any changes in estimates are adjusted prospectively in the Company’s consolidated financial statements.

(c) Recent Accounting Pronouncements    

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 London Inter-Bank Offered Rate (“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 on its consolidated financial statements.

In August 2020, FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU removes separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature and hence most of the instruments will be accounted for as a single model (either debt or equity). The ASU also states that entities must apply the if-converted method to all convertible instruments for calculation of diluted EPS and the treasury stock method is no longer available. An entity can use either a full or modified retrospective approach to adopt the ASU’s guidance. The ASU is effective for fiscal years beginning after December 15, 2021 and may be early adopted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact of adoption of this ASU on its consolidated financial statements.

(d) Recently Adopted Accounting Pronouncements

In December 2019, FASB issued ASU No. 2019-12, Income Taxes Simplifying the Accounting for Income Taxes. This ASU eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The Company adopted this ASU on January 1, 2021. The adoption of this ASU has a minimal impact on the Company’s unaudited consolidated financial statements.

In October 2020, FASB issued ASU No. 2020-10, Codification Improvements, to provide guidance for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements. The amendments in this ASU improve the consistency of the ASC by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section of the ASC. The Company adopted this ASU on January 1, 2021. The adoption of this ASU did not have a material impact on the Company’s unaudited consolidated financial statements.

In January 2021, Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2021-01, Reference Rate Reform (Topic 848): Scope, to expand the scope of Topic 848 to include derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment (commonly referred to as the discounting transition). This ASU extends some of Topic 848’s optional expedients and exceptions for contract modifications and hedge accounting to derivative instruments impacted by discounting transition as a result of the discontinuation of the use of LIBOR as a benchmark interest rate due to reference rate reform. This ASU is effective immediately for all entities with the option to be applied retrospectively as of any date from the beginning of an interim period

11

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

that includes or is subsequent to March 12, 2020, and prospectively to any new contract modifications made on or after January 7, 2021 through December 31, 2022. The adoption of this ASU did not have a material impact 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.

The Company manages and reports financial information through its four strategic business units: Insurance, Healthcare, Analytics and Emerging Business. 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.

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 June 30, 2021 and 2020, respectively, for each of the reportable segments, are as follows:

	Three months ended June 30, 2021
	Insurance		Healthcare		Emerging Business		Analytics		Total
Revenues, net	$	94,719	$	28,250	$	40,690	$	111,405	$	275,064
Cost of revenues(1)	59,359		17,685		22,346		71,311		170,701
Gross profit(1)	$	35,360	$	10,565	$	18,344	$	40,094	$	104,363
Operating expenses									68,533
Foreign exchange gain, interest expense and other income, net									1,048
Income tax expense									8,865
Gain from equity-method investment									8
Net income									$	28,021

(1) Exclusive of depreciation and amortization expense.

	Three months ended June 30, 2020
	Insurance		Healthcare		Emerging Business		Analytics		Total
Revenues, net	$	81,281	$	24,978	$	34,535	$	81,679	$	222,473
Cost of revenues(1)	59,113		19,640		22,416		57,232		158,401
Gross profit(1)	$	22,168	$	5,338	$	12,119	$	24,447	$	64,072
Operating expenses									54,206
Foreign exchange gain, interest expense and other income, net									2,701
Income tax expense									4,072
Loss from equity-method investment									66
Net income									$	8,429

12

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

(1) Exclusive of depreciation and amortization expense.

Revenues and cost of revenues for the six months ended June 30, 2021 and 2020, respectively, for each of the reportable

segments, are as follows:

	Six months ended June 30, 2021
	Insurance		Healthcare		Emerging Business		Analytics		Total
Revenues, net	$	185,879	$	58,515	$	78,358	$	213,727	$	536,479
Cost of revenues(1)	115,452		35,076		43,190		135,804		329,522
Gross profit(1)	$	70,427	$	23,439	$	35,168	$	77,923	$	206,957
Operating expenses									129,572
Foreign exchange gain, interest expense and other income, net									418
Income tax expense									17,823
Loss from equity-method investment									28
Net income									$	59,952

(1) Exclusive of depreciation and amortization expense.

	Six months ended June 30, 2020
	Insurance		Healthcare		Emerging Business		Analytics		Total
Revenues, net	$	165,020	$	52,007	$	77,326	$	174,110	$	468,463
Cost of revenues(1)	118,078		39,233		47,898		115,848		321,057
Gross profit(1)	$	46,942	$	12,774	$	29,428	$	58,262	$	147,406
Operating expenses									110,053
Foreign exchange gain, interest expense and other income, net									3,535
Income tax expense									9,927
Loss from equity-method investment									121
Net income									$	30,840

(1) Exclusive of depreciation and amortization expense.

Revenues, net by service type, were as follows:

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
BPM and related services(1)	$	163,659	$	140,794	$	322,752	$	294,353
Analytics services	111,405		81,679		213,727		174,110
Revenues, net	$	275,064	$	222,473	$	536,479	$	468,463

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

13

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(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 June 30,				Six months ended June 30,
	2021		2020		2021		2020
Revenues, net
United States	$	235,288	$	189,032	$	459,656	$	396,912
Non-United States
United Kingdom	26,175		18,830		50,926		42,108
Rest of World	13,601		14,611		25,897		29,443
Total Non-United States	39,776		33,441		76,823		71,551
Revenues, net	$	275,064	$	222,473	$	536,479	$	468,463

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
	June 30, 2021		December 31, 2020
Long-lived assets
India	$	87,234	$	97,261
United States	46,965		46,659
Philippines	25,635		29,434
Rest of World	9,957		11,439
Long-lived assets	$	169,791	$	184,793

4. Revenues, net

Refer to Note 3 - Segment and Geographical Information 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
	June 30, 2021		December 31, 2020
Accounts receivable, net	$	182,111	$	147,635
Contract assets	$	3,547	$	4,437
Contract liabilities
Deferred revenue (consideration received in advance)	$	10,503	$	30,450
Consideration received for process transition activities	$	1,966	$	2,774

Accounts receivable includes $89,237 and $63,995 as of June 30, 2021 and December 31, 2020, 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

14

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

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. 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 and six months ended June 30, 2021 and 2020, which was included in the contract liabilities balance at the beginning of the respective periods:

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Deferred revenue (consideration received in advance)	$	3,332	$	2,226	$	26,953	$	8,194
Consideration received for process transition activities	$	508	$	287	$	1,187	$	561

Contract acquisition and fulfillment costs

The following table provides details of the Company’s contract acquisition and fulfillment costs: