What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-10-29 compared with 2020-08-06 · 180 added, 160 removed, 312 unchanged (52% of the section changed)

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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 June 30, 2020.

However, it remains difficult to predict at this time what impact, the spread of COVID-19 will have on our 2020 financial results.

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 September 30, 2020.

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.

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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;

• the impact of the COVID-19 pandemic and related response measures on our business, results of operations and financial condition, including the impact of governmental lockdowns and other restrictions on our operations and processes and those of our clients and suppliers;

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

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• increasing competition in our industry;

• telecommunications or technology disruptions;

• telecommunications or technology disruptions or breaches, natural or other disasters, or medical epidemics or pandemics;

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

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• 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.

In particular, you should consider the numerous risks outlined in Part II, Item 1A—“Risk Factors” in this Quarterly Report on Form 10-Q, Part II, Item 1A—“Risk Factors” in our Quarterly Reports on Form 10-Q for the quarter ended June 30, 2020 and March 31, 2020 and Part I, Item 1A—“Risk Factors” 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.

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• 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.

In conjunction with the new reporting structure, we recast our segment and goodwill 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.

Impact of COVID-19 on Our Business

Continued impact of COVID-19 on Our Business

The global COVID-19 pandemic continues to materially impact worldwide economic activity and levels of business confidence and has had widespread, rapidly-evolving and unpredictable impacts on global societies, economies, financial markets and business practices.

During the first fiscal quarter ended March 31, 2020, COVID-19 did not have a significant impact on our business, however during the second fiscal quarter ended June 30, 2020, COVID-19 materially impacted us and our customers, employees, contractors, suppliers, and other partners, who were prevented from conducting business activities as usual, including due to the health and safety measures in response to COVID-19, such as shutdowns, which have been requested or mandated by governmental authorities.

The shutdown measures 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.

During the first fiscal quarter ended March 31, 2020, COVID-19 did not have a significant impact on our business, however, in subsequent quarters, COVID-19 materially impacted us and our customers, employees, contractors, suppliers, and other partners, who were prevented from conducting business activities as usual, including due to the health and safety measures in response to COVID-19, such as shutdowns, which have been requested or mandated by governmental authorities.

The continued spread of COVID-19 and the measures taken by the governments of countries affected has disrupted the continuity of our provision of services to our customers and adversely impacted our business, financial condition or results of operations.

In the second quarter of 2020, we took actions in response to the pandemic that focused on maintaining business continuity and helping our employees and our customers, as well as on preparing for the future and the long-term success of our business.

These actions included disseminating guidance and information to our employees, periodic CEO messaging, various programs aimed at employee wellness and facilitating work from home, including a global wellness program, enhanced awareness towards information security, cyber security and data privacy policies and practices for employees while working from home among others.

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, declared states of emergency, some of which are now being slowly lifted in a piecemeal manner through multi-step reopening policies, while others are being reinstated in response to new outbreaks.

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, scope and severity of the pandemic and the current and future health and safety measures implemented in response to the pandemic, and the unknown overall impact on our services, it makes it difficult to forecast the full impact on our business or the duration of such impact;

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.

In the second and third quarters of 2020, we took actions in response to the pandemic that focused on the implementation of our business continuity plans, helping our employees and our customers, as well as on preparing for the future and the long-term success of our business.

These actions included disseminating guidance and information to our employees, facilitating work from home, implementing best practices for employees while working from home, periodic CEO messaging, various programs aimed at employee wellness, including a global wellness program, enhanced awareness towards information security, and updated cyber security and data privacy policies, among others.

We have implemented broad travel restrictions and largely moved to virtual-only events for the safety of our employees and our customers.

We also implemented pandemic-specific protocols for our essential employees whose jobs require them to be on-site or with our customers by implementing additional safety measures at all of our facilities, including increased frequency in cleaning and disinfecting, and enhanced hygiene and social distancing practices.

We continue to work closely with our customers and business partners to support them as they expand their own remote work solutions and contingency plans, and help them to access our products and services remotely.

There continues to be volatility and economic and geopolitical uncertainty in many markets around the world.

Despite the efforts described above, there is a risk that if jurisdictions in which we operate reinstate prior restrictions, stagnate in their reopening processes, or implement new restrictions in response to new outbreaks or continued spread, our operations and business could be materially impacted.

The full extent of the impact of COVID-19 on our business, results of operations, financial position and cash flow in fiscal year 2020 and beyond is currently uncertain and will depend on many factors that are not within our control, including, but not limited to:

the duration and scope of the pandemic;

the effectiveness of actions taken to contain or mitigate the pandemic and prevent or limit any reoccurrence;

governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic;

general economic uncertainty in key global markets and financial market volatility;

global economic conditions and levels of economic growth;

and the pace of recovery when the COVID-19 pandemic subsides.

We also continue to evaluate market conditions and are taking precautionary measures to strengthen our financial position, including reevaluating the pace of our investment plans, hiring practices, use of our real estate and facilities, employee compensation, stock repurchase and discretionary spending, including marketing and travel expenses.

In addition, some of our expenses are less variable in nature and do not closely correlate to changes in revenues, which may lead to a decrease in our profitability.

However we do not expect COVID-19 and its related economic impact to materially adversely affect our liquidity position in the foreseeable future.

Due to the above circumstances and as described generally in this Quarterly Report on Form 10-Q, our results of operations for the three and six months ended period ended June 30, 2020 are not necessarily indicative of the results to be expected for the full fiscal year and such impact may not be directly comparable to any historical period.

Due to the above circumstances and as described generally in this Quarterly Report on Form 10-Q, our results of

operations for the three and nine months ended period ended September 30, 2020 are not necessarily indicative of our future performance, and our financial results, including but not limited to net revenues, income from operations, net income, cash flow and earnings per share, in future periods may differ materially from historical trends.

We continue to monitor the implications of COVID-19 on our business, as well as our customers’ and suppliers’ businesses.

In response to certain anticipated impacts from COVID-19, we have also implemented a series of temporary cost reduction measures to further preserve financial flexibility.

These actions include the postponement of certain discretionary spending and capital expenditures, deferring scheduled increases in base salaries and temporarily reducing the base salaries of our executive officers and certain other groups of employees.

These actions include the postponement of certain discretionary spending and capital expenditures, deferring scheduled increases in base salaries, deferring non-critical hiring, temporarily reducing the base salaries of our executive officers and certain other groups of employees and temporarily suspending the 401(k) match program for U.S.

Some of these actions have been reversed as of September 30, 2020.

We have also taken certain precautionary measures to maintain financial flexibility during this time, 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, however it was repaid in full on April 20, 2020.

We also temporarily suspended our stock repurchase program during the first and second quarter of 2020, which was resumed as of July 1, 2020.

As of June 30, 2020, due to the macroeconomic conditions arising from COVID-19, we performed a goodwill impairment test for any potential impairment and concluded that there was no impairment.

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.

We resumed share repurchases effective July 1, 2020, considering improved market conditions, our capital and liquidity needs and other factors, and are now targeting to repurchase up to $80.0 million for calendar year 2020, subject to market conditions.

As of September 30, 2020, due to the macroeconomic conditions arising from COVID-19, 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.

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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.

As public health protocols begin to accommodate returning to work at our facilities, we are implementing additional safety measures at all of our facilities, including increased frequency in cleaning and disinfecting as well as hygiene and social distancing practices.

However there is a risk that if jurisdictions in which we operate re-instate prior restrictions, our operations and business will be materially impacted.

We determined there was no triggering event and no impairment test was performed during the three months ended September 30, 2020.

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

For the three months ended June 30, 2020, we had revenues of $222.5 million compared to revenues of $243.5 million for the three months ended June 30, 2019, a decrease of $21.0 million, or 8.6%.

For the six months ended June 30, 2020, we had revenues of $468.5 million compared to revenues of $483.1 million for the six months ended June 30, 2019, a decrease of $14.6 million, or 3.0%.

We serve clients mainly in the United States and the United Kingdom, with these two regions generating 85.0% and 8.5%, respectively, of our total revenues for the three months ended June 30, 2020, and 81.3% and 12.4%, respectively, of our total revenues for the three months ended June 30, 2019.

For the six months ended June 30, 2020, these two regions generated 84.7% and 9.0%, respectively, of our total revenues and 81.6% and 12.3%, respectively, of our total revenues for the six months ended June 30, 2019.

For the three months ended June 30, 2020 and 2019, our total revenues from our top ten clients accounted for 38.7% and 36.5% of our total revenues, respectively.

For the six months ended June 30, 2020 and 2019, our total revenues from our top ten clients accounted for 37.1% and 36.5% of our total revenues, respectively.

For the three months ended September 30, 2020, we had revenues of $241.0 million compared to revenues of $251.4 million for the three months ended September 30, 2019, a decrease of $10.4 million, or 4.1%.

For the nine months ended September 30, 2020, we had revenues of $709.5 million compared to revenues of $734.5 million for the nine months ended September 30, 2019, a decrease of $25.0 million, or 3.4%.

We serve clients mainly in the United States and the United Kingdom, with these two regions generating 84.6% and 9.5%, respectively, of our total revenues for the three months ended September 30, 2020, and 83.0% and 11.1%, respectively, of our total revenues for the three months ended September 30, 2019.

For the nine months ended September 30, 2020, these two regions generated 84.7% and 9.2%, respectively, of our total revenues and 82.1% and 11.9%, respectively, of our total revenues for the nine months ended September 30, 2019.

For the three months ended September 30, 2020 and 2019, our total revenues from our top ten clients accounted for 38.7% and 35.7% of our total revenues, respectively.

For the nine months ended September 30, 2020 and 2019, our total revenues from our top ten clients accounted for 37.3% and 36.2% 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.

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Such reassessments did not have a significant impact on our results of operations and cash flows for the periods presented.

Due to rounding, the numbers presented in the tables included in this “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” may not add up precisely to the totals provided.

Results of Operations

The following table summarizes our results of operations for the three months ended June 30, 2020 and 2019:

Three months ended June 30, Six months ended June 30,

The following table summarizes our results of operations for the three and nine months ended September 30, 2020 and 2019:

Three months ended September 30, Nine months ended September 30,

2020 2019 2020 2019

(dollars in millions)

(dollars in millions) (dollars in millions)

Revenues, net $ 241.0 $ 251.4 $ 709.5 $ 734.5

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(1) Exclusive of depreciation and amortization expense.

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

The following table summarizes our revenues by reportable segments for the three months ended June 30, 2020 and 2019:

Three months ended June 30, Percentage

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

The following table summarizes our revenues by reportable segments for the three months ended September 30, 2020 and 2019:

Three months ended September 30, Percentage

2020 2019 Change

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Total revenues, net $ 241.0 $ 251.4 $ (10.4) (4.1) %

Revenues for the three months ended June 30, 2020 were $222.5 million, down $21.0 million, or 8.6%, compared to the three months ended June 30, 2019.

Revenue decline in Insurance of $4.3 million was primarily driven by lower volumes due to the impact of COVID-19, partially offset by expansion of business from certain existing clients aggregating to $3.6 million and $0.7 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 June 30, 2020, compared to the three months ended June 30, 2019.

Insurance revenues were 36.5% and 35.1% of our total revenues in the three months ended June 30, 2020 and June 30, 2019, respectively.

Revenue growth in Healthcare of $3.3 million was primarily driven by expansion of business from our existing clients of $6.2 million, partially offset by our December 2019 wind-down of Health Integrated business revenues of $2.9 million during the three months ended June 30, 2019.

Healthcare revenues were 11.2% and 8.9% of our total revenues in the three months ended June 30, 2020 and June 30, 2019, respectively.

Revenue decline in Emerging Business of $13.8 million was primarily driven by lower volumes due to the impact of COVID-19 and ramp down in certain client contracts aggregating to $13.0 million and $0.8 million attributable to the depreciation of the Indian rupee against the U.S.

dollar during the three months ended June 30, 2020, compared to the three months ended June 30, 2019.

Emerging Business revenues were 15.5% and 19.8% of our total revenues in the three months ended June 30, 2020 and June 30, 2019, respectively.

Revenue decline in Analytics of $6.2 million was primarily driven by lower revenues from our recurring and project-based engagements due to the impact of COVID-19 aggregating to $6.0 million, and $0.2 million attributable to the depreciation of the U.K.

pound sterling and Indian rupee against the U.S.

dollar during the three months ended June 30, 2020, compared to the three months ended June 30, 2019.

Analytics revenues were 36.7% and 36.1% of our total revenues in the three months ended June 30, 2020 and June 30, 2019, respectively.

Revenues for the three months ended September 30, 2020 were $241.0 million, down $10.4 million, or 4.1%, compared to the three months ended September 30, 2019.

The impact of the COVID-19 pandemic on our net revenues in the third quarter of 2020 was primarily related to clients adapting to the shift in our delivery capabilities from a physical to a virtual, work-from-home operating environment as well as economic uncertainty leading to lower volumes from some existing clients and causing delays in the execution and implementation of new client contracts, which impacted growth.

Revenue decline in Insurance of $3.3 million was primarily driven by ramp down of certain client contracts and lower volumes due to the impact of COVID-19 aggregating to $14.1 million, partially offset by expansion of business from certain existing clients aggregating to $10.6 million and $0.2 million mainly attributable to the appreciation of Australian dollar and U.K pound sterling against the U.S.

dollar and depreciation of the Indian rupee and South African ZAR against the U.S.

dollar during the three months ended September 30, 2020, compared to the three months ended September 30, 2019.

Insurance revenues were 36.4% and 36.2% of our total revenues in the three months ended September 30, 2020 and September 30, 2019, respectively.

Revenue decline in Healthcare of $0.5 million was primarily driven by our December 2019 wind-down of Health Integrated business revenues of $2.9 million, partially offset by expansion of business from certain existing clients aggregating to $2.4 million during the three months ended September 30, 2020.

Healthcare revenues were 10.4% and 10.2% of our total revenues in the three months ended September 30, 2020 and September 30, 2019, respectively.

Revenue decline in Emerging Business of $8.3 million was primarily driven by lower volumes due to the impact of COVID-19 and ramp down of certain client contracts aggregating to $7.9 million and $0.4 million attributable to the depreciation of the Indian rupee against the U.S.

dollar during the three months ended September 30, 2020, compared to the three months ended September 30, 2019.

Emerging Business revenues were 15.6% and 18.3% of our total revenues in the three months ended September 30, 2020 and September 30, 2019, respectively.

Revenue growth in Analytics of $1.7 million was attributable to higher volumes from our existing clients of $1.4 million, and $0.3 million attributable to the appreciation of the U.K.

pound sterling against the U.S.

dollar during the three months ended September 30, 2020, compared to the three months ended September 30, 2019.

Analytics revenues were 37.5% and 35.3% of our total revenues in the three months ended September 30, 2020 and September 30, 2019, respectively.

Cost of Revenues and Gross Margin :

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Cost of Revenues Gross Margin

Three months ended June 30, Change Percentage

change Three months ended June 30, Change

Three months ended September 30, Change Percentage

change Three months ended September 30, Change

2020 2019 2020 2019

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Total $ 152.1 $ 167.5 $ (15.4) (9.2) % 36.9 % 33.4 % 3.5 %

For the three months ended June 30, 2020, cost of revenues was $158.4 million compared to $162.4 million for the three months ended June 30, 2019, a decrease of $4.0 million, or 2.5%.

Our gross margin for the three months ended June 30, 2020 was 28.8% compared to 33.3% for the three months ended June 30, 2019, a decrease of 450 basis points (“bps”).

The decrease in cost of revenues in Insurance of $0.3 million was primarily due to decrease in employee-related costs of $1.3 million and currency movements, net of hedging of $0.8 million.

This was offset by higher infrastructure, technology and other operating costs of $1.8 million.

Gross margin in Insurance decreased by 330 bps during the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily due to lower revenues and impact of COVID-19 related expenses during the three months ended June 30, 2020.

The increase in cost of revenues in Healthcare of $1.9 million was primarily due to an increase in employee-related costs of $1.6 million and other operating costs of $0.5 million.

This was partially offset by currency movements, net of hedging of $0.2 million.

Gross margin in Healthcare increased by 310 bps during the three months ended June 30, 2020, compared to the three months ended June 30, 2019, primarily due to lower margin in the Heath Integrated business during the three months ended June 30, 2019 and higher revenues during the three months ended June 30, 2020.

The decrease in cost of revenues in Emerging Business of $5.4 million was primarily due to a decrease in employee-related costs of $3.5 million, lower travel costs of $0.9 million, lower other operating costs of $0.4 million and currency movements, net of hedging of $0.6 million.

Gross margin in Emerging Business decreased by 730 bps during the three months ended June 30, 2020, compared to the three months ended June 30, 2019, primarily due to lower revenues during the three months ended June 30, 2020.

The decrease in cost of revenues in Analytics of $0.2 million was primarily due to lower travel costs of $2.2 million and currency movements, net of hedging of $0.7 million.

This was partially offset by an increase in employee-related costs of $2.2 million and higher other operating costs of $0.5 million.

Gross margin in Analytics decreased by 470 bps during the three months ended June 30, 2020, compared to the three months ended June 30, 2019, primarily due to lower revenues and higher operating expenses.

For the three months ended September 30, 2020, cost of revenues was $152.1 million compared to $167.5 million for the three months ended September 30, 2019, a decrease of $15.4 million, or 9.2%.

Our gross margin for the three months ended September 30, 2020 was 36.9% compared to 33.4% for the three months ended September 30, 2019, an increase of 350 basis points (“bps”).

The decrease in cost of revenues in Insurance of $5.4 million was primarily due to decrease in employee-related costs of $3.9 million, lower travel costs of $2.2 million and currency movements, net of hedging of $0.3 million.

This was offset by higher technology and other operating costs of $0.9 million.

Gross margin in Insurance increased by 360 bps during the three months ended September 30, 2020 compared to the three months ended September 30, 2019, primarily due to expansion in margin in certain existing clients and lower operating expenses as a result of COVID-19 cost reduction measures during the three months ended September 30, 2020.

The decrease in cost of revenues in Healthcare of $2.4 million was primarily due to decrease in employee-related costs of $2.2 million, lower travel costs of $0.3 million and currency movements, net of hedging of $0.1 million, partially offset by higher other operating costs of $0.2 million.

Gross margin in Healthcare increased by 800 bps during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to lower margin in the Heath Integrated business during the three months ended September 30, 2019 and higher revenues during the three months ended September 30, 2020.

The decrease in cost of revenues in Emerging Business of $6.3 million was primarily due to a decrease in employee-related costs of $4.9 million, lower infrastructure and travel costs of $1.5 million and currency movements, net of hedging of $0.2 million, partially offset by higher other operating costs of $0.3 million.

Gross margin in Emerging Business increased by 370 bps during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to lower operating expenses as a result of COVID-19 cost reduction measures during the three months ended September 30, 2020.

The decrease in cost of revenues in Analytics of $1.3 million was primarily due to lower travel costs of $1.8 million, lower other operating costs of $1.1 million, lower infrastructure costs of $0.5 million and currency movements, net of hedging of $0.4 million.

This was partially offset by an increase in employee-related costs of $1.5 million and technology costs of $0.9 million.

Gross margin in Analytics increased by 280 bps during the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to higher revenues and lower operating expenses as a result of COVID-19 cost reduction measures.

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

Three months ended June 30, Change Percentage

Three months ended September 30, Change Percentage

(dollars in millions)

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The decrease in SG&A expenses of $5.8 million was primarily due to COVID-19 cost reduction measures including the temporary reduction of the base salaries of our executive officers and certain other groups of employees.

This was driven by lower employee-related costs of $4.5 million, lower infrastructure and travel costs of $1.9 million and currency movements, net of hedging of $0.6 million.

The decrease was driven by lower employee-related costs of $4.7 million, lower travel costs of $1.7 million, partially offset by higher other operating costs of $0.6 million.

Depreciation and Amortization.

Three months ended June 30, Change Percentage

Three months ended September 30, Change Percentage

(dollars in millions)

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As a percentage of revenues 5.2 % 5.2 %

The decrease in intangibles amortization expense of $2.2 million was primarily due to end of useful lives for certain intangible assets during the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

The decrease in intangibles amortization expense of $2.2 million was primarily due to end of useful lives for certain intangible assets during the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

The increase in depreciation expense of $1.5 million was due to depreciation related to our investments in new operating centers to support our business growth.

Impairment and Restructuring Charges.

Three months ended June 30, Percentage change

Three months ended September 30, Percentage change

2020 2019 Change

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As a percentage of revenues — % 0.2 %

During the three months ended June 30, 2019, we recorded an impairment charge of $1.9 million and restructuring charges of $3.7 million in connection with the wind-down of our Health Integrated business.

During the three months ended September 30, 2019, we recorded restructuring charges of $0.5 million in connection with the wind-down of our Health Integrated business.

Income from Operations.

Income from operations decreased by $4.0 million, or 28.8%, from $13.9 million for the three months ended June 30, 2019 to $9.9 million for the three months ended June 30, 2020.

As a percentage of revenues, income from operations decreased from 5.7% for the three months ended June 30, 2019 to 4.4% for the three months ended June 30, 2020.

Income from operations increased by $12.0 million, or 53.4%, from $22.4 million for the three months ended September 30, 2019 to $34.4 million for the three months ended September 30, 2020.

As a percentage of revenues, income from operations increased from 8.9% for the three months ended September 30, 2019 to 14.3% for the three months ended September 30, 2020.

Foreign Exchange Gain/(Loss).

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dollar against the Indian rupee, the U.K.

pound sterling and the Philippine peso during the three months ended June 30, 2020.

pound sterling, the Philippine peso and the Australian dollar during the three months

ended September 30, 2020.

The average exchange rate of the U.S.

dollar against the Indian rupee increased from 69.42 during the three months ended June 30, 2019 to 75.41 during the three months ended June 30, 2020.

dollar against the Indian rupee increased from 70.35 during the three months ended September 30, 2019 to 74.06 during the three months ended September 30, 2020.

The average exchange rate of the U.K.

pound sterling against the U.S.

dollar decreased from 1.28 during the three months ended June 30, 2019 to 1.24 during the three months ended June 30, 2020.

dollar increased from 1.22 during the three months ended September 30, 2019 to 1.31 during the three months ended September 30, 2020.

The average exchange rate of the U.S.

dollar against the Philippine peso decreased from 51.84 during the three months ended June 30, 2019 to 50.28 during the three months ended June 30, 2020.

We recorded a net foreign exchange gain of $1.4 million for the three months ended June 30, 2020 compared to the net foreign exchange gain of $1.2 million for the three months ended June 30, 2019.

dollar against the Philippine peso decreased from 51.59 during the three months ended September 30, 2019 to 48.71 during the three months ended September 30, 2020.

The average exchange rate of the U.S.

dollar against the Australian dollar decreased from 1.47 during the three months ended September 30, 2019 to 1.39 during the three months ended September 30, 2020.

We recorded a net foreign exchange gain of $0.7 million for the three months ended September 30, 2020 compared to the net foreign exchange gain of $1.0 million for the three months ended September 30, 2019.

Interest expense.

Interest expense decreased from $3.9 million for the three months ended June 30, 2019 to $2.9 million for the three months ended June 30, 2020 primarily due to lower borrowings and lower effective interest rates under our Credit Facility (as defined below) during the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

Interest expense decreased from $3.2 million for the three months ended September 30, 2019 to $2.6 million for the three months ended September 30, 2020, primarily due to repayments leading to lower outstanding borrowings and lower effective interest rates under our Credit Facility during the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

Other Income, net.

Three months ended June 30, Percentage

Three months ended September 30, Percentage

2020 2019 Change

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Other income, net $ 2.5 $ 4.6 $ (2.1) (45.5) %

Other income, net increased by $0.1 million, from $4.1 million for the three months ended June 30, 2019 to $4.2 million for the three months ended June 30, 2020, primarily due to recognition of non-recurring benefits of $0.5 million related to wind-down of the Health Integrated business during the three months ended June 30, 2020.

This was partially offset by lower return on mutual fund investments and interest income of $0.3 million during the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

Other income, net decreased by $2.1 million, from $4.6 million for the three months ended September 30, 2019 to $2.5 million for the three months ended September 30, 2020, primarily due to lower return on mutual fund investments of $1.2 million during the three months ended September 30, 2020 compared to the three months ended September 30, 2019 and recognition of one-time other income of $0.8 million related to our Health Integrated business during the three months ended September 30, 2019.

Income Tax Expense.

We recorded income tax expense of $4.1 million and $2.7 million for the three months ended June 30, 2020 and 2019, respectively.

The effective tax rate increased from 17.5% during the three months ended June 30, 2019 to 32.4% during the three months ended June 30, 2020, primarily as a result of recording a one-time tax expense of $1.3 million due to electing a new tax regime for two of our Indian subsidiaries which provides for a lower tax rate on earnings in exchange for foregoing certain tax credits, including minimum alternative tax credits during the three months ended June 30, 2020.

Net income decreased from $12.5 million for the three months ended June 30, 2019 to $8.4 million for the three months ended June 30, 2020, primarily due to decrease in income from operations of $4.0 million, and higher income tax expense of $1.4 million.

This was partially offset by lower interest expense of $1.0 million, higher foreign exchange gain, net of $0.2 million, higher other income, net of $0.1 million.

As a percentage of revenues, net income decreased from 5.2% for the three months ended June 30, 2019 to 3.8% for the three months ended June 30, 2020.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

The following table summarizes our revenues by reportable segments for the six months ended June 30, 2020 and 2019:

Six months ended June 30, Percentage

The effective tax rate increased from 23.0% during the three months ended September 30, 2019 to 24.3% during the three months ended September 30, 2020.

We recorded income tax expense of $8.5 million and $5.7 million for the three months ended September 30, 2020 and 2019, respectively.

The increase in income tax expense was primarily as a result of (i) higher profit during the three months ended September 30, 2020 and (ii) recording a discrete benefit of $0.5 million during the three months ended September 30, 2019 relating to job related incentives in India for prior years.

Net income increased from $19.0 million for the three months ended September 30, 2019 to $26.4 million for the three months ended September 30, 2020, primarily due to increase in income from operations of $12.0 million, lower interest expense of $0.6 million.

This was partially offset by higher income tax expense of $2.8 million, lower other income, net of $2.1 million, lower foreign exchange gain, net of $0.3 million.

As a percentage of revenues, net income increased from 7.6% for the three months ended September 30, 2019 to 11.0% for the three months ended September 30, 2020.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

The following table summarizes our revenues by reportable segments for the nine months ended September 30, 2020 and 2019:

Nine months ended September 30, Percentage

2020 2019 Change

5 unchanged sentences

Total revenues, net $ 709.5 $ 734.5 $ (25.0) (3.4) %

Revenues for the six months ended June 30, 2020 were $468.5 million, down $14.6 million, or 3.0%, compared to the six months ended June 30, 2019.

Revenue decline in Insurance of $1.9 million was primarily driven by lower volumes due to the impact of COVID-19, partially offset by expansion of business from certain existing clients aggregating to $0.3 million and $1.6 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 six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Insurance revenues were 35.2% and 34.5% of our total revenues in the six months ended June 30, 2020 and June 30, 2019, respectively.

Revenue growth in Healthcare of $8.0 million was primarily driven by expansion of business from our existing clients and new wins aggregating to $14.9 million, partially offset by our December 2019 wind-down of Health Integrated business revenues of $6.9 million during the six months ended June 30, 2019.

Healthcare revenues were 11.1% and 9.1% of our total revenues in the six months ended June 30, 2020 and June 30, 2019, respectively.

Revenue decline in Emerging Business of $20.0 million was primarily driven by lower volumes due to the impact of COVID-19 and ramp down in certain client contracts aggregating to $18.7 million, and $1.3 million attributable to the depreciation of the Indian rupee against the U.S.

dollar during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Emerging Business revenues were 16.5% and 20.2% of our total revenues in the six months ended June 30, 2020 and June 30, 2019, respectively.

Revenue decline in Analytics of $0.7 million was primarily driven by lower revenues from our recurring and project based engagements due to the impact of COVID-19 aggregating to $0.2 million and $0.5 million attributable to the depreciation of the U.K.

pound sterling and Indian rupee against the U.S.

dollar during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Analytics revenues were 37.2% and 36.2% of our total revenues in the six months ended June 30, 2020 and June 30, 2019, respectively.

Revenues for the nine months ended September 30, 2020 were $709.5 million, down $25.0 million, or 3.4%, compared to the nine months ended September 30, 2019.

The impact of the COVID-19 pandemic on our net revenues for the nine months ended September 30, 2020 was primarily related to clients adapting to the shift in our delivery capabilities from a physical to a virtual, work-from-home operating environment, as well as economic uncertainty leading to lower volumes from some existing clients and causing delays in the execution and implementation of new client contracts, which impacted growth.

Revenue decline in Insurance of $5.1 million was primarily driven by lower volumes due to the impact of COVID-19 and ramp down of certain client contracts, partially offset by expansion of business from certain existing clients aggregating to $3.8 million and $1.4 million mainly attributable to the depreciation of the Indian rupee, Australian dollar and South African ZAR against the U.S.

dollar during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Insurance revenues were 35.6% and 35.1% of our total revenues in the nine months ended September 30, 2020 and September 30, 2019, respectively.

Revenue growth in Healthcare of $7.5 million was primarily driven by expansion of business from our existing clients and new wins aggregating to $17.2 million, partially offset by our December 2019 wind-down of Health Integrated business revenues of $9.7 million during the nine months ended September 30, 2019.

Healthcare revenues were 10.9% and 9.5% of our total revenues in the nine months ended September 30, 2020 and September 30, 2019, respectively.

Revenue decline in Emerging Business of $28.4 million was primarily driven by lower volumes due to the impact of COVID-19 and ramp down of certain client contracts aggregating to $26.7 million, and $1.7 million attributable to the depreciation of the Indian rupee against the U.S.

dollar during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Emerging Business revenues were 16.2% and 19.5% of our total revenues in the nine months ended September 30, 2020 and September 30, 2019, respectively.

Revenue growth in Analytics of $1.0 million was attributable to our recurring and project-based engagements from our existing clients of $1.2 million, partially offset by $0.2 million attributable to the depreciation of the U.K.

pound sterling against the U.S.

dollar during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Analytics revenues were 37.3% and 35.9% of our total revenues in the nine months ended September 30, 2020 and September 30, 2019, respectively.

Cost of Revenues and Gross Margin :

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Cost of Revenues Gross Margin

Six months ended June 30, Percentage change Six months ended June 30, Change

Nine months ended September 30, Percentage change Nine months ended September 30, Change

2020 2019 Change 2020 2019

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Total $ 473.1 $ 487.2 $ (14.1) (2.9) % 33.3 % 33.7 % (0.4) %

For the six months ended June 30, 2020, cost of revenues was $321.1 million compared to $319.7 million for the six months ended June 30, 2019, an increase of $1.4 million, or 0.4%.

Our gross margin for the six months ended June 30, 2020 was 31.5% compared to 33.8% for six months ended June 30, 2019, a decrease of 230 bps.

The increase in cost of revenues in Insurance of $3.4 million was primarily due to an increase in employee-related costs of $1.7 million, higher infrastructure and technology costs of $2.4 million, and other operating costs of $0.8 million.

This was partially offset by currency movements, net of hedging of $1.5 million.

Gross margin in Insurance decreased by 290 bps during the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to higher operating expenses.

For the nine months ended September 30, 2020, cost of revenues was $473.1 million compared to $487.2 million for the nine months ended September 30, 2019, a decrease of $14.1 million, or 2.9%.

Our gross margin for the nine months ended September 30, 2020 was 33.3% compared to 33.7% for nine months ended September 30, 2019, a decrease of 40 bps.

The decrease in cost of revenues in Insurance of $2.0 million was primarily due to a decrease in employee-related costs of $2.2 million, lower travel costs of $1.8 million and currency movements, net of hedging of $1.8 million.

This was partially offset by higher infrastructure and technology costs of $2.6 million and other operating costs of $1.2 million.

Gross margin in Insurance decreased by 60 bps during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily due to lower revenues in existing clients.

The increase in cost of revenues in Healthcare of $1.2 million was primarily due to an increase in employee-related costs of $1.5 million and other operating costs of $0.5 million.

This was partially offset by lower technology costs of $0.4 million and currency movements, net of hedging of $0.4 million.

Gross margin in Healthcare increased by 540 bps during the six months ended June 30, 2020 compared to the six months ended June 30, 2019, primarily due to lower margin in the Heath Integrated business during the six months ended June 30, 2019 and higher revenues during the six months ended June 30, 2020.

The decrease in cost of revenues in Emerging Business of $7.1 million was primarily due to a decrease in employee-related costs of $4.8 million, lower infrastructure and technology cost of $1.2 million, currency movements, net of hedging of $0.9 million and lower travel costs of $0.8 million, partially offset by higher other operating costs of $0.6 million.

Gross margin in Emerging Business decreased by 530 bps during the six months ended June 30, 2020, compared to the six months ended June 30, 2019, primarily due to lower revenues.

The increase in cost of revenues in Analytics of $1.5 million was primarily due to an increase in employee-related costs of $4.0 million.

This was partially offset by lower other operating costs of $1.4 million and currency movements, net of hedging of $1.1 million.

Gross margin in Analytics decreased by 110 bps during the six months ended June 30, 2020, compared to the six months ended June 30, 2019, primarily due to higher operating expenses.

Gross margin in Healthcare increased by 620 bps during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily due to lower margin in the Health Integrated business during the nine months ended September 30, 2019 and higher revenues during the nine months ended September 30, 2020.

The decrease in cost of revenues in Emerging Business of $13.4 million was primarily due to a decrease in employee-related costs of $9.7 million, lower infrastructure and technology cost of $2.1 million, lower travel costs of $1.4 million, and currency movements, net of hedging of $1.1 million, partially offset by higher other operating costs of $0.9 million.

Gross margin in Emerging Business decreased by 240 bps during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily due to lower revenues.

The increase in cost of revenues in Analytics of $0.1 million was primarily due to an increase in employee-related costs of $10.7 million and higher technology costs of $1.1 million.

This was partially offset by lower other operating costs of $6.4 million, lower travel costs of $3.7 million and currency movements, net of hedging of $1.6 million.

Gross margin in Analytics increased by 20 bps during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019.

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

Six months ended June 30, Percentage change

Nine months ended September 30, Percentage change

2020 2019 Change

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The decrease in SG&A expenses of $20.1 million was primarily due to COVID-19 cost reduction measures including the temporary reduction of the base salaries of our executive officers and certain other groups of employees.

This was driven by lower employee-related costs of $7.7 million, a decrease in stock-based compensation expense of $2.0 million mostly due to revision in estimates related to revenue linked performance based restricted stock units due to COVID-19, lower infrastructure and travel costs of $2.6 million, lower other operating costs of $1.0 million and currency movements, net of hedging of $1.0 million.

The decrease was driven by lower employee-related costs of $14.4 million, lower infrastructure and travel costs of $4.0 million, lower other operating costs of $0.6 million and currency movements, net of hedging of $1.1 million.

Depreciation and Amortization.

Six months ended June 30, Percentage change

Nine months ended September 30, Percentage change

2020 2019 Change

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As a percentage of revenues 5.3 % 5.4 %

The decrease in intangibles amortization expense of $3.5 million was primarily due to end of useful lives for certain intangible assets during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

The decrease in intangibles amortization expense of $5.6 million was primarily due to end of useful lives for certain intangible assets during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

The increase in depreciation expense of $3.4 million was due to depreciation related to our investments in new operating centers to support our business growth.

Impairment and Restructuring Charges.

Six months ended June 30, Percentage change

Nine months ended September 30, Percentage change

2020 2019 Change

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As a percentage of revenues — % 1.0 %

During the six months ended June 30, 2019, we recorded impairment charges of $3.2 million and restructuring charges of $3.6 million in connection with the wind-down of our Health Integrated business.

During the nine months ended September 30, 2019, we recorded impairment charges of $3.2 million and restructuring charges of $4.1 million in connection with the wind-down of our Health Integrated business.

Income from Operations.

Income from operations increased by $6.6 million, or 21.6%, from $30.7 million for the six months ended June 30, 2019 to $37.4 million for the six months ended June 30, 2020.

As a percentage of revenues, income from operations increased from 6.4% for the six months ended June 30, 2019 to 8.0% for the six months ended June 30, 2020.

Income from operations increased by $18.7 million, or 35.0%, from $53.1 million for the nine months ended September 30, 2019 to $71.8 million for the nine months ended September 30, 2020.

As a percentage of revenues, income from operations increased from 7.2% for the nine months ended September 30, 2019 to 10.1% for the nine months ended September 30, 2020.

Foreign Exchange Gain/(Loss).

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dollar against the Indian rupee, the U.K.

pound sterling and the Philippine peso during the six months ended June 30, 2020.

pound sterling, the Philippine peso, Australian dollar and the South African ZAR during the nine months ended September 30, 2020.

The average exchange rate of the U.S.

dollar against the Indian rupee increased from 69.87 during the six months ended June 30, 2019 to 74.25 during the six months ended June 30, 2020.

dollar against the Indian rupee increased from 70.03 during the nine months ended September 30, 2019 to 74.18 during the nine months ended September 30, 2020.

The average exchange rate of the U.K.

pound sterling against the U.S.

dollar decreased from 1.30 during the six months ended June 30, 2019 to 1.26 during the six months ended June 30, 2020.

dollar remained stable at 1.27 during the nine months ended September 30, 2020 from the nine months ended September 30, 2019.

The average exchange rate of the U.S.

dollar against the Philippine peso decreased from 51.97 during the six months ended June 30, 2019 to 50.55 during the six months ended June 30, 2020.

We recorded a net foreign exchange gain of $2.7 million for the six months ended June 30, 2020 compared to the net foreign exchange gain of $2.5 million for the six months ended June 30, 2019.

dollar against the Philippine peso decreased from 51.84 during the nine months ended September 30, 2019 to 49.94 during the nine months ended September 30, 2020.

The average exchange rate of the U.S.

dollar against the Australian dollar increased

from 1.43 during the nine months ended September 30, 2019 to 1.48 during the nine months ended September 30, 2020.

The average exchange rate of the U.S.

dollar against the South African ZAR increased from 14.38 during the nine months ended September 30, 2019 to 16.88 during the nine months ended September 30, 2020.

We recorded a net foreign exchange gain of $3.5 million each for the nine months ended September 30, 2020 and 2019.

Interest expense.

Interest expense decreased from $7.4 million for the six months ended June 30, 2019 to $6.0 million for the six months ended June 30, 2020 primarily due to lower borrowings and lower effective interest rates under our Credit Facility during the six months ended June 30, 2020, compared to the six months ended June 30, 2019.

Interest expense decreased from $10.6 million for the nine months ended September 30, 2019 to $8.6 million for the nine months ended September 30, 2020 primarily due to repayments of borrowings leading to lower outstanding borrowings and lower effective interest rates under our Credit Facility during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019.

Other Income, net.

Six months ended June 30, Percentage change

Nine months ended September 30, Percentage change

2020 2019 Change

3 unchanged sentences

Other income, net $ 9.2 $ 13.1 $ (3.9) (29.4) %

Other income, net decreased by $1.7 million, from $8.5 million for the six months ended June 30, 2019 to $6.8 million for the six months ended June 30, 2020, primarily due to lower return on mutual fund investments of $1.6 million during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Other income, net decreased by $3.9 million, from $13.1 million for the nine months ended September 30, 2019 to $9.2 million for the nine months ended September 30, 2020, primarily due to lower return on mutual fund investments of $3.0 million during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 and recognition of one-time other income of $0.8 million related to our Health Integrated business during the nine months ended September 30, 2019.

Income Tax Expense.

We recorded income tax expense of $9.9 million and $6.9 million for the six months ended June 30, 2020 and 2019, respectively.

The effective tax rate increased from 20.1% during the six months ended June 30, 2019 to 24.3% during the six months ended June 30, 2020, primarily as a result of (i) recording of a one-time tax expense of $1.3 million due to electing a new tax regime for two of our Indian subsidiaries which provides for a lower tax rate on earnings in exchange for foregoing certain tax credits, including minimum alternative tax credits during the six months ended June 30, 2020, compared to a benefit of $1.5 million recorded during the six months ended June 30, 2019 and (ii) recording of excess tax benefits related to stock awards of $1.8 million pursuant to ASU No.

2016-09 during the six months ended June 30, 2020 compared to $1.1 million during the six months ended June 30, 2019.

The effective tax rate increased from 21.3% during the nine months ended September 30, 2019 to 24.3% during the nine months ended September 30, 2020.

We recorded income tax expense of $18.4 million and $12.6 million for the nine months ended September 30, 2020 and 2019, respectively.

The increase in income tax expense was primarily as a result of (i) recording of a one-time tax expense of $1.3 million due to electing a new tax regime for two of our Indian subsidiaries which provides for a lower tax rate on earnings in exchange for foregoing certain tax credits, including minimum alternative tax credits during the nine months ended September 30, 2020, compared to a benefit of $2.5 million recorded during the nine months ended September 30, 2019, (ii) higher profit during the nine months ended September 30, 2020, partially offset by (iii) recording of excess tax benefits related to stock awards of $1.9 million pursuant to ASU No.

2016-09 during the nine months ended September 30, 2020 compared to $1.1 million during the nine months ended September 30, 2019.

See Note 21 - Income Taxes to our unaudited consolidated financial statements.

Net income increased from $27.3 million for the six months ended June 30, 2019 to $30.8 million for the six months ended June 30, 2020, primarily due to increase in income from operations of $6.6 million, lower interest expense of $1.4 million and higher foreign exchange gain, net of $0.2 million.

Net income increased from $46.3 million for the nine months ended September 30, 2019 to $57.3 million for the nine months ended September 30, 2020, primarily due to increase in income from operations of $18.7 million, lower interest expense of $2.0 million.

This was partially offset by lower other income, net of $3.9 million and higher income tax expense of $5.8 million.

As a percentage of revenues, net income increased from 5.6% for the six months ended June 30, 2019 to 6.6% for the six months ended June 30, 2020.

As a percentage of revenues, net income increased from 6.3% for the nine months ended September 30, 2019 to 8.1% for the nine months ended September 30, 2020.

Liquidity and Capital Resources

Six months ended June 30,

Nine months ended September 30,

(dollars in millions)

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Net cash provided by operating activities 126.3 106.0

Net cash provided by investing activities 1.1 0.9

Net cash provided by/(used for) investing activities 11.1 (21.3)

Net cash used for financing activities (48.4) (77.7)

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Closing cash, cash equivalents and restricted cash $ 216.0 $ 109.3

As of June 30, 2020 and 2019, we had $335.6 million and $253.0 million, respectively, in cash, cash equivalents and short-term investments, of which $275.5 million, and $214.8 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.

As of September 30, 2020 and 2019, we had $362.6 million and $280.8 million, respectively, in cash, cash equivalents and short-term investments, of which $300.7 million, and $228.7 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 provided by operating activities were $58.9 million for the six months ended June 30, 2020 as compared to cash flows provided by operating activities of $47.7 million during the six months ended June 30, 2019.

Cash flows provided by operating activities were $126.3 million for the nine months ended September 30, 2020 as compared to cash flows provided by operating activities of $106.0 million during the nine months ended September 30, 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 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 provided by operating activities for the six months ended June 30, 2020 were $58.9 million.

Cash flows provided by operating activities for the nine months ended September 30, 2020 were $126.3 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 $130.6 million.

The primary working capital use of cash of $41.6 million during the six months ended June 30, 2020 was driven by decrease in accrued employee costs, operating lease liabilities, accrued expenses and other liabilities and increase in other current assets.

The primary working capital sources of cash of $24.9 million was driven by decrease in accounts receivables, advance income tax, net, other assets, increase in deferred revenues and accounts payable.

The primary working capital use of cash of $32.2 million during the nine months ended September 30, 2020 was driven by payments of operating lease liabilities, accrued employee costs, accrued expenses and other liabilities and accounts payable.

The primary working capital sources of cash of $27.9 million was driven by collections of accounts receivables, decrease in advance income tax, net, current and non-current assets and increase in deferred revenues.

Investing Activities:

Cash flows provided by investing activities were $1.1 million for the six months ended June 30, 2020 as compared to cash flows provided by investing activities of $0.9 million for the six months ended June 30, 2019.

The increase is mainly due to higher net redemption of investments of $23.8 million during the six months ended June 30, 2020 as compared to net redemptions of investments of $23.5 million during the six months ended June 30, 2019.

Cash flows provided by investing activities were $11.1 million for the nine months ended September 30, 2020 as compared to cash flows used for investing activities of $21.3 million for the nine months ended September 30, 2019.

The increase is mainly due to higher net redemption of investments of $45.7 million during the nine months ended September 30, 2020 as compared to net redemptions of investments of $11.2 million during the nine months ended September 30, 2019.

This was partially offset by higher capital expenditures for purchase of long-lived assets, including investments in infrastructure, technology assets, software and product developments of $2.1 million during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Financing Activities:

Cash flows used for financing activities were $13.4 million during the six months ended June 30, 2020 as compared to cash flows used for financing activities of $61.1 million during the six months ended June 30, 2019.

The decrease in cash flows used for financing activities was primarily due to higher repayment of $33.6 million (net of proceeds) under our Credit Facility (as described below in “Financing Arrangements (Debt Facility)”) during the six months ended June 30, 2019 as compared to net repayments of $0.2 million during the six months ended June 30, 2020 and lower purchases of treasury stock by $13.5 million under our share repurchase program during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019.

Cash flows used for financing activities were $48.4 million during the nine months ended September 30, 2020 as compared to cash flows used for financing activities of $77.7 million during the nine months ended September 30, 2019.

The decrease in cash flows used for financing activities was primarily due to lower net repayment of $10.4 million (net of proceeds) under our Credit Facility (as described below in “Financing Arrangements (Debt Facility)”) during the nine months ended September 30, 2020 as compared to net repayments of $41.8 million during the nine months ended September 30, 2019, partially offset by higher purchases of treasury stock by $3.0 million under our share repurchase program during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 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, digital capabilities and purchase telecommunications equipment and computer hardware and software in connection with managing client operations.

We incurred $22.1 million of capital expenditures in the six months ended June 30, 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.

We incurred $34.6 million of capital expenditures in the nine months ended September 30, 2020.

We expect to incur total capital expenditures of between $36.0 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 - Commitments and Contingencies to our unaudited consolidated financial statements herein for further details).

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If we have significant growth through acquisitions, we may need to obtain additional financing.

During the six months ended June 30, 2020, to enhance our liquidity position in response to COVID-19, management has taken certain precautionary measures, including:

During the nine months ended September 30, 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;

1 unchanged sentence

The 2019 Repurchase Program remains authorized by the Board of Directors and the management using its discretion has resumed share repurchases effective July 1, 2020, considering improved market conditions, our capital needs and other factors.

However, there is no assurance that the impacts we have experienced to date, and any future impact we may experience, from the COVID-19 pandemic will not have an adverse effect on our cash flows.

The Coronavirus Aid, Relief, and Economic Security Act, (the “CARES Act”) allows employers to defer the payment of the employer share of Federal Insurance Contributions Act (“FICA”) taxes for the period from April 1, 2020 and ending December 31, 2020.

During the six months ended June 30, 2020, we deferred FICA payments of $2.4 million under the CARES Act and will continue to defer FICA payments through December 31, 2020.

As of September 30, 2020, we deferred FICA payments of $4.5 million under the CARES Act and will continue to defer FICA payments through December 31, 2020.

The deferred amount will be payable as follows:

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Financing Arrangements (Debt Facility)

The following tables summarizes our Debt balances as of June 30, 2020 and December 31, 2019.

As of June 30, 2020

The following tables summarizes our Debt balances as of September 30, 2020 and December 31, 2019.

As of September 30, 2020

(dollars in millions)

17 unchanged sentences

Total borrowings $ 99.0 $ 0.9 $ 135.1 $ 235.0

*Unamortized debt issuance costs for our revolver credit facility of $0.6 million and $0.7 million as of June 30, 2020 and December 31, 2019, respectively, is presented under “other current assets” and “other assets” in the consolidated balance sheets.

*Unamortized debt issuance costs for our revolver Credit Facility of $0.6 million and $0.7 million as of September 30, 2020 and December 31, 2019, respectively, is presented under “Other current assets” and “Other assets” in the consolidated balance sheets.

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

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In the ordinary course of business, we provide standby letters of credit to third parties primarily for facility leases.

As of June 30, 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.

As of September 30, 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.

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Contractual Obligations

The following table sets forth our contractual obligations as of June 30, 2020:

The following table sets forth our contractual obligations as of September 30, 2020:

Payment Due by Period

13 unchanged sentences

$ 48.7 $ 142.5 $ 191.5 $ 42.6 $ 425.3

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

(b) Represents estimated payments under the Gratuity Plan.

(a) Represents operating lease liabilities payable over the lease term.

(b) Represents estimated employee benefit payments under the Gratuity Plan.

(c) Interest on borrowings is calculated based on the interest rate on the outstanding borrowings as of September 30, 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.

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis