ExlService Holdings, Inc.

Good morning, ladies and gentlemen. Thank you for standing by and welcome to the Q2 2020 EXL Service Holdings, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touch-tone telephone. As a reminder, This conference call may be recorded. I would now like to turn the conference over to your speaker today, Mr. Stephen Barlow. Please go ahead, sir.

Thank you, Andy. Hello, and thanks to everyone for joining EXL's second 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 you've had an opportunity to review our Q2 2020 earnings release we issued this morning. We've also updated our investor fact sheet in the investor relations section of EXL's website. 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. EXL 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 sheets. Now we'll turn the call over to Rohit Kapoor, EXL's Chief Executive Officer. Rohit.

Thank you, Steve. Good morning, everyone. Welcome to our Q2 2020 earnings call. I hope you and your families are all safe and healthy. As each day brings headlines about the economic recovery, a resurgence of COVID-19 cases, and concerns about what comes next, I am reminded of the lessons we learned During the early days of the pandemic, we need to stay agile, embrace uncertainty, and keep focused on the things that matter. This is no small task in this environment, but we are progressing thanks to the efforts and the innovation of our people and close partnerships with our clients. Today, a vast majority of our employees are working from the safety of their homes. Over 95% of our clients' demand is currently being fulfilled through work-from-anywhere business models. We are slowly reopening offices throughout parts of India, Europe, and the Philippines as stay-at-home orders are relaxed and conditions in those countries allow us to operate with enhanced safety protocols. We have taken a methodical and thoughtful approach aligned with local guidelines on social distancing, sanitization, and other safety measures. At the same time, we continue to improve our work from anywhere capabilities to enable the flexibility to switch between the two models seamlessly and provide uninterrupted service delivery for our clients. In fact, we have seen tremendous appreciation from our clients Thank you very much. with an increased need for digital and analytics capabilities and pressure to manage costs, client organizations are ready to embrace change and to collaborate with EXL to pursue new operating models. We are seeing a robust demand across industry verticals and business lines to elevate customer experience, drive end-to-end operations digitization and Optimize Cost Structures. To illustrate this, I would like to share three specific developments over the last quarter that reaffirm my confidence in our current growth trajectory. One, we signed several significant long-term renewals in Q2. Two, we have developed new solutions leveraging our data and analytics capabilities to cater to the unique market requirements of this crisis. And three, we have signed multiple new clients in a completely virtual sales cycle. First, we signed three strategic renewals in Q2 which included one of our top five operations management clients and two of our top 10 analytics clients. Each of these renewals faced strong competition But in each case, EXL came out as the key strategic partner, differentiated by our innovative approach, strong execution focus, and the trust built across the organization. Second, we rapidly launched new solutions in direct response to the crisis, which helped our clients manage volatility in consumer demand and respond to the disruption from the pandemic. These solutions include managing loan servicing demand for the U.S. Small Business Paycheck Protection Program and the development of breakthrough recovery indicators to help our clients predict the shape and timing of the recovery across the U.S. These new recovery indicators are an important example to demonstrate how we are innovating to help our clients improve their agility. Because this crisis is unprecedented in its scale and impact, traditional models and crisis management plans are limited in their ability to support growth and recovery-related decisions. Our solution leverages a large number of high-frequency, granular, non-traditional data elements aggregated across government directives, infection and hospitalization, consumer behavior and business activity across industries to create a composite score. We use this score to predict a range of metrics such as infection progression, spending patterns, unemployment trends, and consumer confidence. One of our large global bank clients is using these indicators to better align their marketing initiatives with the uneven recovery across the U.S. Understanding these emergent trends has been critical to optimizing the timing of marketing and new business underwriting strategies, and EXL is playing a key role in unlocking these insights. Third, I wanted to give you some color on new client wins. We signed a leading Australia-based property and casualty insurer as a part of their operational resiliency enhancement plan. Thank you very much. delivered for other clients in this complex area. Another compelling win was a utilization management engagement with a large U.S. health plan that had never previously outsourced its operations. All of these wins are great examples of opening new clients with strong potential for expansion into new buying centers and product lines. Thank you for joining us. and many more. Higher than expected revenues from ramp-ups and new wins driven by our pivot to new offerings relevant to our clients in the current market. And three, lower than expected decline in demand as the quarter progressed. Operations management revenue declined 8% sequentially on a constant currency basis. The most significant drop as expected was in our travel business. In insurance, we saw some impact from decrease in claims volume and our premium audit and survey businesses were impacted by stay-at-home mandates. This was partially offset by new growth in insurance business resulting in a relatively lower impact in the business. Our analytics business revenue declined 11.5% sequentially on a constant currency basis, Thank you very much. Thank you for joining us. The monthly revenue run rate of the analytics business has continued to improve. With the implementation of Q2 wins, ongoing client conversations for engagement expansions, and a strong pipeline for our new solutions, we expect a strong bounce back in the analytics business in the second half of the year. Our adjusted EPS for the quarter was 53 cents. Higher than our guidance of 20 to 40 cents. This was a result of better than expected performance on revenue and the timely and proactive cost containment actions taken during the quarter. As you know, we temporarily reduced senior leadership compensation and took a sharp look at discretionary expenses such as professional fees and subscription costs. We also took some employee actions to align our cost base with our revenue. Overall, we continue to have a solid financial position and we are well prepared to withstand the crisis. Throughout this period, I have been inspired by the selflessness and the resilience of the EXL community. We have navigated through a challenging few months and we continue to build momentum. Both in terms of new business development and personal growth. I am very proud to be part of that effort and I want to thank all of our associates for that commitment. As we move ahead, we continue to collaborate closely with our clients on new solutions and operating models, leveraging our ability to unlock the full power of our data and analytics capabilities and striking the right balance between and many more. has given our clients the confidence to continue with new ramp-ups without hesitation. This is a strong foundation for business development and growth for EXL in a work-from-anywhere model. Our focus remains on the long-term sustainability of EXL, and we are optimistic about our future growth. In the near term, the crisis continues to be volatile. Collectively, the overall health of the global economy remains uncertain and the pace of recovery is likely to be gradual and uneven, causing some clients to delay decisions or slow transitions. At the same time, EXL and our clients both have increased confidence and better visibility into Q3 and Q4 financials than we did three months ago. Our full-year revenue guidance is in the range of $922 million to $938 million, with growth coming from the implementations of wins from the first half of the year and conversion of our pipeline across new and existing accounts. We expect an adjusted EPS in the range of $2.60 to $2.80 per year, driven by higher revenue, lower work-from-home enablement expenses, and the full benefit of cost actions taken over the past few months. Overall, we are well positioned to acquire our share of market growth as the economy recovers. The pandemic has created many business challenges, but it has also sparked a mandate to innovate and introduce new ways of working that are driving companies of all types to challenge the status quo. We are encouraged by what we are seeing in our own business as well as in our client businesses. Our client relationships were strengthened by working even more closely throughout this period of heightened stress and we continue to collaborate and innovate to find solutions to emerging challenges. Look forward to embracing this culture of change as an opportunity to grow. I will now turn the call over to Maurizio.