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Table of Contents

 
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

TABLE OF CONTENTS
 
 
 
 
 
 
 
PAGE
ITEM
 
 
 
 
 
 
 
 
 
1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.
 
 
 
 
 
3.
 
 
 
 
 
4.
 
 
 
 
 
 
 
 
 
 
 
1.
 
 
 
 
 
1A.
 
 
 
 
 
2.
 
 
 
 
 
3.
 
 
 
 
 
4.
 
 
 
 
 
5.
 
 
 
 
 
6.
 
 
 

2


Table of Contents

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.

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Table of Contents

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.

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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.

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Table of Contents

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.


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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.

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Table of Contents

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

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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)

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

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Table of Contents
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

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Table of Contents
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

Table of Contents
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

Table of Contents
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

Table of Contents
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

Table of Contents
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

Table of Contents
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

Table of Contents
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

Table of Contents
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

Table of Contents
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

Table of Contents
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

Table of Contents
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

Table of Contents
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

Table of Contents
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

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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)

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

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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)

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

Table of Contents
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

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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)

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

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Table of Contents
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

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Table of Contents
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

Table of Contents
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.

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Table of Contents
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.


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Table of Contents
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

Table of Contents
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.


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Table of Contents
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.


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Table of Contents
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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Table of Contents

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

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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

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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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Table of Contents

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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Table of Contents

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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Table of Contents

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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Table of Contents

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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Table of Contents

ITEM 6.    Exhibits

The following exhibits are being filed as part of this Quarterly Report on Form 10-Q:
 
 
 
3.1
 
 
 
 
3.2
 
 
 
 
3.3
 
 
 
 
31.1
 
 
 
 
31.2
 
 
 
 
32.1
 
 
 
 
32.2
 
 
 
 
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)


53
Exhibit


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


Exhibit


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


Exhibit


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
 


Exhibit


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
 


v3.20.1
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.
v3.20.1
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


v3.20.1
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.
v3.20.1
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
v3.20.1
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
v3.20.1
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
v3.20.1
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
v3.20.1
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  
v3.20.1
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
v3.20.1
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
)

v3.20.1
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
v3.20.1
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


v3.20.1
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.
v3.20.1
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


v3.20.1
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


v3.20.1
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


v3.20.1
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.
v3.20.1
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


v3.20.1
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
v3.20.1
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


v3.20.1
Segment and Geographical Information - Additional Information (Details)
3 Months Ended
Mar. 31, 2020
operating_segment
Segment Reporting [Abstract]  
Number of operating segments 4
v3.20.1
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  
v3.20.1
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
v3.20.1
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
v3.20.1
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
v3.20.1
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


v3.20.1
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


v3.20.1
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


v3.20.1
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


v3.20.1
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.
v3.20.1
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
)

v3.20.1
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.
v3.20.1
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
v3.20.1
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        
v3.20.1
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
v3.20.1
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
v3.20.1
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    
v3.20.1
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


v3.20.1
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
v3.20.1
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)  
v3.20.1
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


v3.20.1
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


v3.20.1
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
v3.20.1
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
v3.20.1
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
v3.20.1
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.
v3.20.1
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.
v3.20.1
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 $58.37 under the 2017 Repurchase Program.
Repurchased shares have been recorded as treasury shares and will be held until the Company’s Board of Directors designates that these shares be retired or used for other purposes.
v3.20.1
Commitments and Contingencies - Additional Information (Details) - USD ($)
$ 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
v3.20.1
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 $10,092 is expected to be expensed over a weighted average period of 2.21 years.
v3.20.1
Stock Based Compensation - Stock Based Compensation Stock Option Activity (Details) - Employee Stock Option - USD ($)
$ / 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    
v3.20.1
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


v3.20.1
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.
v3.20.1
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


v3.20.1
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


v3.20.1
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.
v3.20.1
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
v3.20.1
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
v3.20.1
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
v3.20.1
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
v3.20.1
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
v3.20.1
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  
v3.20.1
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
v3.20.1
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
v3.20.1
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
v3.20.1
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    
v3.20.1
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
v3.20.1
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  
v3.20.1
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
v3.20.1
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
v3.20.1
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.
v3.20.1
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.
v3.20.1
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


v3.20.1
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”).
v3.20.1
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


v3.20.1
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


v3.20.1
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
v3.20.1
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
v3.20.1
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  
v3.20.1
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
v3.20.1
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%
v3.20.1
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
v3.20.1
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  
v3.20.1
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


v3.20.1
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


v3.20.1
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.
v3.20.1
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 $0.001 per share  
Trading Symbol  EXLS  
Security Exchange Name NASDAQ  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   34,316,121
Amendment Flag false  
Entity Central Index Key 0001297989  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2020  
v3.20.1
Consolidated Statements of Comprehensive (Loss)/Income (Unaudited) - USD ($)
$ 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.
v3.20.1
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    
v3.20.1
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.
v3.20.1
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.
v3.20.1
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


v3.20.1
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.

v3.20.1
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


v3.20.1
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


v3.20.1
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


v3.20.1
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)
v3.20.1
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
v3.20.1
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
v3.20.1
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
v3.20.1
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
v3.20.1
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
v3.20.1
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


v3.20.1
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