ExlService Holdings, Inc.

Ladies and gentlemen, thank you for standing by. And welcome to the EXL Service's first quarter 2020 earnings conference call. At this time, all participants line to on and listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Stephen Barlow. Please go ahead, sir.

Thank you, Victor. Hello, and thanks to everyone for joining EXL's first quarter 2020 financial results conference call. I'm Steve Barlow, EXL's Vice President of Investor Relations. With me today by telephone are Rohit Kapoor, our Vice Chairman and Chief Executive Officer, and Maurizio Nicolelli, our Chief Financial Officer. We hope that you had an opportunity to review our Q1 2020 earnings release and 8K we issued this morning. We have also updated our investor fact sheet in the investor relations section of EXL's website, which recasts 2017 through 2019 revenues and gross margins as our reportable segments have changed. As you know, some of the matters we'll discuss in this call are forward-looking. Please keep in mind that these forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, General Economic Conditions, those factors set forth in today's press release, discussed in the company's periodic reports and other documents filed with the Securities and Exchange Commission from time to time. eXcel assumes no obligation to update the information presented on this conference call. During our call today, we may reference certain non-GAAP financial measures, which we believe provide useful information for investors. Reconciliation of these measures to GAAP can be found in our press release, as well as the investor fact sheet. Now I'll turn the call over to Rohit Kapoor, EXL's Chief Executive Officer. Rohit.

Thank you, Steve. Good morning, everyone. Welcome to our Q1 2020 earnings call. I hope all of you and your families are safe and healthy. As you know, COVID-19 is causing massive disruption around the world and is impacting our business as well. At EXL, Our culture and values are guiding our response to this crisis. Our top priorities are the health and safety of our employees, the continuity of our clients' businesses and ensuring the long-term sustainability of our company. We are demonstrating resilience and creativity as we navigate these unprecedented times. Today, I would like to talk about, one, our response to the COVID-19 crisis, including our transition to a global work-from-home operating model. Two, emerging opportunities and risks. Three, our performance for Q1 2020 and guidance for the next quarter. And four, actions we have taken to secure our financial position. First, I want to acknowledge the speed and ingenuity with which we transitioned to a work-from-home operating model. Our technology, infrastructure and operations teams rapidly enabled work-from-home solutions throughout our global delivery network. This was a massive shift from our standard operating model. Today, the vast majority of our employees around the world are working for the safety of their homes. This is no small achievement. It took hundreds of individuals who programmed computers, developed new IT processes, and mounted a mammoth logistics exercise to transport equipment to their colleagues. I am deeply grateful for the outstanding commitment and hard work of our employees around the world. Because of this tremendous effort, I am pleased to report that today we are fulfilling over 95% of our clients' demand and our clients are very appreciative of our rapid response. Additionally, this crisis has reaffirmed the extraordinary strength of our partnership with our clients and I want to thank them for their support. We are working hand in hand with our clients to prioritize critical functions and to develop innovative solutions. Through this, we have developed an even deeper level of trust and forged stronger bonds. The COVID-19 pandemic has introduced many challenges, but it has also created opportunities to develop solutions to help our clients address issues that have emerged from this crisis. For example, in our healthcare business, our analytics team has developed a solution that predicts emerging COVID hotspots by analyzing data on preexisting conditions and other health indicators. A large healthcare system and a regional healthcare pair are already using the solution to anticipate resource needs and Better Manage Patient Volumes. We are also supporting a number of our banking clients with the implementation of the Small Business Authority's Paycheck Protection Program, or SPAPPP, which will grant over $650 billion in loans to U.S. small businesses. The program has led to large volumes of loan applications, and lenders need to scale their operations quickly. We have leveraged our small business banking domain knowledge, operations expertise, and digital tools to set up customized loan processing capabilities for our clients. Our solutions help clients significantly reduce the processing time and the manual effort to deliver timely relief to small businesses. We are cognizant of the issues that our clients face and have built the solutions necessary to support demand surges with accuracy and speed. Innovation born out of a direct response to COVID-19 will deliver immediate value and help our clients address their challenges and take advantage of new opportunities. While we are helping our clients with new solutions, The uncertainty associated with this pandemic is likely to continue. The global economy is stressed and certain industries are being impacted much more than others. Governments across the world are actively responding to this crisis and the efforts of those actions on our business are currently unpredictable. However, this crisis is likely to accentuate The following four trends. Number one, the digital agenda will become more central to our clients' business strategy as end customers migrate to a more touchless and online experience. Two, migration to the cloud for enterprise-wide data and analytics capabilities will accelerate. Three, Cost pressures will create a higher demand for global operation management services. And four, the need for diversification to improve operational resiliency will further the demand from global partners like EXL. While these trends have been emerging for some time, the current crisis will significantly accelerate their adoption. Because we have been investing in these capabilities for the last several years, we feel confident that we are well positioned to capitalize on these trends in the longer term. Now, I would like to discuss our Q1 20 performance. Despite the impact from COVID-19 in the second half of March, we had a healthy first quarter following the strong momentum we had built up as we exited 2019. For the first quarter, we generated $246 million in revenue, which represents an annual growth rate of 5.1% on a constant currency basis. Operations management grew 4.2%, and analytics revenue increased by 6.6%. We estimate that around $10 million of revenue in Q1 was not realized due to the disruption caused by the pandemic. Our adjusted EPS for the quarter was 81 cents. Despite the loss of revenue and higher expenses due to our COVID response, we were still able to grow our adjusted EPS year over year. In view of the current business environment, we are not providing guidance for the full year. We expect our revenue in Q2 to be around 15% lower than Q1. This is due to the anticipated reduction in client volumes and our fulfillment capacity. We expect an adjusted EPS in the range of 20 to 40 cents for the quarter. We realized the need to take immediate actions to deal with the uncertainty of the situation and better align our cost base to our revenue outlook. As part of this effort, today we announced a temporary reduction of compensation for our senior management and non-executive directors. These reductions were effective May 1st. We have always chosen to contribute to communities that we are a part of. During these times, we are working with organizations across the world to support healthcare workers who are at the frontline and members of dislocated workforces that are facing hardship due to sudden lockdowns. We are proud to contribute towards providing food and critical supplies in our Let's Do It Together spirit. Now, I would like to comment on our plans to return to office and the role of remote work in our operations going forward. As countries ease restrictions, we expect a staggered return to our facilities. With employee health as our top priority, we will work with employees, clients, local government, and the industry to carefully manage this return while maintaining flexibility, safety, and security. Over the longer term, we will build on the lessons learned during this time. The work-from-home model has significant potential in terms of economic value, access to more diverse talent pools, and higher employee satisfaction and retention. By incorporating remote work as part of our ongoing delivery model, we can ensure greater resilience and flexibility in serving our clients' needs. Our teams are engaged in thoughtful planning towards this objective. Over the past two decades, eXcel has successfully navigated formidable challenges. Through each such experience, we have evolved and Emerge Stronger. We expect this time to be no different. With that, I will turn the call over to Maurizio.