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Item 2. Management’s Discussion and Analysis

2021-11-02 compared with 2021-07-29 · 177 added, 177 removed, 300 unchanged (54% of the section changed)

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Some of the statements in the following discussion are forward looking statements.

Dollar amounts within Item 2 are presented as actual, rounded, dollar amounts.

We have described in this Quarterly Report on Form 10-Q, the impact of the global Coronavirus Disease 2019 pandemic (“COVID-19”) on our financial results for the three months ended June 30, 2021.

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 three months ended September 30, 2021.

See "Cautionary Note Regarding Forward-Looking Statements" below, Item 1A -“Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for further information regarding risks and uncertainties relating to COVID-19.

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Executive Overview

We are a leading operations management and analytics company that helps our clients build and grow sustainable businesses.

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

We serve customers in multiple industries, including insurance, healthcare, banking and financial services, utilities, travel, transportation and logistics, media and retail, among others.

We are a leading global analytics and digital solutions company that helps our clients build and grow sustainable businesses.

By bringing together our deep domain expertise with robust data, powerful analytics, cloud, and AI, we create agile, scalable solutions and execute complex operations for the world’s leading corporations in industries including insurance, healthcare, banking and financial services, media, and retail, among others.

We operate in the Business Process Management (“BPM”) industry and we provide operations management and analytics services.

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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 2020, COVID-19 materially impacted our business, however during the first half of 2021, we saw moderate improvement in key indicators, despite being prevented from conducting business activities as usual from geographies affected by new variants of the COVID-19 virus.

During 2020, COVID-19 materially impacted our business, however during the first nine months of 2021, we saw improvement in key indicators, despite being prevented from conducting business activities as usual from geographies affected by new variants of the COVID-19 virus.

Over the course of 2020, and continuing into 2021, our customers, contractors, suppliers, and other partners adapted in order to conduct business activities in a COVID-19 environment.

economy continued on a path to recovery in the first half of 2021 with millions of Americans receiving the COVID-19 vaccine, and states and municipalities increasingly reopening.

economy continued on a path to recovery in the first nine months of 2021 with millions of Americans receiving the COVID-19 vaccine, and states and municipalities increasingly reopening.

In addition, the U.S.

federal government continued to enact policies to provide fiscal stimulus to the economy and relief to those affected by the pandemic.

As the global

economy begins to emerge from the impact of COVID-19 in 2021, our clients are focused on receiving personalized customer experiences, optimizing costs and supporting resilient operating models.

We remain committed to helping our clients adapt and thrive through the ongoing uncertainties caused by COVID-19 and, going forward, to the shifting business environment.

Notwithstanding the moderate improvement in conditions during the first half of 2021, the COVID-19 pandemic continues, with temporary shutdowns at our operations centers requested or mandated by governmental authorities, and due to the associated uncertainties, we continue to evaluate the nature and scope of the impact to our business and may take further strategic actions in order to manage our business operations, costs and liquidity in response to the ongoing impacts and changing conditions and markets resulting from COVID-19.

As the global economy begins to emerge from the impact of COVID-19 in 2021, our clients are focused on receiving personalized customer experiences, optimizing costs and supporting resilient operating models.

We remain committed to helping our clients adapt and

thrive through the ongoing uncertainties caused by COVID-19 and, going forward, to the shifting business environment.

Notwithstanding the recent improvement in conditions during the first nine months of 2021, the COVID-19 pandemic continues, with temporary shutdowns at our operations centers requested or mandated by governmental authorities, and due to the associated uncertainties, we continue to evaluate the nature and scope of the impact to our business and may take further strategic actions in order to manage our business operations, costs and liquidity in response to the ongoing impacts and changing conditions and markets resulting from COVID-19.

We have a business continuity plan in place and have, since early in the pandemic, adapted delivery to a work from home model, while actively working to understand our clients’ changing requirements, continuing to ensure data security, prioritizing critical processes, adjusting service levels and managing discretionary costs (such as travel costs) and fixed costs (such as non-critical personnel costs).

We have made ongoing efforts to reduce our reliance on travel by incorporating into our business model the ability to conduct business using virtual conferencing and collaboration tools.

Our work from home delivery capability steadily improved throughout 2020 and continued to improve during the first half of 2021.

We have made ongoing efforts to reduce our reliance on travel by incorporating into our business model the ability to conduct business using virtual conferencing and collaboration tools to enable our employees to stay connected with each other, and our sales, marketing and support teams to continue to engage with and remain responsive to our clients.

Our work from home delivery capability steadily improved throughout 2020 and continued to improve during the first nine months of 2021.

We estimate that we are able to deliver a significant portion of our clients’ current requirements in a work from home model given the current lockdown restrictions in the locations in which we operate and certain clients not authorizing us to perform the remaining process work remotely due to its sensitive nature.

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During the same period, the Philippines also began experiencing a spike in the number of COVID patients.

Our Indian and Philippines operations were not materially affected as we initiated appropriate business continuity procedures, so as to minimize the effects of these new developments, but it is possible that our business and results of operations could nevertheless be materially affected if any further developments, including new variants of the COVID-19 virus, emerge .

In July 2021, we saw a significant increase in number of COVID-19 cases across the U.S.

brought on by the new variant of the COVID-19 virus.

Our Indian, Philippines and U.S.

operations were not materially affected as we initiated appropriate business continuity procedures, so as to minimize the effects of these new developments, but it is possible that our business and results of operations could nevertheless be materially affected if any further developments, including new variants of the COVID-19 virus, emerge .

We also took actions in response to the pandemic that focused on helping our employees.

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Other 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 leave for employees affected by COVID-19, enhanced awareness towards information security, and updated cyber security and data privacy policies, among others.

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

We continue to have broad travel restrictions, and while we expect some level of travel to return, we do not expect it to be at pre-pandemic levels.

We are largely operating in virtual-only events for the safety of our employees and our customers with some expectations of return to office for selected employees, as and when necessary.

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.

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We believe that these short-to-medium-term costs may benefit us in the long-term, as these steps have broadened our “remote working” capabilities, which we expect to become a permanent feature in our future delivery model, as well as our business continuity plans.

In response to certain anticipated impacts from COVID-19, we implemented a series of temporary cost reduction measures in 2020 which continued in the first half of 2021 to further preserve financial flexibility.

In response to certain anticipated impacts from COVID-19, we implemented a series of temporary cost reduction measures in 2020 which continued in the first nine months of 2021 to further preserve financial flexibility.

These actions included the postponement of certain discretionary spending including travel and marketing expenses, reevaluating the pace of our capital expenditures, rationalizing certain of our real estate and facilities, deferring non-critical hiring among others.

Certain impacts of COVID-19 on our business, results of operations, financial position and cash flow during the first half of 2021 has been described above and below, however the full extent of the impact for the period beyond the first half of 2021 is currently uncertain and will depend on many factors that are not within our control, including, but not limited to:

Certain impacts of COVID-19 on our business, results of operations, financial position and cash flow during the first nine months of 2021 has been described above and below, however the full extent of the impact for the period beyond the first nine months of 2021 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;

the effectiveness of actions taken to contain or mitigate the pandemic, prevent or limit any reoccurrence and emergence of new variants of the virus;

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

development and availability of effective treatments and vaccines and the speed at which such vaccines are administered;

development and availability of effective treatments and vaccines, the speed at which such vaccines are administered, the extent of vaccine aversion, as well as the effect of emerging targeted vaccine mandates and booster vaccines, and breakthrough infections among the fully vaccinated ;

significant increases in healthcare costs in the event that a significant number of our personnel become infected with COVID-19 and require medical treatment;

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For additional information and risks related to COVID-19, see Item 1A - “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

For the three months ended June 30, 2021, we had revenues of $275.1 million compared to revenues of $222.5 million for the three months ended June 30, 2020, an increase of $52.6 million, or 23.6%.

For the six months ended June 30, 2021, we had revenues of $536.5 million compared to revenues of $468.5 million for the six months ended June 30, 2020, an increase of $68.0 million, or 14.5%.

We serve cli ents mainly in the United States and the United Kingdom, with these two regions generating 85.5% and 9.5%, respectively, of our total revenues for the three months ended June 30, 2021, and 85.0% and 8.5%, respectively, of our total revenues for the three months ended June 30, 2020.

For the six months ended June 30, 2021, these two regions generated 85.7% and 9.5%, respectively, of our total revenues and 84.7% and 9.0%, respectively, of our total revenues for the six months ended June 30, 2020.

For the three months ended June 30, 2021 and 2020, our total revenues from our top ten clients accounted for 37.8% and 38.7% of our total revenues, respectively.

For the six months ended June 30, 2021 and 2020, our total revenues from our top ten clients accounted for 38.5% and 37.1% of our total revenues, respectively.

For the three months ended September 30, 2021, we had revenues of $290.3 million compared to revenues of $241.0 million for the three months ended September 30, 2020, an increase of $49.3 million, or 20.5%.

For the nine months ended September 30, 2021, we had revenues of $826.8 million compared to revenues of $709.5 million for the nine months ended September 30, 2020, an increase of $117.3 million, or 16.5%.

We serve cli ents mainly in the United States and the United Kingdom, with these two regions generating 86.0% and 9.4%, respectively, of our total revenues for the three months ended September 30, 2021, and 84.6% and 9.5%, respectively, of our total revenues for the three months ended September 30, 2020.

For the nine months ended September 30, 2021, these two regions generated 85.8% and 9.5%, respectively, of our total revenues and 84.7% and 9.2%, respectively, of our total revenues for the nine months ended September 30, 2020.

For the three months ended September 30, 2021 and 2020, our total revenues from our top ten clients accounted for 38.7% each of our total revenues.

For the nine months ended September 30, 2021 and 2020, our total revenues from our top ten clients accounted for 38.6% and 37.3% 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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We provide our clients with a range of operations management services from our Insurance, Healthcare and Emerging Business operating segments, which typically involve the transfer by our clients to EXL of certain of their business operations, such as claims processing, clinical operations, or financial transaction processing, after which we administer and manage those operations on an ongoing basis.

As part of this transfer, we hire and train employees to work at our operations centers on the relevant business operations, implement a process migration to these operations centers and then provide services either to the client or directly to the client’s customers.

Each client contract has different terms based

on the scope, deliverables and complexity of the engagement.

As part of this transfer, we hire and train employees to

work at our operations centers on the relevant business operations, implement a process migration to these operations centers and then provide services either to the client or directly to the client’s customers.

Each client contract has different terms based on the scope, deliverables and complexity of the engagement.

We also provide consulting services related to operations management that include industry-specific digital transformational services as well as cross-industry finance and accounting services as part of the Emerging Business operating segment.

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Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies and estimates, during the three and six months ended June 30, 2021, as compared to the critical accounting policies and estimates referred in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Critical Accounting Policies and Estimates” and Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

There have been no significant changes in our critical accounting policies and estimates, during the three and nine months ended September 30, 2021, as compared to the critical accounting policies and estimates referred in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Critical Accounting Policies and Estimates” and Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Results of Operations

The following table summarizes our results of operations for the three months and six months ended June 30, 2021 and 2020:

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

The following table summarizes our results of operations for the three months and nine months ended September 30, 2021 and 2020:

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

2021 2020 2021 2020

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Other income, net 1.7 2.5 5.3 9.2

Loss on settlement of convertible notes (12.8) — (12.8) —

Income before income tax expense and earnings from equity affiliates 30.7 35.0 108.5 75.9

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(1) Exclusive of depreciation and amortization expense.

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

The following table summarizes our revenues by reportable segments for the three months ended June 30, 2021 and 2020:

Three months ended June 30, Percentage

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

The following table summarizes our revenues by reportable segments for the three months ended September 30, 2021 and 2020:

Three months ended September 30, Percentage

2021 2020 Change

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Total revenues, net $ 290.3 $ 241.0 $ 49.3 20.5 %

Revenues for the three months ended June 30, 2021 were $275.1 million, up $52.6 million, or 23.6%, compared to the three months ended June 30, 2020.

Revenue growth in Insurance of $13.4 million was primarily driven by expansion of business from our existing clients aggregating to $12.1 million and an increase in revenues of $1.3 million that was mainly attributable to the appreciation of the Australian dollar, the U.K.

pound sterling and the South African ZAR against the U.S.

dollar during the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

Insurance revenues were 34.4% and 36.5% of our total revenues in the three months ended June 30, 2021 and June 30, 2020, respectively.

Revenue growth in Healthcare of $3.3 million was primarily driven by expansion of business from our new and existing clients aggregating to $3.3 million during the three months ended June 30, 2021.

Healthcare revenues were 10.3% and 11.2% of our total revenues in the three months ended June 30, 2021 and June 30, 2020, respectively.

Revenue growth in Emerging Business of $6.2 million was primarily driven by expansion of business from our new and existing clients aggregating to $5.6 million and an increase in revenues of $0.6 million that was mainly attributable to the appreciation of the Indian rupee and the U.K.

Revenues for the three months ended September 30, 2021 were $290.3 million, up $49.3 million, or 20.5%, compared to the three months ended September 30, 2020.

Revenue growth in Insurance of $10.2 million was primarily driven by expansion of business from our existing clients aggregating to $9.9 million and an increase in revenues of $0.3 million that was mainly attributable to the appreciation of the U.K.

pound sterling against the U.S.

dollar during the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

Emerging Business revenues were 14.8% and 15.5% of our total revenues in the three months ended June 30, 2021 and June 30, 2020, respectively.

Revenue growth in Analytics of $29.7 million was attributable to the higher volumes in our annuity and project-based engagements from our new and existing clients of $28.7 million and an increase in revenues of $1.0 million mainly attributable to the appreciation of the U.K.

dollar during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Insurance revenues were 33.8% and 36.4% of our total revenues in the three months ended September 30, 2021 and September 30, 2020, respectively.

Revenue growth in Healthcare of $2.2 million was primarily driven by expansion of business from our new clients aggregating to $2.2 million during the three months ended September 30, 2021.

Healthcare revenues were 9.4% and 10.4% of our total revenues in the three months ended September 30, 2021 and September 30, 2020, respectively.

Revenue growth in Emerging Business of $6.9 million was primarily driven by expansion of business from our new and existing clients aggregating to $6.8 million and an increase in revenues of $0.1 million that was mainly attributable to the appreciation of the U.K.

pound sterling against the U.S.

dollar during the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

Analytics revenues were 40.5% and 36.7% of our total revenues in the three months ended June 30, 2021 and June 30, 2020, respectively.

dollar during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Emerging Business revenues were 15.3% and 15.6% of our total revenues in the three months ended September 30, 2021 and September 30, 2020, respectively.

Revenue growth in Analytics of $30.0 million was attributable to the higher volumes in our annuity and project-based engagements from our new and existing clients of $29.6 million and an increase in revenues of $0.4 million mainly attributable to the appreciation of the U.K.

pound sterling and the South African ZAR against the U.S.

dollar during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Analytics revenues were 41.5% and 37.5% of our total revenues in the three months ended September 30, 2021 and September 30, 2020, 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

2021 2020 2021 2020

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Total $ 177.7 $ 152.1 $ 25.6 16.8 % 38.8 % 36.9 % 1.9 %

For the three months ended June 30, 2021, cost of revenues was $170.7 million compared to $158.4 million for the three months ended June 30, 2020, an increase of $12.3 million, or 7.8%.

Our gross margin for the three months ended June 30, 2021 was 37.9% compared to 28.8% for the three months ended June 30, 2020, an increase of 9.1% primarily driven by higher revenues and operational efficiencies during the three months ended June 30, 2021, compared to the impact of COVID-19 related expenses during the three months ended June 30, 2020.

The increase in cost of revenues in Insurance of $0.3 million for the three months ended June 30, 2021 was primarily due to increases in employee-related costs, partially offset by lower COVID-19 related expenses.

Gross margin in Insurance increased by 10.0% during the three months ended June 30, 2021, compared to the three months ended June 30, 2020, primarily due to higher revenues and operational efficiencies during the three months ended June 30, 2021, compared to the impact of COVID-19 related expenses during the three months ended June 30, 2020.

The decrease in cost of revenues in Healthcare of $1.9 million for the three months ended June 30, 2021 was primarily due to decreases in employee-related costs of $1.9 million.

Gross margin in Healthcare increased by 16.0% during the three months ended June 30, 2021, compared to the three months ended June 30, 2020, primarily due to higher revenues during the three months ended June 30, 2021, compared to the impact of COVID-19 related expenses during the three months ended June 30, 2020.

The decrease in cost of revenues in Emerging Business of $0.2 million for the three months ended June 30, 2021 was primarily due to decreases in employee-related costs.

Gross margin in Emerging Business increased by 10.0% during the three months ended June 30, 2021, compared to the three months ended June 30, 2020, primarily due to higher revenues, decrease in employee-related costs and operational efficiencies during the three months ended June 30, 2021, compared to the impact of COVID-19 related expenses during the three months ended June 30, 2020.

The increase in cost of revenues in Analytics of $14.1 million for the three months ended June 30, 2021 was primarily due to increases in employee-related costs of $8.5 million, higher other operating costs of $5.2 million and higher technology costs of $0.4 million.

Gross margin in Analytics increased by 6.1% during the three months ended June 30, 2021, compared to the three months ended June 30, 2020, primarily due to higher revenues during the three months ended June 30, 2021, compared to the impact of COVID-19 related expenses during the three months ended June 30, 2020.

For the three months ended September 30, 2021, cost of revenues was $177.7 million compared to $152.1 million for the three months ended September 30, 2020, an increase of $25.6 million, or 16.8%.

Our gross margin for the three months ended September 30, 2021 was 38.8% compared to 36.9% for the three months ended September 30, 2020, an increase of 190 basis points ("bps") primarily driven by higher revenues and operational efficiencies during the three months ended September 30, 2021, compared to three months ended September 30, 2020.

The increase in cost of revenues in Insurance of $4.6 million for the three months ended September 30, 2021 was primarily due to increases in employee-related costs of $6.0 million, partially offset by lower travel costs of $1.3 million and foreign exchange gain, net of hedging $0.1 million.

Gross margin in Insurance increased by 200 bps during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily due to operational efficiencies during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

The decrease in cost of revenues in Healthcare of $0.9 million for the three months ended September 30, 2021 was primarily due to decreases in employee-related costs of $0.5 million and lower technology costs of $0.4 million.

Gross margin in Healthcare increased by 920 bps during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily due to higher revenues and operational efficiencies during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

The increase in cost of revenues in Emerging Business of $2.9 million for the three months ended September 30, 2021 was primarily due to increases in employee-related costs of $2.5 million and higher technology costs of $0.4 million.

Gross margin in Emerging Business increased by 210 bps during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily due to higher revenues and operational efficiencies during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

The increase in cost of revenues in Analytics of $19.0 million for the three months ended September 30, 2021 was primarily due to increases in employee-related costs of $15.8 million and higher other operating costs of $4.1 million, partially offset by lower infrastructure costs of $0.5 million and foreign exchange gain, net of hedging $0.4 million.

Gross margin in Analytics decreased by 30 bps during the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily due to increases in employee-related costs, partially offset by higher revenues and operational efficiencies during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

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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As a percentage of revenues 19.9 % 17.5 %

The increase in SG&A expenses of $14.5 million was primarily due to higher employee-related costs of $13.0 million, COVID-19-related expenses of $2.2 million, primarily related to financial support to family members of deceased employees and higher other operating costs of $0.6 million, partially offset by lower facilities costs of $1.3 million due to optimization of office space.

The increase in SG&A expenses of $15.8 million was primarily due to higher employee-related costs of $13.5 million, COVID-19-related expenses of $0.7 million primarily related to financial support to family members of deceased employees, higher other operating costs of $2.6 million and higher travel costs of $0.3 million, partially offset by lower facilities costs of $1.3 million due to optimization of office space.

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 4.2 % 5.2 %

The decrease in depreciation expense of $0.1 million was primarily due to lower depreciation on assets related to operating centers closed as a result of optimization of office space and increased reliance on the work from home model, due to the impact of COVID-19 during the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

The decrease in intangibles amortization expense of $0.4 million was primarily due to end of useful lives for certain intangible assets during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

The increase in depreciation expense of $0.3 million was primarily due to depreciation related to our investments in new operating centers, internally developed software and accelerated depreciation resulting from a reduction in useful lives related to certain operating centers, due to the impact of COVID-19 during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Income from Operations.

Income from operations increased by $25.9 million, or 261.6%, from $9.9 million for the three months ended June 30, 2020 to $35.8 million for the three months ended June 30, 2021, primarily due to higher revenues, partially offset by higher cost of revenues and higher SG&A expenses during the three months ended June 30, 2021.

As a percentage of revenues, income from operations increased from 4.4% for the three months ended June 30, 2020 to 13.0% for the three months ended June 30, 2021.

Income from operations increased by $8.0 million, or 23.3%, from $34.4 million for the three months ended September 30, 2020 to $42.4 million for the three months ended September 30, 2021, primarily due to higher revenues, partially offset by higher cost of revenues and higher SG&A expenses during the three months ended September 30, 2021.

As a percentage of revenues, income from operations increased from 14.3% for the three months ended September 30, 2020 to 14.6% for the three months ended September 30, 2021.

Foreign Exchange Gain/(Loss).

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dollar against the Indian rupee, the U.K.

pound sterling, the Philippine peso and the South African ZAR during the three months ended June 30, 2021.

pound sterling, the Philippine peso and the South African ZAR during the three months ended September 30, 2021.

The average exchange rate of the U.S.

dollar against the Indian rupee decreased from 75.41 during the three months ended June 30, 2020 to 73.67 during the three months ended June 30, 2021.

dollar against the Indian rupee decreased from 74.06 during the three months ended September 30, 2020 to 73.88 during the three months ended September 30, 2021.

The average exchange rate of the U.K.

pound sterling against the U.S.

dollar increased from 1.24 during the three months ended June 30, 2020 to 1.40 during the three months ended June 30, 2021.

dollar increased from 1.31 during the three months ended September 30, 2020 to 1.37 during the three months ended September 30, 2021.

The average exchange rate of the U.S.

dollar against the Philippine peso decreased from 50.28 during the three months ended June 30, 2020 to 48.20 during the three months ended June 30, 2021.

dollar against the Philippine peso increased from 48.71 during the three months ended September 30, 2020 to 50.24 during the three months ended September 30, 2021.

The average exchange rate of the U.S.

dollar against the South African ZAR decreased from 17.66 during the three months ended June 30, 2020 to 14.15 during the three months ended June 30, 2021.

We recorded a net foreign exchange gain of $1.4 million, each, for the three months ended June 30, 2021 and 2020.

dollar against the South African ZAR decreased from 16.84 during the three months ended September 30, 2020 to 14.76 during the three months ended September 30, 2021.

We recorded a net foreign exchange gain of $1.2 million for the three months ended September 30, 2021, compared to the net foreign exchange gain of $0.7 million for three months ended September 30, 2020.

Interest expens e.

Interest expense decreased from $2.9 million for the three months ended June 30, 2020 to $2.5 million for the three months ended June 30, 2021, primarily due to lower outstanding borrowings and lower effective interest rates of

1.8% under our Credit Facility during the three months ended June 30, 2021, compared to 2.2% during the three months ended June 30, 2020.

Interest expense decreased from $2.6 million for the three months ended September 30, 2020 to $1.8 million for the three months ended September 30, 2021, primarily due to settlement of outstanding obligations under the Notes on August 27, 2021, partially offset by increase in interest expense under our Credit Facility due to higher effective interest rates of 2.3% during the three months ended September 30, 2021, compared to 1.9% during the three months ended September 30, 2020.

Other Income, net.

Three months ended June 30, Percentage

Three months ended September 30, Percentage

2021 2020 Change

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Other income, net $ 1.7 $ 2.5 $ (0.8) (32.0) %

Other income, net decreased by $2.0 million, from $4.2 million for the three months ended June 30, 2020 to $2.2 million for the three months ended June 30, 2021, primarily due to lower return on mutual fund investments of $1.5 million, partially offset by increase in interest income of $0.1 million during the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

Other income, net decreased by $0.8 million, from $2.5 million for the three months ended September 30, 2020 to $1.7 million for the three months ended September 30, 2021, primarily due to lower amount invested in mutual funds and lower returns on such investments of $0.8 million, during the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Loss on settlement of Notes.

On August 27, 2021, we settled our outstanding obligations under the Notes and recognized a loss of $12.8 million during the three months ended September 30, 2021.

See Note 17 - Borrowings to our unaudited consolidated financial statements.

Income Tax Expense.

The 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.

We recorded income tax expense of $8.9 million and $4.1 million 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 $1.3 million due to the election of a new tax regime, during the three months ended June 30, 2020, for two of our Indian subsidiaries that provides for a lower tax rate on earnings in exchange for foregoing certain tax credits, including minimum alternative tax credits.

Net income increased from $8.4 million for the three months ended June 30, 2020 to $28.0 million for the three months ended June 30, 2021, primarily due to increase in income from operations of $25.9 million, lower interest expense of $0.4 million and lower loss from equity-method investment of $0.1 million, partially offset by higher income tax expense of $4.8 million and lower other income, net of $2.0 million.

As a percentage of revenues, net income increased from 3.8% for the three months ended June 30, 2020 to 10.2% for the three months ended June 30, 2021.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

The following table summarizes our revenues by reportable segments for the six months ended June 30, 2021 and 2020:

Six months ended June 30, Percentage

The 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.

We recorded income tax expense of $4.2 million and $8.5 million 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 $2.4 million 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 $0.5 million 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.

Net income increased from $26.4 million for the three months ended September 30, 2020 to $26.5 million for the three months ended September 30, 2021, primarily due to increase in income from operations of $8.0 million, lower income tax expense of $4.3 million, lower interest expense of $0.8 million, higher net foreign exchange gain of $0.5 million and lower loss from equity-method investment of $0.1 million, partially offset by loss on settlement of the Notes of $12.8 million and lower other income, net of $0.8 million .

As a percentage of revenues, net income decreased from 11.0% for the three months ended September 30, 2020 to 9.1% for the three months ended September 30, 2021.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

The following table summarizes our revenues by reportable segments for the nine months ended September 30, 2021 and 2020:

Nine months ended September 30, Percentage

2021 2020 Change

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Total revenues, net $ 826.8 $ 709.5 $ 117.3 16.5 %

Revenues for the six months ended June 30, 2021 were $536.5 million, up $68.0 million, or 14.5%, compared to the six months ended June 30, 2020.

Revenues for the nine months ended September 30, 2021 were $826.8 million, up $117.3 million, or 16.5%, compared to the nine months ended September 30, 2020.

Revenue growth in Insurance of $30.9 million was primarily driven by expansion of business from our existing clients aggregating to $28.3 million and an increase in revenues $2.6 million that was mainly attributable to the appreciation of the Australian dollar, the U.K.

pound sterling and the South African ZAR against the U.S.

dollar during the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

Insurance revenues were 34.6% and 35.2% of our total revenues in the six months ended June 30, 2021 and June 30, 2020, respectively.

Revenue growth in Healthcare of $6.6 million was primarily driven by expansion of business from our new and existing clients aggregating to $6.6 million during the six months ended June 30, 2021.

Healthcare revenues were 10.9% and 11.1% of our total revenues in the six months ended June 30, 2021 and June 30, 2020, respectively.

Revenue growth in Emerging Business of $1.0 million was primarily driven by expansion of business from our new clients and existing clients aggregating to $0.3 million and an increase in revenues of $0.7 million that was mainly attributable to the appreciation of the Indian rupee and the U.K.

pound sterling against the U.S.

dollar during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Emerging Business revenues were 14.6% and 16.5% of our total revenues in the six months ended June 30, 2021 and June 30, 2020, respectively.

dollar during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

Insurance revenues were 34.3% and 35.6% of our total revenues in the nine months ended September 30, 2021 and September 30, 2020, respectively.

Revenue growth in Healthcare of $8.8 million was primarily driven by expansion of business from our new and existing clients aggregating to $8.8 million during the nine months ended September 30, 2021.

Healthcare revenues were 10.4% and 10.9% of our total revenues in the nine months ended September 30, 2021 and September 30, 2020, respectively.

Revenue growth in Emerging Business of $8.0 million was primarily driven by expansion of business from our new clients and existing clients aggregating to $7.1 million and an increase in revenues of $0.9 million that was mainly attributable to the appreciation of the U.K.

pound sterling and the Indian rupee against the U.S.

dollar during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

Emerging Business revenues were 14.9% and 16.2% of our total revenues in the nine months ended September 30, 2021 and September 30, 2020, respectively.

Revenue growth in Analytics of $69.6 million was attributable to the higher volumes in our annuity and project based engagements from our new and existing clients of $67.5 million and an increase in revenues $2.1 million mainly attributable to the appreciation of the U.K.

pound sterling and the South African ZAR against the U.S.

dollar during the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

Analytics revenues were 39.8% and 37.2% of our total revenues in the six months ended June 30, 2021 and June 30, 2020, respectively.

dollar during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

Analytics revenues were 40.4% and 37.3% of our total revenues in the nine months ended September 30, 2021 and September 30, 2020, 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

2021 2020 Change 2021 2020

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Total $ 507.2 $ 473.1 $ 34.1 7.2 % 38.6 % 33.3 % 5.3 %

For the six months ended June 30, 2021, cost of revenues was $329.5 million compared to $321.1 million for the six months ended June 30, 2020, an increase of $8.4 million, or 2.6%.

Our gross margin for the six months ended June 30, 2021 was 38.6% compared to 31.5% for six months ended June 30, 2020, an increase of 7.1% primarily driven by higher revenues and operational efficiencies during the six months ended June 30, 2021, compared to the impact of COVID-19 related expenses during the six months ended June 30, 2020.

The decrease in cost of revenues in Insurance of $2.6 million for the six months ended June 30, 2021 was primarily due to decreases in other operating costs of $4.4 million, due to the impact of COVID-19 related expenses during the six months ended June 30, 2020 and foreign exchange gain, net of hedging of $0.1 million.

This was partially offset by higher employee-related costs of $1.9 million.

Gross margin in Insurance increased by 9.5% during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to higher revenues, expansion in margin in certain existing clients and operational efficiencies during the six months ended June 30, 2021, compared to the impact of COVID-19 related expenses during the six months ended June 30, 2020.

The decrease in cost of revenues in Healthcare of $4.1 million for the six months ended June 30, 2021 was primarily due to decreases in employee-related costs of $4.3 million, partially offset by higher other operating costs of $0.2 million.

Gross margin in Healthcare increased by 15.5% during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to higher revenues during the six months ended June 30, 2021, compared to the impact of COVID-19 related expenses during the six months ended June 30, 2020.

The decrease in cost of revenues in Emerging Business of $4.9 million for the six months ended June 30, 2021 was primarily due to decreases in employee-related costs of $3.8 million, lower other operating costs of $0.9 million and foreign exchange gain, net of hedging $0.2 million.

Gross margin in Emerging Business increased by 6.8% during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to higher revenues, decrease in employee-related costs and higher operational efficiencies during the six months ended June 30, 2021, compared to the impact of COVID-19 related expenses during the six months ended June 30, 2020.

The increase in cost of revenues in Analytics of $20.0 million for the six months ended June 30, 2021 was primarily due to increases in employee-related costs of $13.3 million, higher other operating costs of $7.4 million and higher technology costs of $1.2 million, primarily due to increased usage of the work from home model.

This was partially offset by lower travel costs of $1.5 million and foreign exchange gain, net of hedging of $0.4 million.

Gross margin in Analytics increased by 3.0% during the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to higher revenues during the six months ended June 30, 2021, compared to the impact of COVID-19 related expenses during the six months ended June 30, 2020.

For the nine months ended September 30, 2021, cost of revenues was $507.2 million compared to $473.1 million for the nine months ended September 30, 2020, an increase of $34.1 million, or 7.2%.

Our gross margin for the nine months ended September 30, 2021 was 38.6% compared to 33.3% for nine months ended September 30, 2020, an increase of 530 bps primarily driven by higher revenues, operational efficiencies and lower COVID-19 related expenses during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

The increase in cost of revenues in Insurance of $2.0 million for the nine months ended September 30, 2021 was primarily due to increases in employee-related costs of $7.9 million and higher technology costs of $0.5 million, partially offset by lower travel costs of $6.1 million and foreign exchange gain, net of hedging of $0.3 million.

Gross margin in Insurance increased by 690 bps during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to higher revenues, expansion in margin in certain existing clients, operational efficiencies and lower COVID-19 related expenses during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

The decrease in cost of revenues in Healthcare of $5.0 million for the nine months ended September 30, 2021 was primarily due to decreases in employee-related costs of $4.8 million, lower travel costs of $0.5 million and lower technology costs of $0.2 million, partially offset by higher facility costs of $0.3 million and foreign exchange loss, net of hedging $0.2 million.

Gross margin in Healthcare increased by 1,350 bps during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to higher revenues, operational efficiencies and lower COVID-19 related expenses during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

The decrease in cost of revenues in Emerging Business of $1.9 million for the nine months ended September 30, 2021 was primarily due to decreases in employee-related costs of $1.3 million, lower facility costs of $0.5 million, lower travel costs of $0.5 million and foreign exchange gain, net of hedging $0.3 million, partially offset by higher technology costs of $0.7 million, primarily due to increased usage of the work from home model.

Gross margin in Emerging Business increased by 540 bps during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to higher revenues, operational efficiencies and lower COVID-19 related expenses during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

The increase in cost of revenues in Analytics of $39.0 million for the nine months ended September 30, 2021 was primarily due to increases in employee-related costs of $29.1 million, higher other operating costs of $11.6 million and higher technology costs of $0.7 million, primarily due to increased usage of the work from home model.

This was partially offset by lower travel costs of $1.1 million, lower facility costs of $0.6 million and foreign exchange gain, net of hedging of $0.7 million.

Gross margin in Analytics increased by 190 bps during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, primarily due to higher revenues, operational efficiencies and lower COVID-19 related expenses during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

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

Six months ended June 30, Percentage change

Nine months ended September 30, Percentage change

2021 2020 Change

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Depreciation and Amortization.

Six months ended June 30, Percentage change

Nine months ended September 30, Percentage change

2021 2020 Change

4 unchanged sentences

As a percentage of revenues 4.4 % 5.3 %

The decrease in intangibles amortization expense of $0.8 million was primarily due to end of useful lives for certain intangible assets during the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

The increase in depreciation expense of $0.3 million was primarily due to depreciation related to our investments in new operating centers, internally developed software and accelerated depreciation resulting from a reduction in useful lives related to certain operating centers, due to the impact of COVID-19 during the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

The decrease in intangibles amortization expense of $1.2 million was primarily due to end of useful lives for certain intangible assets during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

The increase in depreciation expense of $0.6 million was primarily due to depreciation related to our investments in new operating centers, internally developed software and accelerated depreciation resulting from a reduction in useful lives related to certain operating centers, due to the impact of COVID-19 during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

Income from Operations.

Income from operations increased by $40.1 million, or 107.5%, from $37.3 million for the six months ended June 30, 2020 to $77.4 million for the six months ended June 30, 2021, primarily due to higher revenues, partially offset by higher cost of revenues, higher SG&A expenses during the six months ended June 30, 2021.

As a percentage of revenues, income from operations increased from 8.0% for the six months ended June 30, 2020 to 14.4% for the six months ended June 30, 2021.

Income from operations increased by $48.0 million, or 66.9%, from $71.8 million for the nine months ended September 30, 2020 to $119.8 million for the nine months ended September 30, 2021, primarily due to higher revenues, partially offset by higher cost of revenues, higher SG&A expenses during the nine months ended September 30, 2021.

As a percentage of revenues, income from operations increased from 10.1% for the nine months ended September 30, 2020 to 14.5% for the nine months ended September 30, 2021.

Foreign Exchange Gain/(Loss).

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dollar against the Indian rupee, the U.K.

pound sterling, the Philippine peso and the South African ZAR during the six months ended June 30, 2021.

pound sterling, the Philippine peso and the South African ZAR during the nine months ended September 30, 2021.

The average exchange rate of the U.S.

dollar against the Indian rupee decreased from 74.25 during the six months ended June 30, 2020 to 73.42 during the six months ended June 30, 2021.

dollar against the Indian rupee decreased from 74.18 during the nine months ended September 30, 2020 to 73.57 during the nine months ended September 30, 2021.

The average exchange rate of the U.K.

pound sterling against the U.S.

dollar increased from 1.26 during the six months ended June 30, 2020 to 1.39 during the six months ended June 30, 2021.

dollar increased from 1.27 during the nine months ended September 30, 2020 to 1.38 during the nine months ended September 30, 2021.

The average exchange rate of the U.S.

dollar against the Philippine peso decreased from 50.55 during the six months ended June 30, 2020 to 48.29 during the six months ended June 30, 2021.

dollar against the Philippine peso decreased from 49.94 during the nine months ended September 30, 2020 to 48.94 during the nine months ended September 30, 2021.

The average exchange rate of the U.S.

dollar against the South African ZAR decreased from 16.90 during the six months ended June 30, 2020 to 14.58 during the six months ended June 30, 2021.

We recorded a net foreign exchange gain of $1.8 million for the six months ended June 30, 2021, compared to the net foreign exchange gain of $2.7 million for the six months ended June 30, 2020.

dollar against the South African ZAR decreased from 16.88 during the nine months ended September 30, 2020 to 14.64 during the nine months ended September 30, 2021.

We recorded a net foreign exchange gain of $3.0 million for the nine months ended September 30, 2021, compared to the net foreign exchange gain of $3.5 million for the nine months ended September 30, 2020.

Interest expense.

Interest expense decreased from $6.0 million for the six months ended June 30, 2020 to $5.0 million for the six months ended June 30, 2021 primarily due to lower outstanding borrowings and lower effective interest rates of 1.9%

under our Credit Facility during the six months ended June 30, 2021, compared to 2.6% during the six months ended June 30, 2020.

Interest expense decreased from $8.6 million for the nine months ended September 30, 2020 to $6.8 million for the nine months ended September 30, 2021, primarily due to settlement of outstanding obligations under the Notes

on August 27, 2021, and lower effective interest rates of 2.0% under our Credit Facility during the nine months ended September 30, 2021, compared to 2.4% during the nine months ended September 30, 2020.

Other Income, net.

Six months ended June 30, Percentage change

Nine months ended September 30, Percentage change

2021 2020 Change

3 unchanged sentences

Other income, net $ 5.3 $ 9.2 $ (3.9) (42.4) %

Other income, net decreased by $3.2 million, from $6.8 million for the six months ended June 30, 2020 to $3.6 million for the six months ended June 30, 2021, primarily due to lower return on mutual fund investments of $2.5 million during the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

Other income, net decreased by $3.9 million, from $9.2 million for the nine months ended September 30, 2020 to $5.3 million for the nine months ended September 30, 2021, primarily due to lower amount invested in mutual funds and lower returns on such investments of $3.2 million, partially offset by increase in interest income of $0.2 million during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

Loss on settlement of Notes.

On August 27, 2021, we settled our outstanding obligations under the Notes and recognized loss of $12.8 million during the nine months ended September 30, 2021.

See Note 17 - Borrowings to our unaudited consolidated financial statements.

Income Tax Expense.

The 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.

We recorded income tax expense of $17.9 million and $9.9 million for the six months ended June 30, 2021 and 2020, respectively.

The increase in 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 $1.3 million due to the election of a new tax regime, during the six months ended June 30, 2020, for two of our 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 $1.8 million pursuant to ASU No.

2016-09 during the six months ended June 30, 2020 compared to $1.0 million during the six months ended June 30, 2021.

Net income increased from $30.8 million for the six months ended June 30, 2020 to $59.9 million for the six months ended June 30, 2021, primarily due to increase in income from operations of $40.1 million, lower interest expense of $1.0 million and lower loss from equity-method investment of $0.1 million, partially offset by higher income tax expense of $8.0 million, lower other income, net of $3.2 million and foreign exchange gain, net of $0.9 million.

As a percentage of revenues, net income increased from 6.6% for the six months ended June 30, 2020 to 11.2% for the six months ended June 30, 2021.

The 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.

We recorded income tax expense of $22.1 million and $18.4 million 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 $1.8 million pursuant to ASU No.

2016-09 during the nine months ended September 30, 2020, compared to $1.6 million during the nine months ended September 30, 2021, partially offset by (i) the recording of a one-time deferred tax benefit of $2.4 million on settlement of the Notes during the nine months ended September 30, 2021, and (ii) the recording of a one-time tax expense of $1.3 million due to the election of a new tax regime, during the nine months ended September 30, 2020, for two of our Indian subsidiaries that provides for a lower tax rate on earnings in exchange for foregoing certain tax credits, including minimum alternative tax credits.

Net income increased from $57.3 million for the nine months ended September 30, 2020 to $86.4 million for the nine months ended September 30, 2021, primarily due to increase in income from operations of $48.0 million, lower interest expense of $1.8 million and lower loss from equity-method investment of $0.2 million, partially offset by loss on settlement of the Notes of $12.8 million, lower other income, net of $3.9 million, higher income tax expense of $3.7 million and lower foreign exchange gain, net of $0.5 million.

As a percentage of revenues, net income increased from 8.1% for the nine months ended September 30, 2020 to 10.5% for the nine months ended September 30, 2021.

Liquidity and Capital Resources

Six months ended June 30,

Nine months ended September 30,

(dollars in millions)

1 unchanged sentence

Net cash provided by operating activities 113.8 126.3

Net cash provided by investing activities 11.7 1.1

Net cash (used for)/provided by investing activities

Net cash used for financing activities (189.1) (48.4)

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Closing cash, cash equivalents and restricted cash $ 123.7 $ 216.0

As of June 30, 2021 and 2020, we had $294.7 million and $335.6 million, respectively, in cash, cash equivalents and short-term investments, of which $254.2 million and $275.5 million, respectively, is located in foreign jurisdictions that upon distribution may be subject to withholding and other taxes.

As of September 30, 2021 and 2020, we had $284.3 million and $362.6 million, respectively, in cash, cash equivalents and short-term investments, of which $254.2 million and $300.7 million, respectively, is located in foreign jurisdictions that upon distribution may be subject to withholding and other taxes.

We periodically evaluate opportunities to distribute cash among our group entities to fund our operations in the United States and other geographies, and as and when we decide to distribute, we may have to accrue, additional taxes in accordance with local tax laws, rules and regulations in the relevant foreign jurisdictions.

During the three months ended June 30, 2021, we repatriated to the United States $49.0 million (net of $2.6 million withholding taxes) from India, $42.5 million (net of $7.5 million withholding taxes) from the Philippines and $17.0 million (net of $0.9 million withholding taxes) from India in July 2021.

During the three months ended September 30, 2021, we repatriated to the United States $17.0 million (net of $0.9 million withholding taxes) from India.

During the nine months ended September 30, 2021, we repatriated to the United States $66.0 million (net of $3.5 million withholding taxes) from India and $42.5 million (net of $7.5 million withholding taxes) from the Philippines.

These distributions do not constitute a change in our permanent reinvestment assertion.

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Operating Activities:

Net cash provided by operating activities was $53.9 million for the six months ended June 30, 2021 as compared to net cash provided by operating activities of $58.9 million for the six months ended June 30, 2020, reflecting higher working capital needs, offset by cash earnings.

Net cash provided by operating activities was $113.8 million for the nine months ended September 30, 2021 as compared to net cash provided by operating activities of $126.3 million for the nine months ended September 30, 2020, reflecting higher working capital needs, offset by higher cash earnings.

The major drivers contributing to the decrease of $12.5 million year-over-year included the following:

• Changes in accounts receivable, including advance billings, contributed lower cash flow of $71.9 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The decrease was a result of higher accounts receivable resulting from revenue growth, change in credit terms for certain clients during the six months ended June 30, 2021 , and advance collections during the three months ended December 31, 2020.

This was partially offset by our accounts receivable days sales outstanding, which improved to 58 days as of June 30, 2021 from 63 days as of June 30, 2020.

• Increase in net income of $29.1 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to an increase in income from operations of $40.1 million driven by higher revenues, offset by higher income tax expense of $8.0 million and lower other income, net of interest expense of $3.1 million.

• Increase in accrued employee costs, accrued expenses and other liabilities contributed higher cash flow of $51.6 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The increase was primarily due to lower payment and higher provisions of annual performance incentives of $23.3 million, higher other employee cost accruals of $4.0 million and higher accrued expenses and other liabilities of $24.3 million, during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

• Other drivers decreasing cash flows during the six months ended June 30, 2021 compared to the six months ended June 30, 2020 included:

income tax payments, net of refunds, of $13.8 million, primarily due to higher advance income tax payments on account of higher net income.

• Changes in accounts receivable, including advance billings, contributed lower cash flow of $78.4 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The decrease was a result of higher accounts receivable resulting from revenue growth, change in credit terms for certain clients during the nine months ended September 30, 2021 , and advance collections during the three months ended December 31, 2020.

Lower cash flows were also affected by our accounts receivable days sales outstanding, which marginally increased to 58 days as of September 30, 2021 from 57 days as of September 30, 2020.

• Increase in net income of $29.1 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily due to an increase in income from operations of $48.0 million driven by higher revenues, lower interest expense of $1.8 million, partially offset by loss on settlement of the Notes of $12.8 million, lower other income, net of $3.9 million, and higher income tax expense of $3.7 million.

• Increase in accrued employee costs, accrued expenses and other liabilities contributed higher cash flow of $56.3 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The increase was primarily due to lower payment and higher provisions of annual performance incentives of $37.2 million, higher other employee cost accruals of $2.5 million and higher accrued expenses and other liabilities of $16.6 million, during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

• Other drivers decreasing cash flows during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 included:

income tax payments, net of refunds, of $19.6 million, primarily due to higher advance income tax payments on higher net income.

Investing Activities:

Cash flows provided by investing activities were $11.7 million for the six months ended June 30, 2021 as compared to cash flows provided by investing activities of $1.1 million for the six months ended June 30, 2020.

The increase is mainly due to net redemption of investments of $31.0 million during six months ended June 30, 2021 as compared to

net redemption of investments of $23.8 million during the six months ended June 30, 2020, lower capital expenditures for purchase of long-lived assets, including investments in infrastructure, technology assets, software and product developments of $2.7 million during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 and acquisition of an additional stake in our equity affiliate of $0.7 million during the six months ended June 30, 2020.

Cash flows used for investing activities were $21.5 million for the nine months ended September 30, 2021 as compared to cash flows provided by investing activities of $11.1 million for the nine months ended September 30, 2020.

The decrease is mainly due to net redemption of investments of $6.7 million during nine months ended September 30, 2021 as compared to net redemption of investments of $45.8 million during the nine months ended September 30, 2020.

This was partially offset by lower capital expenditures for purchase of long-lived assets, including investments in infrastructure, technology assets, software and product developments of $5.8 million during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 and acquisition of an additional stake in our equity affiliate of $0.7 million during the nine months ended September 30, 2020.

Financing Activities:

Cash flows used for financing activities were $131.4 million during the six months ended June 30, 2021 as compared to cash flows used for financing activities of $13.4 million during the six months ended June 30, 2020.

The increase in cash flows used for financing activities was primarily due to higher net repayment of $73.8 million under our revolving Credit Facility, higher purchases of treasury stock by $43.4 million under our share repurchase program and lower proceeds from the exercise of stock options of $0.8 million during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Cash flows used for financing activities were $189.1 million during the nine months ended September 30, 2021 as compared to cash flows used for financing activities of $48.4 million during the nine months ended September 30, 2020.

The increase in cash flows used for financing activities was primarily due to higher net repayment of our borrowings of $94.0 million under our revolving Credit Facility and the Notes and higher purchases of treasury stock by $46.7 million under our share repurchase program during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

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 $19.9 million of capital expenditures in the six months ended June 30, 2021.

We incurred $29.0 million of capital expenditures in the nine months ended September 30, 2021.

We expect to incur capital expenditures of between $35.0 million and $40.0 million in 2021, 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.

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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.

As of June 30, 2021 and December 31, 2020, we deferred our contributions to FICA of $6.3 million each under the CARES Act.

As of September 30, 2021 and December 31, 2020, we deferred our contributions to FICA of $6.3 million each under the CARES Act.

The deferred amount will be payable as follows:

(1) 50% of the deferred amount will be paid on or before December 31, 2021 and (2) the remaining 50% of the deferred amount will be paid on or before December 31, 2022.

Financing Arrangements (Debt Facility and Notes)

The following tables summarizes our Debt balances as of June 30, 2021 and December 31, 2020.

As of June 30,2021

(dollars in millions)

Revolving Credit Facility Notes Total

Current portion of long-term borrowings $ 15.0 $ — $ 15.0

Long-term borrowings $ — $ 150.0 $ 150.0

Unamortized debt discount — (9.9) (9.9)

Unamortized debt issuance costs* — (0.7) (0.7)

Long-term borrowings

$ — $ 139.4 $ 139.4

Total borrowings $ 15.0 $ 139.4 $ 154.4

As of December 31,2020

(dollars in millions)

Revolving Credit Facility Notes Total

Financing Arrangements (Debt Facility)

The following tables summarizes our Debt balances as of September 30, 2021 and December 31, 2020:

As of September 30, 2021 As of December 31, 2020

(dollars in millions) (dollars in millions)

Revolving Credit Facility Total Revolving Credit Facility Notes Total

Current portion of long-term borrowings $ 15.0 $ 15.0 $ 25.0 $ — $ 25.0

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Total borrowings $ 185.0 $ 185.0 $ 89.0 $ 138.0 $ 227.0

*Unamortized debt issuance costs for our revolving Credit Facility of $0.4 million and $0.5 million as of June 30, 2021 and December 31, 2020, respectively, is presented under “Other current assets” and “Other assets” in our consolidated balance sheets.

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

*Unamortized debt issuance costs for our revolving Credit Facility of $0.3 million and $0.5 million as of September 30, 2021 and December 31, 2020, respectively, is presented under “Other current assets” and “Other assets,” as applicable in our consolidated balance sheets.

On August 27, 2021, we entered into a Payoff and Termination Agreement (the “Payoff and Termination Agreement”) with the Purchaser, pursuant to which we prepaid and settled its outstanding obligations under the Notes for an aggregate consideration of $236.7 million, excluding accrued and unpaid interest under the Notes calculated through and including, August 26, 2021, in the form of a combination of cash and share of our common stock.

As a result, we made a cash payment of $200.0 million to the Purchaser and satisfied the remainder of the obligation under the Notes by issuing to the Purchaser 310,394 shares of our common stock calculated at $118.37 per share based on a 20-day volume weighted average price ending on, and including, August 26, 2021.

We satisfied the cash payment obligation under the Payoff and Termination Agreement by drawing $200.0 million from our existing revolving Credit Facility, and our common stock was issued from our existing treasury shares.

See Note 17 - Borrowings and Note 18 - Capital Structure to our unaudited consolidated financial statements herein for further details.

Off-Balance Sheet Arrangements

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

As of June 30, 2021 and December 31, 2020, we had outstanding letters of credit of $0.5 million each, that were not recognized in our unaudited and audited consolidated balance sheets, respectively.

As of September 30, 2021 and December 31, 2020, we had outstanding letters of credit of $0.5 million each, 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, 2021:

The following table sets forth our contractual obligations as of September 30, 2021:

Payment Due by Period

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2.8 5.0 4.0 7.0 18.8

Principal payments (c)

15.0 — 150.0 — 165.0

Interest payments (d)

Principal payments 15.0 170.0 — — 185.0

Interest payments (c)

1.9 0.2 — — 2.1

Total contractual cash obligations (e)

Total contractual cash obligations (d)

$ 49.4 $ 218.6 $ 25.0 $ 35.2 $ 328.2

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

(c) Represents our intent and ability to settle the principal amount of our Notes of $150 million in cash and does not reflect any assumptions about our ability or intent to settle the Notes before their maturity.

(d) Interest on borrowings is calculated based on the interest rate on the outstanding borrowings as of June 30, 2021.

(e) Excludes $0.9 million related to uncertain tax positions, since the extent of the amount and timing of payment is currently not reliably estimable or determinable.

(c) Interest on borrowings is calculated based on the interest rate on the outstanding borrowings as of September 30, 2021 .

(d) Excludes $0.9 million related to uncertain tax positions, since the extent of the amount and timing of payment is currently not reliably estimable or determinable.

Certain units of our Indian subsidiaries were established as 100% Export-Oriented units under the Software Technology Parks of India or Special Economic Zone scheme promulgated by the Government of India.

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Our operations centers in the Philippines are registered with the Philippine Economic Zone Authority.

The registration provides us with certain fiscal incentives on the import of capital goods and local purchase of services and materials and requires that ExlService Philippines, Inc.

to meet certain performance and investment criteria.

The registration provides us with certain fiscal incentives on the import of capital goods and local purchase of services and materials and requires our Philippines subsidiary to meet certain performance and investment criteria.

We believe that these centers have in the past satisfied and will continue to satisfy the required criteria.

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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