What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-02 compared with 2021-07-29 · 300 added, 287 removed, 912 unchanged (39% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Current assets:

38 unchanged sentences

Common stock, $ 0.001 par value;

100,000,000 shares authorized, 39,283,853 shares issued and 33,249,709 shares outstanding as of June 30, 2021 and 38,968,052 shares issued and 33,559,434 shares outstanding as of December 31, 2020

100,000,000 shares authorized, 39,312,225 shares issued and 33,343,895 shares outstanding as of September 30, 2021 and 38,968,052 shares issued and 33,559,434 shares outstanding as of December 31, 2020

Additional paid-in capital 385,917 420,976

2 unchanged sentences

Total including shares held in treasury 1,021,537 987,410

6,034,144 shares as of June 30, 2021 and 5,408,618 shares as of December 31, 2020, held in treasury, at cost

5,968,330 shares as of September 30, 2021 and 5,408,618 shares as of December 31, 2020, held in treasury, at cost

( 336,552 ) ( 268,238 )

6 unchanged sentences

(In thousands, except share and per share amounts)

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

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

2021 2020 2021 2020

13 unchanged sentences

Other income, net 1,721 2,485 5,346 9,239

Loss on settlement of convertible notes ( 12,845 ) — ( 12,845 ) —

Income before income tax expense and earnings from equity affiliates 30,675 34,979 108,478 75,867

17 unchanged sentences

(In thousands)

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

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

2021 2020 2021 2020

12 unchanged sentences

Total other comprehensive income/(loss) $ ( 5,512 ) $ 19,057 $ ( 17,273 ) $ ( 325 )

Total comprehensive income/(loss) $ 20,029 $ 17,259 $ 48,191 $ 11,458

(1) These are reclassified to net income and are included either in cost of revenues or operating expenses, as applicable in the unaudited consolidated statements of income.

Total comprehensive income $ 20,995 $ 45,475 $ 69,186 $ 56,933

(1) These are reclassified to net income and are included in cost of revenues and operating expenses, as applicable in the unaudited consolidated statements of income.

Refer to Note 16 - Derivatives and Hedge Accounting to the unaudited consolidated financial statements.

6 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

For the three months ended June 30, 2021 and 2020

For the three months ended September 30, 2021 and 2020

(In thousands, except share and per share amounts)

1 unchanged sentence

Shares Amount Shares Amount

Balance as of March 31, 2021 39,273,989 $ 39 $ 428,882 $ 673,310 $ ( 78,753 ) ( 5,747,100 ) $ ( 297,253 ) $ 726,225

Balance as of June 30, 2021 39,283,853 $ 39 $ 439,051 $ 701,331 $ ( 86,745 ) ( 6,034,144 ) $ ( 325,662 ) $ 728,014

Stock issued against stock-based compensation plans 28,372 — 536 — — — — 536

1 unchanged sentence

Acquisition of treasury stock — — — — — ( 244,580 ) ( 28,196 ) ( 28,196 )

Issuance of treasury stock — — 19,436 — — 310,394 17,306 36,742

Settlement of convertible notes — — ( 84,000 ) — — — — ( 84,000 )

Other comprehensive loss — — — — ( 5,512 ) — — ( 5,512 )

Net income — — — 26,507 — — — 26,507

Balance as of June 30, 2021 39,283,853 $ 39 $ 439,051 $ 701,331 $ ( 86,745 ) ( 6,034,144 ) $ ( 325,662 ) $ 728,014

Balance as of September 30, 2021 39,312,225 $ 39 $ 385,917 $ 727,838 $ ( 92,257 ) ( 5,968,330 ) $ ( 336,552 ) $ 684,985

Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Equity

Shares Amount Shares Amount

Balance as of March 31, 2020 38,813,775 $ 39 $ 396,939 $ 574,314 $ ( 113,104 ) ( 4,497,779 ) $ ( 202,284 ) $ 655,904

Balance as of June 30, 2020 38,818,365 $ 39 $ 404,704 $ 582,743 $ ( 104,274 ) ( 4,497,779 ) $ ( 202,284 ) $ 680,928

Stock issued against stock-based compensation plans 22,525 — 85 — — — — 85

Stock-based compensation — — 8,346 — — — — 8,346

Acquisition of treasury stock — — — — — ( 389,575 ) ( 24,906 ) ( 24,906 )

Other comprehensive income — — — — 19,057 — — 19,057

Net income — — — 26,418 — — — 26,418

Balance as of June 30, 2020 38,818,365 $ 39 $ 404,704 $ 582,743 $ ( 104,274 ) ( 4,497,779 ) $ ( 202,284 ) $ 680,928

Balance as of September 30, 2020 38,840,890 $ 39 $ 413,135 $ 609,161 $ ( 85,217 ) ( 4,887,354 ) $ ( 227,190 ) $ 709,928

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

For the six months ended June 30, 2021 and 2020

For the nine months ended September 30, 2021 and 2020

(In thousands, except share and per share amounts)

5 unchanged sentences

Acquisition of treasury stock — — — — — ( 870,106 ) ( 85,620 ) ( 85,620 )

Issuance of treasury stock — — 19,436 — — 310,394 17,306 36,742

Settlement of convertible notes — — ( 84,000 ) — — — — ( 84,000 )

Other comprehensive loss — — — — ( 17,273 ) — — ( 17,273 )

Net income — — — 86,459 — — — 86,459

Balance as of June 30, 2021 39,283,853 $ 39 $ 439,051 $ 701,331 $ ( 86,745 ) ( 6,034,144 ) $ ( 325,662 ) $ 728,014

Balance as of September 30, 2021 39,312,225 $ 39 $ 385,917 $ 727,838 $ ( 92,257 ) ( 5,968,330 ) $ ( 336,552 ) $ 684,985

Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Equity

6 unchanged sentences

Net income — — — 57,258 — — — 57,258

Balance as of June 30, 2020 38,818,365 $ 39 $ 404,704 $ 582,743 $ ( 104,274 ) ( 4,497,779 ) $ ( 202,284 ) $ 680,928

Balance as of September 30, 2020 38,840,890 $ 39 $ 413,135 $ 609,161 $ ( 85,217 ) ( 4,887,354 ) $ ( 227,190 ) $ 709,928

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

(In thousands)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

4 unchanged sentences

Amortization of operating lease right-of-use assets 20,012 20,484

Unrealized loss / (gain) on short term investments 6,777 ( 2,842 )

Unrealized (gain) / loss on short term investments 5,987 ( 4,807 )

Unrealized foreign exchange gain, net ( 3,799 ) ( 484 )

Deferred income tax benefit ( 17,374 ) ( 1,572 )

Allowance for expected credit losses ( 390 ) 389

Allowance / (reversal) for expected credit losses ( 405 ) 353

Loss on settlement of convertible notes 12,845 —

Loss from equity-method investment — 193

Amortization of non-cash interest expense related to convertible senior notes 1,364 1,289

Amortization of non-cash interest expense related to convertible notes 1,795 1,943

Others, net 590 ( 935 )

16 unchanged sentences

Proceeds from redemption of investments 83,183 103,718

Net cash provided by investing activities 11,668 1,066

Net cash (used for)/provided by investing activities ( 21,518 ) 11,063

Cash flows from financing activities:

14 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Settlement of portion of convertible notes through issuance of treasury stock $ 36,742 $ —

Assets acquired under finance lease $ 79 $ 90

2 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

1 unchanged sentence

(“ExlService Holdings”) is organized as a corporation under the laws of the state of Delaware.

ExlService Holdings, together with its subsidiaries and affiliates (collectively, the “Company”), operates in the Business Process Management (“BPM”) industry providing operations management services and analytics services that helps its clients build and grow sustainable businesses.

By orchestrating its domain expertise, data, analytics and digital technology, the Company looks deeper to design and manage agile, customer-centric operating models to improve global operations, drive profitability, enhance customer satisfaction, increase data-driven insights, and manage risk and compliance.

ExlService Holdings, together with its subsidiaries and affiliates (collectively, the “Company”), is a global analytics and digital solutions company that partners with clients to improve business outcomes and unlock growth.

Bringing together deep domain expertise with robust data, powerful analytics, cloud, and AI, the Company creates agile, scalable solutions and executes complex operations for the world’s leading corporations in industries including insurance, healthcare, banking and financial services, media, and retail, among others.

The Company’s clients are located principally in the United States of America (“U.S.”) and the United Kingdom (“U.K.”).

20 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

estimated costs to complete fixed price contracts, recoverability of dues from statutory authorities, assets and obligations related to employee benefit plans, deferred tax valuation allowances, income-tax uncertainties and other contingencies, valuation of derivative financial instruments, assumptions used to calculate stock-based compensation expense, assumptions used to determine the incremental borrowing rate to calculate lease liabilities and right-of-use (“ROU”) assets, lease term to calculate amortization of ROU, depreciation and amortization periods, purchase price allocation and recoverability of long-lived assets, goodwill and intangibles.

As of June 30, 2021, the extent to which the global Coronavirus Disease 2019 pandemic (“COVID-19”) will ultimately impact the Company's business depends on numerous dynamic factors, which the Company still cannot reliably predict.

As of September 30, 2021, the extent to which the global Coronavirus Disease 2019 pandemic (“COVID-19”) will ultimately impact the Company's business depends on numerous dynamic factors, which the Company still cannot reliably predict.

As a result, many of the Company's estimates and assumptions herein required increased judgment and carry a higher degree of variability and volatility.

2 unchanged sentences

In March 2020, FASB issued ASU No.

In March 2020, Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2020-04, Reference Rate Reform (Topic 848):

5 unchanged sentences

The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

In August 2020, FASB issued ASU No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The ASU removes separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature and hence most of the instruments will be accounted for as a single model (either debt or equity).

The ASU also states that entities must apply the if-converted method to all convertible instruments for calculation of diluted EPS and the treasury stock method is no longer available.

An entity can use either a full or modified retrospective approach to adopt the ASU’s guidance.

The ASU is effective for fiscal years beginning after December 15, 2021 and may be early adopted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The Company is currently evaluating the impact of adoption of this ASU on its consolidated financial statements.

(d) Recently Adopted Accounting Pronouncements

3 unchanged sentences

The Company adopted this ASU on January 1, 2021.

The adoption of this ASU has a minimal impact on the Company’s unaudited consolidated financial statements.

The adoption of this ASU did not have a material impact on the Company’s unaudited consolidated financial statements.

In October 2020, FASB issued ASU No.

3 unchanged sentences

The adoption of this ASU did not have a material impact on the Company’s unaudited consolidated financial statements.

In January 2021, Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

In January 2021, FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848):

1 unchanged sentence

This ASU extends some of Topic 848’s optional expedients and exceptions for contract modifications and hedge accounting to derivative instruments impacted by discounting transition as a result of the discontinuation of the use of LIBOR as a benchmark interest rate due to reference rate reform.

This ASU is effective immediately for all entities with the option to be applied retrospectively as of any date from the beginning of an interim period

This ASU is effective immediately for all entities with the option to be applied retrospectively as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, and prospectively to any new contract modifications made on or after January 7, 2021 through December 31, 2022.

The adoption of this ASU did not have a material impact on the Company’s unaudited consolidated financial statements.

Segment and Geographical Information

The Company operates in the Business Process Management (“BPM”) industry and is a provider of operations management and analytics services.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

that includes or is subsequent to March 12, 2020, and prospectively to any new contract modifications made on or after January 7, 2021 through December 31, 2022.

The adoption of this ASU did not have a material impact on the Company’s unaudited consolidated financial statements.

Segment and Geographical Information

The Company operates in the BPM industry and is a provider of operations management and analytics services.

The Company manages and reports financial information through its four strategic business units:

5 unchanged sentences

The Company manages these assets on a total Company basis, not by operating segment, and therefore asset information and capital expenditures by operating segment are not presented.

Revenues and cost of revenues for the three months ended June 30, 2021 and 2020, respectively, for each of the reportable segments, are as follows:

Three months ended June 30, 2021

Revenues and cost of revenues for the three months ended September 30, 2021 and 2020, respectively, for each of the reportable segments, are as follows:

Three months ended September 30, 2021

Insurance Healthcare Emerging Business Analytics Total

5 unchanged sentences

Operating expenses 70,144

Foreign exchange gain, interest expense and other income, net 1,048

Loss on settlement of convertible notes, foreign exchange gain, interest expense and other income, net ( 11,763 )

Income tax expense 4,196

2 unchanged sentences

(1) Exclusive of depreciation and amortization expense.

Three months ended June 30, 2020

Three months ended September 30, 2020

Insurance Healthcare Emerging Business Analytics Total

9 unchanged sentences

Net income $ 26,418

(1) Exclusive of depreciation and amortization expense.

Revenues and cost of revenues for the nine months ended September 30, 2021 and 2020, respectively, for each of the reportable segments, are as follows:

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

(1) Exclusive of depreciation and amortization expense.

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

segments, are as follows:

Six months ended June 30, 2021

Nine months ended September 30, 2021

Insurance Healthcare Emerging Business Analytics Total

5 unchanged sentences

Operating expenses 199,716

Foreign exchange gain, interest expense and other income, net 418

Loss on settlement of convertible notes, foreign exchange gain, interest expense and other income, net ( 11,345 )

Income tax expense 22,019

Loss from equity-method investment 28

Gain / (loss) from equity-method investment —

Net income $ 86,459

(1) Exclusive of depreciation and amortization expense.

Six months ended June 30, 2020

Nine months ended September 30, 2020

Insurance Healthcare Emerging Business Analytics Total

11 unchanged sentences

Revenues, net by service type, were as follows:

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

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

2021 2020 2021 2020

5 unchanged sentences

Refer to the reportable segment disclosure above.

The Company attributes the revenues to regions based upon the location of its customers.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

The Company attributes the revenues to regions based upon the location of its customers.

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

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

2021 2020 2021 2020

7 unchanged sentences

Long-lived assets by geographic area, which consist of property and equipment, net and operating lease right-of-use assets were as follows:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Long-lived assets

8 unchanged sentences

The following table provides information about accounts receivable, contract assets and contract liabilities from contracts with customers:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Accounts receivable, net $ 192,170 $ 147,635

3 unchanged sentences

Consideration received for process transition activities $ 1,527 $ 2,774

Accounts receivable includes $ 89,237 and $ 63,995 as of June 30, 2021 and December 31, 2020, respectively, representing unbilled receivables.

Accounts receivable includes $ 90,736 and $ 63,995 as of September 30, 2021 and December 31, 2020, respectively, representing unbilled receivables.

The Company has accrued the unbilled receivables for work performed in accordance with the terms of contracts with customers and considers no significant performance risk associated with its unbilled receivables.

3 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

5 unchanged sentences

The revenues are recognized as (or when) the performance obligation is fulfilled under the contract with customer.

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

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

Revenue recognized during the three and nine months ended September 30, 2021 and 2020, which was included in the contract liabilities balance at the beginning of the respective periods:

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

2021 2020 2021 2020

4 unchanged sentences

Contract Acquisition Costs

Three months ended Six months ended Year ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 December 31, 2020

Three months ended Nine months ended Year ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 December 31, 2020

Opening Balance $ 867 $ 1,270 $ 1,027 $ 1,307 $ 1,307

Additions 374 187 374 187 310

Additions / (reductions) ( 97 ) 63 277 250 310

Amortization ( 158 ) ( 112 ) ( 692 ) ( 336 ) ( 590 )

1 unchanged sentence

Contract Fulfillment Costs

Three months ended Six months ended Year ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 December 31, 2020

Three months ended Nine months ended Year ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 December 31, 2020

Opening Balance $ 3,694 $ 6,780 $ 5,631 $ 7,255 $ 7,255

2 unchanged sentences

Closing Balance $ 3,280 $ 6,433 $ 3,280 $ 6,433 $ 5,631

There was no impairment for contract acquisition and contract fulfillment costs as of June 30, 2021 and December 31, 2020.

There was no impairment for contract acquisition and contract fulfillment costs as of September 30, 2021 and December 31, 2020.

The capitalized costs are amortized over the expected period of benefit of the contract.

Allowance for expected credit losses

The Company evaluates the credit risk of its customers based on a combination of various financial and qualitative factors that may affect the ability of each customer to pay.

The Company considered current and anticipated future economic

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

Allowance for expected credit losses

The Company evaluates the credit risk of its customers based on a combination of various financial and qualitative factors that may affect the ability of each customer to pay.

The Company considered current and anticipated future economic conditions relating to the industries of the Company’s customers and the countries where it operates.

conditions relating to the industries of the Company’s customers and the countries where it operates.

In calculating expected credit loss, the Company also considered past payment trends, credit rating and other related credit information for its significant customers to estimate the probability of default in the future and estimates relating to the possible effects resulting from COVID-19.

The duration and severity of COVID-19 and continued market volatility is highly uncertain and, as such, the impact on expected losses is subject to significant judgment, including but not limited to changes in customers’ credit rating, and may cause variability in the Company’s allowance for credit losses in future periods.

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Accounts receivable, including unbilled receivables $ 192,841 $ 148,824

1 unchanged sentence

Accounts receivable, net $ 192,170 $ 147,635

The movement in allowance for expected credit loss on customer balances for the three and six months ended June 30, 2021 and 2020 and year ended December 31, 2020 was as follows:

Three months ended Six months ended Year ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 December 31, 2020

The movement in “Allowance for expected credit losses” on customer balances for the three and nine months ended September 30, 2021 and 2020 and year ended December 31, 2020 was as follows:

Three months ended Nine months ended Year ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 December 31, 2020

Balance at the beginning of the period $ 730 $ 1,434 $ 1,189 $ 1,163 $ 1,163

Additions / (reductions) during the period ( 19 ) ( 36 ) ( 414 ) 345 300

Charged against allowance ( 13 ) ( 100 ) ( 73 ) ( 100 ) ( 269 )

Reductions due to write-off of accounts receivable ( 41 ) — ( 114 ) ( 100 ) ( 269 )

Translation adjustment 1 2 10 ( 8 ) ( 5 )

5 unchanged sentences

The Company includes performance stock unit awards in dilutive potential common shares when they become contingently issuable and have a dilutive impact per authoritative guidance and excludes such awards when they are not contingently issuable.

Diluted weighted-average shares outstanding is affected by the treatment of our 3.5 % per annum Convertible Senior Notes due October 1, 2024 (the “Notes”).

The Company has a choice to settle the Notes in cash, shares or any combination of the two.

The Company presently intends and has the ability to settle the principal balance of the Notes in cash, and as such, the Company has applied the treasury stock method.

The dilution related to the conversion premium, if any, of the Notes is included in the calculation of diluted weighted-average shares outstanding to the extent the issuance is dilutive based on the average stock price during the reporting period being greater than the conversion price of $ 75 .

Diluted weighted-average shares outstanding is affected by the treatment of the Company's 3.5 % per annum Convertible Senior Notes due October 1, 2024 (the “Notes”).

The Company had a choice to settle the Notes in cash, shares or any combination of the two.

The Company intended and had the ability to settle the principal balance of the Notes in cash, and as such, the Company applied the treasury stock method.

The dilution related to the conversion premium, if any, of the Notes is included in the calculation of diluted weighted-average shares outstanding for the portion of the period until actual settlement and to the extent the issuance is dilutive based on the average stock price during the reporting period being greater than the conversion price of $ 75 .

During the three months ended September 30, 2021, the Company settled the Notes by electing a combination of cash and shares of the Company’s common stock and as such included the count of shares issued on settlement in the calculation of basic earnings per share for the portion of the period outstanding.

Refer to Note 17 - Borrowings to the unaudited consolidated financial statements for further details.

The following table sets forth the computation of basic and diluted earnings per share:

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

The following table sets forth the computation of basic and diluted earnings per share:

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

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

2021 2020 2021 2020

3 unchanged sentences

Dilutive effect of share-based awards 440,378 208,572 371,145 213,032

Dilutive effect of conversion premium on convertible notes 488,631 — 364,919 —

Dilutive effect of conversion premium on the Notes 416,204 — 382,014 —

Diluted weighted average common shares outstanding 34,305,893 34,536,049 34,336,950 34,617,830

6 unchanged sentences

For the purpose of unaudited statements of cash flows, cash, cash equivalents and restricted cash comprise of the following:

June 30, 2021 June 30, 2020 December 31, 2020

September 30, 2021 September 30, 2020 December 31, 2020

Cash and cash equivalents $ 114,581 $ 206,423 $ 218,530

4 unchanged sentences

Other income, net consists of the following:

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

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

2021 2020 2021 2020

5 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

2 unchanged sentences

Estimated useful lives As of

(Years) June 30, 2021 December 31, 2020

(Years) September 30, 2021 December 31, 2020

Owned Assets:

22 unchanged sentences

Capital work in progress represents advances paid towards acquisition of property and equipment and costs incurred on internally developed software not yet ready to be placed in service.

During the three and six months ended June 30, 2021, there were no changes in estimated useful lives of property and equipment.

During the three and nine months ended September 30, 2021, there were no changes in estimated useful lives of property and equipment during the ordinary course of operations.

The depreciation and amortization expense, excluding amortization of acquisition-related intangibles, recognized in the unaudited consolidated statements of income was as follows:

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

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

2021 2020 2021 2020

1 unchanged sentence

The effect of foreign exchange gain/(loss) upon settlement of cash flow hedges recorded under depreciation and amortization, was as follows:

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

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

2021 2020 2021 2020

2 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

Internally developed software costs, included under Software, was as follows:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Cost $ 18,827 $ 18,371

2 unchanged sentences

The amortization expense on internally developed software recognized in the unaudited consolidated statements of income was as follows:

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

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

2021 2020 2021 2020

Amortization expense $ 1,086 $ 1,215 $ 3,165 $ 3,892

As of June 30, 2021 and December 31, 2020, the Company believes no impairment exists because the long-lived asset's future undiscounted net cash flows expected to be generated exceeds its carrying value;

As of September 30, 2021 and December 31, 2020, the Company believes no impairment exists because the long-lived asset's future undiscounted net cash flows expected to be generated exceeds its carrying value;

however, there can be no assurances that long-lived assets will not be impaired in future periods.

6 unchanged sentences

In addition, the Company completed an assessment of any potential goodwill impairment for all its reporting units immediately prior to the reallocation and determined that no impairment existed.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

The following table sets forth details of changes in goodwill by reportable segment of the Company:

2 unchanged sentences

Currency translation adjustments ( 77 ) ( 11 ) ( 301 ) — ( 389 )

Balance at June 30, 2021 $ 50,536 $ 21,953 $ 48,971 $ 227,287 $ 348,747

Balance at September 30, 2021 $ 50,422 $ 21,942 $ 49,047 $ 227,288 $ 348,699

During the fourth quarter of 2020, the Company performed its annual impairment test of goodwill for those reporting units that had goodwill recorded.

Based on the results, the fair values of each of the Company’s reporting units exceeded their carrying value and the goodwill was not impaired.

As of June 30, 2021, the Company evaluated the continuing effects of COVID-19 and its impact on the global economy on each of the Company’s reporting units to assess whether there was a triggering event during the quarter requiring the Company to perform a goodwill impairment test.

The Company considered continued improvements in current and forecasted economic and market conditions and qualitative factors, such as the Company’s performance in the first and second quarters, business forecasts for the remainder of the year, stock price movements and the Company’s expansion plans.

The Company did not identify any triggers or indications of potential impairment for its reporting units as of June 30, 2021.

As of September 30, 2021, the Company evaluated the continuing effects of COVID-19 and its impact on the global economy on each of the Company’s reporting units to assess whether there was a triggering event during the quarter requiring the Company to perform a goodwill impairment test.

The Company considered continued improvements in current and forecasted economic and market conditions and qualitative factors, for instance, the Company’s performance during the first three quarters, business forecasts for the remainder of the year, stock price movements and the Company’s expansion plans.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

The Company did not identify any triggers or indications of potential impairment for its reporting units as of September 30, 2021.

There can be no assurances that goodwill will not be impaired in future periods.

2 unchanged sentences

The duration and severity of COVID-19 and continued market volatility is highly uncertain and, as such, the impact on cash flows, long-term debt-free net cash flow growth rate in the terminal year and discount rates are subject to significant judgments and may cause variability in the Company’s assessment of existence of any impairment.

The Company will continue to monitor the impacts of COVID-19 on the Company and significant changes in key assumptions that could result in future period impairment charges.

The Company continues to monitor the impacts of COVID-19 on the Company and significant changes in key assumptions that could result in future period impairment charges.

The recoverability of goodwill is dependent upon the continued growth of cash flows from the Company’s business activities.

3 unchanged sentences

Information regarding the Company’s intangible assets is set forth below:

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

As of June 30, 2021

As of September 30, 2021

Carrying Amount Accumulated

19 unchanged sentences

The amortization expense recognized in the unaudited consolidated statements of income was as follows:

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

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

2021 2020 2021 2020

Amortization expense $ 3,022 $ 3,413 $ 9,780 $ 10,997

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

The remaining weighted average life of intangible assets is as follows:

2 unchanged sentences

Trade names and trademarks (Finite lived) 3.1

Estimated future amortization expense related to finite-lived intangible assets as of June 30, 2021 was as follows:

2021 (July 1 - December 31) $ 6,018

Estimated future amortization expense related to finite-lived intangible assets as of September 30, 2021 was as follows:

2021 (October 1 - December 31) $ 2,996

2026 and thereafter 12,859

Total $ 48,907

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

Other Current Assets

Other current assets consist of the following:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Receivables from statutory authorities $ 16,256 $ 15,658

Derivative instruments 7,371 9,755

Advances to suppliers 3,634 3,906

Receivables from statutory authorities 16,040 15,658

Contract assets 1,742 1,814

Deferred contract fulfillment costs 1,606 2,888

Contract assets 1,516 1,814

Interest accrued on term deposits 621 169

2 unchanged sentences

Other assets consist of the following:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Lease deposits $ 9,447 $ 9,788

Derivative instruments 4,631 6,933

Deposits with statutory authorities 6,425 6,341

Term deposits 180 216

Contract assets 1,805 2,623

Derivative instruments 5,390 6,933

Deferred contract fulfillment costs 1,674 2,743

Contract assets 1,371 2,623

Term deposits 184 216

Others 2,663 3,455

2 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

1 unchanged sentence

Accrued expenses and other current liabilities consist of the following:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Accrued expenses $ 39,369 $ 39,951

Payable to statutory authorities 12,093 10,594

Client liabilities 6,500 4,740

Accrued capital expenditures 4,758 7,857

Derivative instruments 1,819 435

Client liabilities 5,131 4,740

Interest payable 377 1,399

Other current liabilities 4,080 1,205

Finance lease liabilities 171 229

Other current liabilities 2,839 1,205

Accrued expenses and other current liabilities $ 67,926 $ 66,410

1 unchanged sentence

Other non-current liabilities consist of the following:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Retirement benefits $ 6,073 $ 8,940

Derivative instruments 2,504 29

Unrecognized tax benefits 907 907

Retirement benefits 9,332 8,940

Deferred transition revenue 509 924

Accrued capital expenditures — 3,486

Other liabilities 3,311 3,568

Finance lease liabilities 254 281

Accrued capital expenditures — 3,486

Others 3,282 3,568

Other non-current liabilities $ 13,529 $ 18,135

4 unchanged sentences

Upon settlement of foreign exchange contracts designated as cash flow hedges, fair value changes are reclassified from AOCL to net income, whereas such fair value changes related to net investment hedges are included in net income when a foreign operation is disposed or partially disposed.

The balances as of June 30, 2021 and June 30, 2020 are as follows:

The balances as of September 30, 2021 and 2020 are as follows:

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

Foreign currency translation (loss)/gain Unrealized gain/(loss) on cash flow hedges Retirement benefits Total

Foreign currency translation loss Unrealized gain/(loss) on cash flow hedges Retirement benefits Total

Balance as of January 1, 2021 $ ( 86,185 ) $ 13,799 $ ( 2,598 ) $ ( 74,984 )

5 unchanged sentences

1,859 ( 15 ) ( 154 ) 1,690

Accumulated other comprehensive loss as of June 30, 2021 $ ( 92,776 ) $ 8,396 $ ( 2,365 ) $ ( 86,745 )

Accumulated other comprehensive (loss)/gain as of September 30, 2021 $ ( 95,935 ) $ 5,897 $ ( 2,219 ) $ ( 92,257 )

Balance as of January 1, 2020 $ ( 87,591 ) $ 4,098 $ ( 1,399 ) $ ( 84,892 )

Losses recognized during the period ( 19,298 ) ( 7,125 ) — ( 26,423 )

Gains / (losses) recognized during the period ( 7,983 ) 5,040 — ( 2,943 )

Reclassification to net income (1)

2 unchanged sentences

2,142 ( 669 ) 216 1,689

Accumulated other comprehensive loss as of June 30, 2020 $ ( 102,598 ) $ ( 723 ) $ ( 953 ) $ ( 104,274 )

Accumulated other comprehensive (loss)/gain as of September 30, 2020 $ ( 93,432 ) $ 9,102 $ ( 887 ) $ ( 85,217 )

(1) Refer to Note 16 - Derivatives and Hedge Accounting and Note 19 - Employee Benefit Plans to the unaudited consolidated financial statements for reclassification to net income.

3 unchanged sentences

Assets and Liabilities Measured at Fair Value

The following table sets forth the Company’s assets and liabilities that were accounted for at fair value as of June 30, 2021 and December 31, 2020.

The following table sets forth the Company’s assets and liabilities that were accounted for at fair value as of

September 30, 2021 and December 31, 2020.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

2 unchanged sentences

Inputs Significant

As of June 30, 2021 Level 1 Level 2 Level 3 Total

As of September 30, 2021 Level 1 Level 2 Level 3 Total

Mutual funds* $ 119,756 $ — $ — $ 119,756

20 unchanged sentences

The carrying value of the Company’s outstanding revolving credit facility approximates its fair value because the Company’s interest rate yield is near current market rates for comparable debt instruments.

Convertible Senior Notes:

The Company settled the Notes during the three months ended September 30, 2021.

Refer to Note 17 - Borrowings to the unaudited consolidated financial statements for further details.

The total estimated fair value of the Notes as of December 31, 2020 was $ 152,384 .

The fair value was determined based on market yields for similar convertible notes as of December 31, 2020.

The Company considers the fair value of the Notes to be a Level 2 measurement due to the limited inputs available for its fair valuation.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

Convertible Senior Notes:

The total estimated fair value of the convertible senior notes as of June 30, 2021 and December 31, 2020 was $ 156,121 and $ 152,384 , respectively.

The fair value was determined based on the market yields for similar convertible notes as of the June 30, 2021 and December 31, 2020, respectively.

The Company considers the fair value of the convertible senior notes to be a Level 2 measurement due to the limited inputs available for its fair valuation.

Derivatives and Hedge Accounting

1 unchanged sentence

The Company’s derivative financial instruments are largely forward foreign exchange contracts that are designated as effective hedges and that qualify as cash flow hedges under ASC 815.

The Company had outstanding cash flow hedges totaling $ 520,560 as of June 30, 2021 and $ 451,935 as of December 31, 2020.

The Company had outstanding cash flow hedges totaling $ 515,850 as of September 30, 2021 and $ 451,935 as of December 31, 2020.

Changes in the fair value of these cash flow hedges are recorded as a component of accumulated other comprehensive income/(loss), net of tax, until the hedged transactions occurs.

The resultant foreign exchange gain/(loss) upon settlement of these cash flow hedges is recorded along with the underlying hedged item in the same line of unaudited consolidated statements of income as either a part of “Cost of revenues,” “General and administrative expenses,” “Selling and marketing expenses”, “Depreciation and amortization expense,” as applicable.

The resultant foreign exchange gain/(loss) upon settlement of these cash flow hedges is recorded along with the underlying hedged item in the same line of unaudited consolidated statements of income as a part of “Cost of revenues,” “General and administrative expenses,” “Selling and marketing expenses,” “Depreciation and amortization expense,” as applicable.

The Company evaluates hedge effectiveness at the time a contract is entered into as well as on an ongoing basis.

For hedging positions that are discontinued because the forecasted transaction is not expected to occur by the end of the originally specified period, any related amounts recorded in equity are reclassified to earnings.

The Company estimates that approximately $ 6,891 of derivative gains, net, excluding tax effects, included in AOCL, representing changes in the value of cash flow hedges, could be reclassified into earnings within the next twelve months based on exchange rates prevailing as of June 30, 2021.

At June 30, 2021, the maximum outstanding term of the cash flow hedges was 45 months.

The Company estimates that approximately $ 5,695 of derivative gains, net, excluding tax effects, included in AOCL, representing changes in the value of cash flow hedges, could be reclassified into earnings within the next twelve months based on exchange rates prevailing as of September 30, 2021.

At September 30, 2021, the maximum outstanding term of the cash flow hedges was 45 months.

The Company also enters into foreign currency forward contracts to economically hedge its intercompany balances and other monetary assets and liabilities denominated in currencies other than functional currencies, against the risk of foreign currency fluctuations associated with remeasurement of such assets and liabilities to functional currency.

4 unchanged sentences

The Company also has exposure to Colombian pesos (COP), Czech koruna, the Euro (EUR), South African ZAR, the Australian dollar (AUD) and other local currencies in which it operates.

Outstanding foreign currency forward contracts amounted to USD 124,195 , GBP 6,928 , EUR 1,425 and COP 8,172,868 as of June 30, 2021 and USD 143,394 , GBP 6,753 , EUR 2,447 and COP 8,287,950 as of December 31, 2020.

Outstanding foreign currency forward contracts amounted to USD 140,119 , GBP 5,911 , EUR 1,005 and COP 4,675,248 as of September 30, 2021 and USD 143,394 , GBP 6,753 , EUR 2,447 and COP 8,287,950 as of December 31, 2020.

The Company uses forward contracts designated as net investment hedges to hedge the foreign currency risks related to our investments in foreign subsidiaries.

7 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

Derivatives designated as hedging instruments:

Foreign currency exchange contracts June 30, 2021 December 31, 2020

Foreign currency exchange contracts September 30, 2021 December 31, 2020

Other current assets $ 7,247 $ 9,740

3 unchanged sentences

Derivatives not designated as hedging instruments:

Foreign currency exchange contracts June 30, 2021 December 31, 2020

Foreign currency exchange contracts September 30, 2021 December 31, 2020

Other current assets $ 124 $ 15

Accrued expenses and other current liabilities $ 267 $ 259

The following tables set forth the effect of foreign currency exchange contracts on the unaudited consolidated statements of income and accumulated other comprehensive loss for the three and six months ended June 30, 2021 and 2020:

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

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

Forward Exchange Contracts:

6 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

Location and amount of gain/(loss) recognized in unaudited consolidated statements of income for cash flow hedging relationships and derivatives not designated as hedging instruments

Three months ended June 30,

Three months ended September 30,

As per unaudited consolidated

11 unchanged sentences

Total before tax 2,150 ( 435 )

Income tax benefit/(expense) relating to above ( 427 ) 124

Income tax (expense)/benefit relating to above ( 370 ) 47

Net of tax $ 1,780 $ ( 388 )

5 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

Location and amount of gain/(loss) recognized in unaudited consolidated statements of income for cash flow hedging relationships and derivatives not designated as hedging instruments

Six months ended June 30,

Nine months ended September 30,

As per unaudited consolidated

18 unchanged sentences

Effect of net investment hedges on accumulated other comprehensive loss:

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

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

Amount of loss recognized in AOCL Amount of loss recognized in AOCL

3 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

The following tables summarizes the Company’s debt position as of June 30, 2021 and December 31, 2020.

As of June 30, 2021

Revolving Credit Facility Notes Total

Current portion of long-term borrowings $ 15,000 $ — $ 15,000

Long-term borrowings $ — $ 150,000 $ 150,000

Unamortized debt discount — ( 9,871 ) ( 9,871 )

Unamortized debt issuance costs* — ( 697 ) ( 697 )

Long-term borrowings

$ — $ 139,432 $ 139,432

Total borrowings $ 15,000 $ 139,432 $ 154,432

The following tables summarizes the Company’s debt position as of September 30, 2021 and December 31, 2020.

As of September 30, 2021

As of December 31, 2020

Revolving Credit Facility Notes Total

Revolving Credit Facility Total Revolving Credit Facility Notes Total

Current portion of long-term borrowings $ 15,000 $ 15,000 $ 25,000 $ — $ 25,000

5 unchanged sentences

Total borrowings $ 185,000 $ 185,000 $ 89,000 $ 137,961 $ 226,961

*Unamortized debt issuance costs for the Company’s revolving Credit Facility of $ 361 and $ 490 as of June 30, 2021 and December 31, 2020, respectively, is presented under “Other current assets” and “Other assets” in the consolidated balance sheets.

*Unamortized debt issuance costs for the Company’s revolving Credit Facility of $ 297 and $ 490 as of September 30, 2021 and December 31, 2020, respectively, are presented under “Other current assets” and “Other assets,” as applicable in the consolidated balance sheets.

Credit Agreement

1 unchanged sentence

as Administrative Agent (the “Credit Facility”) carried an effective interest rate as shown below.

Three months ended

June 30, Six months ended

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

2021 2020 2021 2020

Effective Interest Rate 2.3 % 1.9 % 2.0 % 2.4 %

As of June 30, 2021 and December 31, 2020, the Company was in compliance with all financial and non-financial covenants listed under the Credit Agreement.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

As of September 30, 2021 and December 31, 2020, the Company was in compliance with all financial and non-financial covenants listed under the Credit Agreement.

Convertible Senior Notes

On October 1, 2018, the Company entered into an investment agreement (the “Investment Agreement”) with Orogen Echo LLC (the “Purchaser”), an affiliate of The Orogen Group LLC, relating to the issuance to the Purchaser of $ 150,000 in an aggregate principal amount of 3.5 % per annum Convertible Senior Notes due October 1, 2024 (the “Notes”).

The transactions contemplated by the Investment Agreement, including the issuance of the Notes, closed on October 4, 2018.

The Notes bear interest at a rate of 3.5 % per annum, payable semi-annually in arrears in cash on April 1 and October 1 of each year.

Until October 4, 2020, under the Investment Agreement, the Purchaser was restricted from transferring the Notes or any shares of common stock issuable upon conversion of the Notes, or entering into any transaction that transfers such interests to a third party.

The Notes carried interest at a rate of 3.5 % per annum, payable semi-annually in arrears in cash on April 1 and October 1 of each year.

The Notes were convertible at an initial conversion rate of 13.3333 shares of the common stock per one thousand dollar principal amount of the Notes (which represented an initial conversion price of approximately $ 75 per share).

The Company had the option to redeem the principal amount of the Notes, at its option, in whole but not in part, at a purchase price equal to the principal amount plus accrued and unpaid interest on or after October 1, 2021, if the closing sale price of the common stock exceeded 150 % of the then-current conversion price for 20 or more trading days in the 30 consecutive trading day period preceding the Company’s exercise of this redemption right (including the trading day immediately prior to the date of the notice of redemption).

The Company had the option to elect to settle conversions of the Notes by paying or delivering, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock.

The Notes carried an effective interest rate as shown below:

Three months ended

June 30, Six months ended

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

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

2021 2020 2021 2020

Effective Interest Rate 3.6 % 3.6 % 3.6 % 3.6 %

During the three and six months ended June 30, 2021 and 2020, the Company recognized interest expense and amortization of debt discount, on the Notes as below:

Three months ended

June 30, Six months ended

On August 27, 2021, the Company entered into a Payoff and Termination Agreement (the “Payoff and Termination Agreement”) with the Purchaser, pursuant to which the Company prepaid and settled its outstanding obligations under the Notes for an aggregate consideration of $ 236,742 , excluding accrued and unpaid interest under the Notes calculated through, and including, August 26, 2021, in the form of a combination of cash and shares of the Company’s common stock.

As a result, the Company made a cash payment of $ 200,000 to the Purchaser and satisfied the remainder of the obligation under the Notes by issuing to the Purchaser 310,394 shares of the Company’s common stock calculated at $ 118.37 per share based on a 20 -day volume weighted average price ending on, and including, August 26, 2021.

The Company satisfied the cash payment obligation under the Payoff and Termination Agreement by drawing $ 200,000 from its existing revolving Credit Facility, and the Company’s common stock was issued from its existing treasury shares.

Refer to Note 18 - Capital Structure to the unaudited consolidated financial statements for further details.

The aggregate consideration of $ 236,742 was allocated between the debt and equity components in an amount of $ 152,742 and $ 84,000 , respectively.

The consideration was first allocated to the fair value of debt component and the remaining was allocated to the equity component.

The fair value of the debt component was calculated using a discounted cash flow technique, which considered debt issuances with similar features of the Company’s debt, without the conversion feature.

The resulting effective interest rate for the Notes was 2.9 % per annum at the time of settlement.

The portion allocated to the equity component was recorded as additional paid-in capital.

Immediately prior to the settlement of the Notes, the carrying amount of the debt component of the Notes, net of unamortized debt discount and issuance costs, was $ 139,897 .

During the three months ended September 30, 2021, the Company recognized a loss on settlement of the Notes of $ 12,845 , representing the difference between the fair value of the consideration allocated to the debt component and the carrying value of the debt component immediately before settlement, and is presented as “Loss on settlement of convertible notes,” in the Company’s unaudited consolidated statements of income.

During the three and nine months ended September 30, 2021 and 2020, the Company recognized interest expense and amortization of debt discount, on the Notes as below:

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

2021 2020 2021 2020

1 unchanged sentence

Amortization of debt discount on the Notes $ 431 $ 654 $ 1,795 $ 1,943

Payments / maturities for all of the Company's borrowings as of June 30, 2021 were as follows:

Notes Revolving Credit Facility Total

2021 (July - December) $ — $ 15,000 $ 15,000

2024 150,000 — 150,000

Expected payments for all of the Company's borrowings as of September 30, 2021 were as follows:

Revolving Credit Facility

2021 (October - December) $ 15,000

Total $ 185,000

1 unchanged sentence

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

As of June 30, 2021 and December 31, 2020, the Company had outstanding letters of credit of $ 461 , each, that were not recognized in the consolidated balance sheets.

Capital Structure

The Company has one class of common stock outstanding.

The Company purchased shares of common stock from employees in connection with withholding tax payments related to the vesting of restricted stock units and performance-based restricted stock units, as below:

As of September 30, 2021 and December 31, 2020, the Company had outstanding letters of credit of $ 461 , each, that were not recognized in the consolidated balance sheets.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

Capital Structure

The Company has one class of common stock outstanding.

Shares repurchased Total consideration Weighted average purchase price per share (1)

Three months ended June 30, 2021 — $ — $ —

Three months ended June 30, 2020 — $ — $ —

Six months ended June 30, 2021 25,450 $ 2,015 $ 79.18

Six months ended June 30, 2020 26,601 $ 2,012 $ 75.63

Three months ended September 30, 2021 — $ — $ —

Three months ended September 30, 2020 — $ — $ —

Nine months ended September 30, 2021 25,450 $ 2,015 $ 79.18

Nine months ended September 30, 2020 26,601 $ 2,012 $ 75.63

On December 16, 2019, the Company’s Board of Directors authorized a $ 200,000 common stock repurchase program beginning January 1, 2020 through December 31, 2022 (the "2019 Repurchase Program").

3 unchanged sentences

Shares repurchased Total consideration Weighted average purchase price per share (1)

Three months ended June 30, 2021 287,044 $ 28,409 $ 98.97

Three months ended June 30, 2020 — $ — $ —

Six months ended June 30, 2021 600,076 $ 55,409 $ 92.34

Six months ended June 30, 2020 175,765 $ 11,983 $ 68.18

Three months ended September 30, 2021 244,580 $ 28,196 $ 115.28

Three months ended September 30, 2020 389,575 $ 24,906 $ 63.93

Nine months ended September 30, 2021 844,656 $ 83,605 $ 98.98

Nine months ended September 30, 2020 565,340 $ 36,889 $ 65.25

(1) The weighted average purchase price per share was the closing price of the Company's share of common stock on the Nasdaq Global Select Market on the trading day prior to the vesting date of the shares of restricted stock.

1 unchanged sentence

The 2019 Repurchase Program may be suspended or discontinued at any time.

In connection with the settlement of the Notes, the Company issued to the Purchaser 310,394 shares of the Company's common stock.

This common stock was issued from the Company’s existing treasury shares.

The excess of issuance price of the Company’s treasury stock over its weighted average cost was recognized in additional paid-in-capital.

Employee Benefit Plans

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

The Company’s Gratuity Plan in India (the "India Plan") provides for a lump sum payment to vested employees on retirement or upon termination of employment in an amount based on the respective employee’s salary and years of employment with the Company.

3 unchanged sentences

Actuarial gains or losses or prior service costs, if any, resulting from amendments to the plans are recognized and amortized over the remaining period of service of the employees.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

Components of net periodic benefit costs, were as follows:

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

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

2021 2020 2021 2020

17 unchanged sentences

Effect of exchange rate changes ( 204 )

Plan assets at June 30, 2021 $ 10,941

Plan assets at September 30, 2021 $ 14,123

The Company maintains several 401(k) plans (the “401(k) Plans”) under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), covering all eligible employees, as defined in the Code as a defined contribution plan.

1 unchanged sentence

The Company's accrual for contributions to the 401(k) Plans were as follows:

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

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

2021 2020 2021 2020

Contribution to the 401(k) Plans $ 789 $ 2,661 $ 2,841 $ 2,916

The Company's contribution for various defined benefit plans on behalf of employees in India, the Philippines, the Czech Republic, South Africa, Colombia, Australia and Singapore were as follows:

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

2021 2020 2021 2020

Contribution to the defined benefit plans $ 3,418 $ 2,646 $ 6,712 $ 5,624

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

September 30, 2021

(In thousands, except share and per share amounts)

The Company's contribution for various defined benefit plans on behalf of employees in India, the Philippines, the Czech Republic, South Africa, Colombia, Australia and Singapore were as follows:

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

2021 2020 2021 2020

Contribution to the defined benefit plans $ 3,580 $ 2,758 $ 10,617 $ 8,382

The Company conducts its operations using facilities leased under operating lease agreements that expire at various dates.

4 unchanged sentences

As part of the Company’s effort to moderate the impact of COVID-19, the Company continued to evaluate its office facilities to determine where it can exit, consolidate, or otherwise optimize its use of office space.

During the year ended December 31, 2020, the Company changed the lease term for certain of its leases and recognized the resultant amount of the remeasurement of the lease liability as an adjustment to the ROU assets.

During the nine months ended September 30, 2021 and year ended December 31, 2020, the Company changed the lease term for certain of its leases and recognized the resultant amount of the remeasurement of the lease liability as an adjustment to the ROU assets.

The impact of COVID-19 on the economic environment is uncertain and has caused variability in the determination of the incremental borrowing rate and extension option, which have an impact on measurement of lease liabilities and ROU assets.

Supplemental balance sheet information

June 30, 2021 December 31, 2020

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

September 30, 2021 December 31, 2020

Operating Lease

12 unchanged sentences

The components of lease cost, which are included in the Company's unaudited consolidated statements of income, are as follows:

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

Lease cost Three months ended June 30, Six months ended June 30,

Lease cost Three months ended September 30, Nine months ended September 30,

Finance lease:

7 unchanged sentences

Supplemental cash flow and other information related to leases are as follows:

Six months ended June 30,

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

Nine months ended September 30,

Cash payments for amounts included in the measurement of lease liabilities :

5 unchanged sentences

Weighted-average remaining lease term (in years)

Finance lease 1.8 2.1

Operating lease 5.8 6.8

Finance lease 1.9 years 1.9 years

Operating lease 5.9 years 6.4 years

Weighted-average discount rate

2 unchanged sentences

The Company determines the incremental borrowing rate by adjusting the benchmark reference rates, with appropriate financing spreads applicable to the respective geographies where the leases were entered and lease specific adjustments for the effects of collateral.

During the six months ended June 30, 2021 and year ended December 31, 2020, the Company modified certain of its operating leases, resulting in a reduction of its lease liabilities by $ 547 and $ 3,143 respectively, with a corresponding reduction in ROU assets.

As of June 30, 2021, the Company did not have any significant leases that have not yet commenced but that create significant rights and obligations for the Company.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

Maturities of lease liabilities as of June 30, 2021 were as follows:

During the nine months ended September 30, 2021 and year ended December 31, 2020, the Company modified certain of its operating leases, resulting in a reduction of its lease liabilities by $ 1,022 and $ 3,143 respectively, with a corresponding reduction in ROU assets.

As of September 30, 2021, the Company did not have any significant leases that have not yet commenced but that create significant rights and obligations for the Company.

Maturities of lease liabilities as of September 30, 2021 were as follows:

Operating Leases Finance Leases

2021 (July 1 - December 31) $ 12,366 $ 146

2021 (October 1 - December 31) $ 6,032 $ 71

2022 24,371 190

7 unchanged sentences

Maturities of lease liabilities as of December 31, 2020 were as follows:

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

Operating Leases Finance Leases

11 unchanged sentences

The impact of COVID-19 on the economic environment is uncertain and may change the annual effective tax rate, which could impact tax expense.

The Company's effective tax rate decreased from 32.4 % during the three months ended June 30, 2020 to 24.0 % during the three months ended June 30, 2021.

The Company recorded income tax expense of $ 8,865 and $ 4,072 for the three months ended June 30, 2021 and 2020, respectively.

The increase in income tax expense was primarily as a result of higher profit during the three months ended June 30, 2021, compared to the three months ended June 30, 2020, partially offset by recording of a one-time tax expense of $ 1,320 due to election of a new tax regime, during the three months ended June 30, 2020, for two of the Company's Indian subsidiaries that provides for a lower tax rate on earnings in exchange for foregoing certain tax credits, including minimum alternative tax credits.

The Company's effective tax rate decreased from 24.3 % during the six months ended June 30, 2020 to 22.9 % during the six months ended June 30, 2021.

The Company recorded income tax expense of $ 17,823 and $ 9,927 for the six months ended June 30, 2021 and 2020, respectively.

The increase in the income tax expense was primarily as a result of higher profit during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, which was partially offset by (i) recording of a one-time tax expense of $ 1,320 due to election of a new tax regime, during the six months ended June 30, 2020, for two of the Company's Indian subsidiaries that provides for a lower tax rate on earnings in exchange for foregoing certain tax credits, including minimum alternative tax credits and (ii) recording of higher excess tax benefits related to stock awards of $ 1,822 pursuant to ASU No.

2016-09 during the six months ended June 30, 2020, compared to $ 1,028 during the six months ended June 30, 2021.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

During the three months ended June 30, 2021, the Company repatriated to the United States $ 49,000 (net of $ 2,586 withholding taxes) from India, $ 42,500 (net of $ 7,494 withholding taxes) from the Philippines and $ 17,000 (net of $ 908 withholding taxes) from India in July 2021.

As of June 30, 2021, the Company accrued withholding taxes of $ 10,988 associated with these distributions and increased the Company’s deferred tax assets.

The Company's effective tax rate decreased from 24.3 % during the three months ended September 30, 2020 to 13.7 % during the three months ended September 30, 2021.

The Company recorded income tax expense of $ 4,196 and $ 8,490 for the three months ended September 30, 2021 and 2020, respectively.

The decrease in income tax expense was primarily a result of (i) the recording of a one-time deferred tax benefit of $ 2,400 on settlement of the Notes during the three months ended September 30, 2021, (ii) the recording of excess tax benefits related to stock awards of $ 528 pursuant to ASU No.

2016-09 during the three months ended September 30, 2021, and (iii) lower profit during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

The Company's effective tax rate decreased from 24.3 % during the nine months ended September 30, 2020 to 20.3 % during the nine months ended September 30, 2021.

The Company recorded income tax expense of $ 22,019 and $ 18,416 for the nine months ended September 30, 2021 and 2020, respectively.

The increase in the income tax expense was primarily a result of higher profit during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, and the recording of higher excess tax benefits related to stock awards of $ 1,874 pursuant to ASU No.

2016-09 during the nine months ended September 30, 2020, compared to $ 1,556 during the nine months ended September 30, 2021, partially offset by (i) the recording of a one-time deferred tax benefit of $ 2,400 on settlement of the Notes during the nine months ended September 30, 2021, and (ii) the recording of a one-time tax expense of $ 1,320 due to election of a new tax regime, during the nine months ended September 30, 2020, for two of the Company's Indian subsidiaries that 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 September 30, 2021, the Company repatriated to the United States $ 17,000 (net of $ 908 withholding taxes) from India.

During the nine months ended September 30, 2021, the Company repatriated to the United States $ 66,000 (net of $ 3,494 withholding taxes) from India and $ 42,500 (net of $ 7,494 withholding taxes) from the Philippines.

As of September 30, 2021, the Company accrued withholding taxes of $ 10,988 associated with these distributions and increased the Company’s deferred tax assets.

These distributions do not constitute a change in the Company’s permanent reinvestment assertion.

1 unchanged sentence

Income tax (deferred) recognized in “Other comprehensive income / (loss)” were as follows:

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

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

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

2021 2020 2021 2020

Deferred taxes benefit / (expense) recognized on:

Unrealized gain / (loss) on cash flow hedges $ 177 $ ( 2,578 ) $ ( 221 ) $ 2,128

Unrealized loss on cash flow hedges $ ( 980 ) $ ( 2,728 ) $ ( 1,201 ) $ ( 600 )

Reclassification adjustment for cash flow hedges 370 ( 47 ) 1,186 ( 69 )

1 unchanged sentence

Effect of tax rate changes on retirement benefits — — — 312

Foreign currency translation loss 945 57 1,229 4,291

Total Income tax benefit recognized in other comprehensive income / (loss) $ 1,478 $ ( 2,388 ) $ 1,702 $ 6,645

Foreign currency translation gain/(loss) 630 ( 2,149 ) 1,859 2,142

Total income tax benefit / (expense) recognized in other comprehensive income / (loss) $ ( 12 ) $ ( 4,956 ) $ 1,690 $ 1,689

Stock-Based Compensation

The following costs related to the Company’s stock-based compensation plan are included in the unaudited consolidated statements of income:

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

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

2021 2020 2021 2020

3 unchanged sentences

Total $ 10,894 $ 8,346 $ 28,796 $ 20,850

As of June 30, 2021, the Company had 1,892,706 shares available for grant under the 2018 Omnibus Incentive Plan.

As of September 30, 2021, the Company had 1,732,630 shares available for grant under the 2018 Omnibus Incentive Plan.

Stock Options

Stock option activity under the Company’s stock-based compensation plans is shown below:

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

Options Weighted-Average

5 unchanged sentences

Forfeited — — — —

Outstanding at June 30, 2021 24,249 $ 25.63 $ 1,955 1.6

Vested and exercisable at June 30, 2021 24,249 $ 25.63 $ 1,955 1.6

Outstanding at September 30, 2021 3,093 $ 27.62 $ 295 2.3

Vested and exercisable at September 30, 2021 3,093 $ 27.62 $ 295 2.3

Restricted Stock Units

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

Restricted stock unit activity under the Company’s stock-based compensation plans is shown below:

5 unchanged sentences

Forfeited ( 63,104 ) 73.21

Outstanding at June 30, 2021* 900,663 $ 75.83

* As of June 30, 2021 and December 31, 2020 restricted stock units vested for which the underlying common stock is yet to be issued was 200,542 and 181,638 respectively.

As of June 30, 2021, unrecognized compensation cost of $ 57,540 is expected to be expensed over a weighted average period of 2.8 years.

Outstanding at September 30, 2021* 1,053,523 $ 83.63

* As of September 30, 2021 and December 31, 2020 restricted stock units vested for which the underlying common stock is yet to be issued was 200,542 and 181,638 respectively.

As of September 30, 2021, unrecognized compensation cost of $ 70,370 is expected to be expensed over a weighted average period of 2.7 years.

Performance Based Stock Awards

Under the 2018 Plan, the Company grants performance-based restricted stock units (“PRSUs”) to executive officers and other specified employees.

During the six months ended June 30, 2021, the Company granted PRSUs that cliff vest at the end of a three year period based on a market condition that is contingent on the Company's meeting the total shareholder return relative to a group of peer companies specified under the program measured over a three-year performance period.

During the nine months ended September 30, 2021, the Company granted PRSUs that cliff vest at the end of a three year period based on a market condition that is contingent on the Company's meeting the total shareholder return relative to a group of peer companies specified under the program measured over a three-year performance period.

The award recipient may earn up to two hundred percent ( 200 %) of the PRSUs granted based on the actual achievement of targets.

7 unchanged sentences

Forfeited ( 157 ) 78.34 ( 157 ) 102.10

Outstanding at June 30, 2021 105,735 $ 72.31 226,891 $ 109.57

As of June 30, 2021, unrecognized compensation cost of $ 18,481 is expected to be expensed over a weighted average period of 2.1 years.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

Outstanding at September 30, 2021 105,734 $ 72.32 226,892 $ 109.57

As of September 30, 2021, unrecognized compensation cost of $ 15,264 is expected to be expensed over a weighted average period of 1.9 years.

The impact of COVID-19 on the economic environment is uncertain and has caused variability in the estimation of number of performance based restricted stock units that will eventually vest and the related compensation cost to be recognized in the unaudited consolidated statements of income.

3 unchanged sentences

Pandit, Chairman and CEO of The Orogen Group LLC (an affiliate of the Purchaser), was appointed to Company’s Board of Directors.

The Company had outstanding Notes with a principal amount of $ 150,000 each as of June 30, 2021 and December 31, 2020 and interest accrued of $ 1,312 and $ 1,313 as of June 30, 2021 and December 31, 2020, respectively, related to the Investment Agreement.

The Company recognized interest expense on the Notes related to the Investment Agreements as below.

Refer to Note 17 – Borrowings to the unaudited consolidated financial statements for details.

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

The Company settled the Notes on August 27, 2021.

Refer to Note 17 - Borrowings to the unaudited consolidated financial statements for further details.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

The principal amount outstanding for the Notes was nil as of September 30, 2021 and $ 150,000 as of December 31, 2020, and interest accrued of nil and $ 1,313 as of September 30, 2021 and December 31, 2020, respectively, related to the Investment Agreement.

The following transactions with the Purchaser were recognized by the Company in connection with the Notes:

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

2021 2020 2021 2020

Interest expense on Notes $ 1,312 $ 1,312 $ 2,625 $ 2,625

Repayment of the Notes in cash $ 200,000 $ — $ 200,000 $ —

Issuance of shares of the Company's common stock $ 36,742 $ — $ 36,742 $ —

Interest expense on the Notes $ 817 $ 1,313 $ 3,442 $ 3,938

Commitments and Contingencies

Capital Commitments

At June 30, 2021, the Company had committed to spend approximately $ 7,100 under agreements to purchase property and equipment.

At September 30, 2021, the Company had committed to spend approximately $ 5,200 under agreements to purchase property and equipment.

This amount is net of capital advances paid which are recognized in the unaudited consolidated balance sheets as “Capital work in progress” under “Property and equipment, net”.

13 unchanged sentences

The Company is currently involved in transfer pricing disputes with Indian tax authorities regarding transactions with some of its related entities.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

June 30, 2021

(In thousands, except share and per share amounts)

Further, the Company and a U.S.

subsidiary are engaged in tax litigation with Indian tax authorities regarding a permanent establishment matter.

For the United States, the Philippines and India, tax year 2016 and subsequent tax years remain open for examination by the tax authorities as of June 30, 2021.

The aggregate amount demanded by Indian tax authorities (net of advance payments, if any) from the Company related to its transfer pricing and other corporate tax issues for tax years 2003 to 2019 and its permanent establishment issues for tax years 2003 to 2006 as of June 30, 2021 and December 31, 2020 is $ 26,180 and $ 16,748 , respectively.

For the United States, the Philippines and India, tax year 2016 and subsequent tax years remain open for examination by the tax authorities as of September 30, 2021.

The aggregate amount demanded by Indian tax authorities (net of advance payments, if any) from the Company related to its transfer pricing and other corporate tax issues for tax years 2003 to 2019 and its permanent establishment issues for tax years 2003 to 2006 as of September 30, 2021 and December 31, 2020 is $ 34,399 and $ 16,748 , respectively.

The Company has made payments and/or provided bank guarantees against these demands in the amounts of $ 8,014 and $ 8,120 , respectively.

Amounts paid as deposits in respect of such assessments aggregating to $ 6,221 and $ 6,307 as of June 30, 2021 and December 31, 2020, respectively, are included in “Other assets” and amounts deposited for bank guarantees aggregating to $ 1,782 and $ 1,813 as of June 30, 2021 and December 31, 2020, respectively, are included in “Restricted cash” in the non-current assets section of the Company’s unaudited consolidated balance sheets.

Amounts paid as deposits in respect of such assessments aggregating to $ 6,229 and $ 6,307 as of September 30, 2021 and December 31, 2020, respectively, are included in “Other assets” and amounts deposited for bank guarantees aggregating to $ 1,785 and $ 1,813

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

as of September 30, 2021 and December 31, 2020, respectively, are included in “Restricted cash” in the non-current assets section of the Company’s unaudited and audited consolidated balance sheets, respectively.

Based on the facts underlying the Company’s position and its experience with these types of assessments, the Company believes that its position will more likely than not be sustained upon final examination by the tax authorities based on its technical merits as of the reporting date and accordingly has not accrued any amount with respect to these matters in its unaudited consolidated financial statements.

21 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 1. Financial Statements