What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-04-28 compared with 2021-11-02 · 400 added, 512 removed, 700 unchanged (57% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share amounts)

September 30, 2021 December 31, 2020

(In thousands, except per share amount and share count)

March 31, 2022 December 31, 2021

Current assets:

38 unchanged sentences

Common stock, $ 0.001 par value;

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

100,000,000 shares authorized, 39,794,154 shares issued and 33,328,744 shares outstanding as of March 31, 2022 and 39,508,340 shares issued and 33,291,482 shares outstanding as of December 31, 2021

Additional paid-in capital 406,966 395,742

Retained earnings 792,315 756,137

Accumulated other comprehensive loss ( 92,257 ) ( 74,984 )

Accumulated other comprehensive income/(loss) ( 98,306 ) ( 89,474 )

Total including shares held in treasury 1,101,015 1,062,445

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

6,465,410 shares as of March 31, 2022 and 6,216,858 shares as of December 31, 2021, held in treasury, at cost

( 400,674 ) ( 369,289 )

5 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except share and per share amounts)

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

2021 2020 2021 2020

(In thousands, except per share amount and share count)

Three months ended March 31,

Revenues, net $ 329,208 $ 261,415

12 unchanged sentences

Other income, net 2,411 1,410

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

Income before income tax expense and earnings from equity affiliates 47,266 40,925

15 unchanged sentences

EXLSERVICE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (UNAUDITED)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

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

2021 2020 2021 2020

Three months ended March 31,

Net income $ 36,178 $ 31,931

1 unchanged sentence

Unrealized gain/(loss) on cash flow hedges ( 517 ) 568

Loss on net investment hedges — — ( 1,134 ) —

Foreign currency translation gain/(loss) ( 3,789 ) 11,315 ( 10,475 ) ( 7,983 )

Foreign currency translation loss ( 7,445 ) ( 1,911 )

Reclassification adjustments

(Gain)/loss on cash flow hedges (1)

Gain on cash flow hedges (1)

( 1,989 ) ( 2,829 )

Retirement benefits (2)

178 98 533 296

Income tax effects relating to above (3)

( 12 ) ( 4,956 ) 1,690 1,689

Total other comprehensive income/(loss) $ ( 8,832 ) $ ( 3,769 )

9 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

For the three months ended September 30, 2021 and 2020

(In thousands, except share and per share amounts)

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

Shares Amount Shares Amount

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

Stock-based compensation — — 10,894 — — — — 10,894

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 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 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 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 nine months ended September 30, 2021 and 2020

(In thousands, except share and per share amounts)

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

For the three months ended March 31, 2022 and 2021

(In thousands, except share count)

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

Shares Amount Shares Amount

3 unchanged sentences

Acquisition of treasury stock — — — — — ( 248,552 ) ( 31,385 ) ( 31,385 )

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

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

Other comprehensive loss — — — — ( 8,832 ) — — ( 8,832 )

Net income — — — 36,178 — — — 36,178

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

Balance as of March 31, 2022 39,794,154 $ 40 $ 406,966 $ 792,315 $ ( 98,306 ) ( 6,465,410 ) $ ( 400,674 ) $ 700,341

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

Shares Amount Shares Amount

5 unchanged sentences

Net income — — — 31,931 — — — 31,931

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

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

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

(In thousands)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

Net income $ 36,178 $ 31,931

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash (used for)/provided by operating activities:

Depreciation and amortization expense 13,669 12,266

1 unchanged sentence

Amortization of operating lease right-of-use assets 6,043 6,761

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

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

Unrealized gain on short term investments ( 384 ) ( 1,103 )

Unrealized foreign currency exchange gain, net ( 3,165 ) ( 1,139 )

Deferred income tax benefit ( 193 ) ( 2,695 )

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 notes 1,795 1,943

Allowance for expected credit losses 34 48

(Gain)/loss from equity-method investment ( 114 ) 36

Amortization of non-cash interest expense related to convertible senior notes — 673

Others, net 819 216

Change in operating assets and liabilities:

Change in operating assets and liabilities, net of effects of acquisitions:

Accounts receivable ( 45,659 ) ( 11,818 )

7 unchanged sentences

Operating lease liabilities ( 6,005 ) ( 6,868 )

Net cash provided by operating activities 113,762 126,314

Net cash (used for)/provided by operating activities ( 26,870 ) 15,205

Cash flows from investing activities:

1 unchanged sentence

Proceeds from sale of property and equipment 63 129

Investment in equity affiliate — ( 700 )

Purchase of investments ( 76,500 ) ( 57,965 )

Business acquisition (net of cash and cash equivalents acquired) ( 1,367 ) —

Purchases of investments ( 36,804 ) ( 18,835 )

Proceeds from redemption of investments 49,515 5,357

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

Net cash used for investing activities ( 4,694 ) ( 26,029 )

Cash flows from financing activities:

4 unchanged sentences

Proceeds from exercise of stock options — 75

Net cash used for financing activities ( 189,067 ) ( 48,429 )

Net cash provided by/(used for) financing activities 3,576 ( 28,997 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 753 ) ( 984 )

Net (decrease)/increase in cash, cash equivalents and restricted cash ( 101,826 ) 88,968

Net decrease in cash, cash equivalents and restricted cash ( 28,741 ) ( 40,805 )

Cash, cash equivalents and restricted cash at the beginning of the period 143,810 225,519

5 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 $ 50 $ 10

2 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(In thousands, except share and per share amounts)

March 31, 2022

(In thousands, except per share amount and share count)

ExlService Holdings, Inc.

(“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”), 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.

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

By bringing together deep domain expertise with robust data, powerful analytics, cloud, artificial intelligence and machine learning, 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 data-led value creation framework enables better and faster decision making, leveraging its end-to-end data and analytics capabilities to drive improved business outcomes, and re-designing of operating models to integrate advanced technology into operational workflows.

The Company embeds digital operations and solutions into clients’ businesses and introduces its data led approach to transform operations.

Accordingly, as the Company’s operations management services are now a part of its digital operations and solutions, they are referred to as “digital operations and solutions” herein;

however, the Company has not changed the way in which it manages its business or its operating segments or segment reporting structure.

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

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the unaudited consolidated statements of income during the reporting period.

Although these estimates are based on management’s best assessment of the current business environment, actual results may be different from those estimates.

The significant estimates and assumptions that affect the unaudited consolidated financial statements include, but are not limited to, allowance for expected credit losses, the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, and variable consideration in a customer contract, expected recoverability from customers with contingent fee arrangements,

Although these estimates are based on management’s best assessment of the current

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

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 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.

As events continue to evolve with respect to COVID-19, the Company’s estimates may materially change in future periods.

Any changes in estimates are adjusted prospectively in the Company’s consolidated financial statements.

March 31, 2022

(In thousands, except per share amount and share count)

business environment, actual results may be different from those estimates.

The significant estimates and assumptions that affect the unaudited consolidated financial statements include, but are not limited to, estimates of the fair value of the identifiable intangible assets and contingent consideration, purchase price allocation, including revenue projections and discount rate applied within the discounted cash flow model for business acquisitions, allowance for expected credit losses, the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, and variable consideration in a customer contract, expected recoverability from customers with contingent fee arrangements, 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, and recoverability of long-lived assets, goodwill and intangibles.

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

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

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

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

(d) Recently Adopted Accounting Pronouncements

In December 2019, FASB issued ASU No.

2019-12, Income Taxes Simplifying the Accounting for Income Taxes .

This ASU eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The Company adopted this ASU on January 1, 2021.

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

In October 2021, FASB issued ASU No.

2020-10, Codification Improvements , to provide guidance for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements.

The amendments in this ASU improve the consistency of the ASC by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section of the ASC.

The Company adopted this ASU on January 1, 2021.

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

In January 2021, FASB issued ASU No.

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

Scope , to expand the scope of Topic 848 to include derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment (commonly referred to as the discounting transition).

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 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.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

This ASU provides guidance in Topic 805 to require the acquirer entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers , as if it had originated the contracts.

Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements, if the acquiree prepared financial statements in accordance with U.S.

The ASU is effective for fiscal years beginning after December 15, 2022.

An entity may early adopt the ASU including adoption in an interim period, with retrospective application to all business combinations within the fiscal year that includes such interim period.

The Company is currently evaluating the impact of this ASU on its 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)

September 30, 2021

(In thousands, except share and per share amounts)

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

Insurance, Healthcare, Analytics and Emerging Business.

The Company is a provider of data analytics and digital operations and solutions.

The Company manages and reports financial information through its four reportable segments:

Insurance, Healthcare, Analytics and Emerging Business, which reflects how management reviews financial information and makes operating decisions.

These business units develop client-specific solutions, build capabilities, maintain a unified go-to-market approach and are integrally responsible for service delivery, customer satisfaction, growth and profitability.

3 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 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

Revenues, net $ 98,008 $ 27,341 $ 44,513 $ 120,463 $ 290,325

Cost of revenues (1)

61,490 17,057 23,660 75,536 177,743

Gross profit (1)

$ 36,518 $ 10,284 $ 20,853 $ 44,927 $ 112,582

Operating expenses 70,144

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

Income tax expense 4,196

Gain from equity-method investment 28

Net income $ 26,507

(1) Exclusive of depreciation and amortization expense.

Three months ended September 30, 2020

Insurance Healthcare Emerging Business Analytics Total

Revenues, net $ 87,830 $ 25,112 $ 37,577 $ 90,499 $ 241,018

Cost of revenues (1)

56,831 17,993 20,792 56,471 152,087

Gross profit (1)

$ 30,999 $ 7,119 $ 16,785 $ 34,028 $ 88,931

Operating expenses 54,525

Foreign exchange gain, interest expense and other income, net 573

Income tax expense 8,490

Loss from equity-method investment 71

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:

The December 2021 acquisition of Clairvoyant AI Inc.

(“Clairvoyant”) is included in the Analytics reportable segment.

Refer to Note 9 - Business Combination, Goodwill and Intangible Assets 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)

Nine months ended September 30, 2021

March 31, 2022

(In thousands, except per share amount and share count)

Revenues and cost of revenues for the three months ended March 31, 2022 and 2021, respectively, for each of the reportable segments, are as follows:

Three months ended March 31, 2022

Insurance Healthcare Emerging Business Analytics Total

5 unchanged sentences

Operating expenses 77,717

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

Foreign exchange gain, interest expense and other income, net 3,291

Income tax expense 11,202

Gain / (loss) from equity-method investment —

Gain from equity-method investment 114

Net income $ 36,178

(1) Exclusive of depreciation and amortization expense.

Nine months ended September 30, 2020

Three months ended March 31, 2021

Insurance Healthcare Emerging Business Analytics Total

11 unchanged sentences

Revenues, net by service type, were as follows:

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

2021 2020 2021 2020

BPM and related services (1)

Three months ended March 31,

Digital operations and solutions (1)

$ 180,169 $ 159,093

1 unchanged sentence

Revenues, net $ 329,208 $ 261,415

(1) BPM and related services include revenues of the Company's Insurance, Healthcare and Emerging Business reportable segments.

(1) Digital operations and solutions include revenues of the Company's Insurance, Healthcare and Emerging Business reportable segments.

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)

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

March 31, 2022

(In thousands, except per share amount and share count)

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

Three months ended March 31,

Revenues, net

6 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:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Long-lived assets

8 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Accounts receivable, net $ 239,279 $ 194,232

3 unchanged sentences

Consideration received for process transition activities $ 3,138 $ 2,203

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

Accounts receivable includes $ 123,123 and $ 93,336 as of March 31, 2022 and December 31, 2021, 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.

Contract assets represent upfront payments such as deal signing discounts or deal signing bonuses made to customers.

These costs are amortized over the expected period of the benefit and are recorded as an adjustment to transaction price and

These costs are amortized over the expected period of the benefit and are recorded as an adjustment to transaction price and reduced from revenues.

The Company’s assessment did not indicate any impairment losses on its contract assets for the periods presented.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

reduced from revenues.

The Company’s assessment did not indicate any impairment losses on its contract assets for the periods presented.

March 31, 2022

(In thousands, except per share amount and share count)

Contract liabilities represent that portion of deferred revenue for which payments have been received in advance from customers.

2 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 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

Revenue recognized during the three months ended March 31, 2022 and 2021, which was included in the contract liabilities balance at the beginning of the respective periods:

Three months ended March 31,

Deferred revenue (consideration received in advance)

$ 9,564 $ 23,621

Consideration received for process transition activities

1 unchanged sentence

The following table provides details of the Company’s contract acquisition and fulfillment costs:

Contract Acquisition Costs

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 / (reductions) ( 97 ) 63 277 250 310

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

Closing Balance $ 612 $ 1,221 $ 612 $ 1,221 $ 1,027

Contract Fulfillment Costs

Three months ended Nine months ended Year ended

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

Contract Acquisition Costs Contract Fulfillment Costs

Quarter Ended Year Ended Quarter Ended Year Ended

March 31, 2022 March 31, 2021 December 31, 2021 March 31, 2022 March 31, 2021 December 31, 2021

Opening Balance $ 511 $ 1,027 $ 1,027 $ 5,795 $ 5,631 $ 5,631

2 unchanged sentences

Closing Balance $ 927 $ 785 $ 511 $ 7,435 $ 4,419 $ 5,795

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

There was no impairment for contract acquisition and contract fulfillment costs as of March 31, 2022 and December 31, 2021.

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

1 unchanged sentence

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)

September 30, 2021

(In thousands, except share and per share amounts)

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

The Company considered current and anticipated future economic 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.

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Accounts receivable, including unbilled receivables $ 239,867 $ 194,805

Allowance for expected credit loss ( 671 ) ( 1,189 )

Allowance for expected credit losses ( 588 ) ( 573 )

Accounts receivable, net $ 239,279 $ 194,232

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

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

The movement in “Allowance for expected credit losses” on customer balances was as follows:

Three months ended Year ended

March 31, 2022 March 31, 2021 December 31, 2021

Balance at the beginning of the period $ 573 $ 1,189 $ 1,189

Additions / (reductions) during the period 172 50 ( 496 )

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

Reductions due to write-off of Accounts Receivables ( 158 ) ( 60 ) ( 129 )

Translation adjustment 1 4 9

2 unchanged sentences

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding, adjusted for outstanding shares that are subject to repurchase during each period.

Diluted earnings per share is computed using the weighted average number of common shares plus the potentially dilutive effect of common stock equivalents (outstanding stock options, restricted stock and restricted stock units) issued and outstanding at the reporting date, and assumed conversion premium of outstanding convertible notes, using the treasury stock method.

Common stock equivalents and the conversion premium of outstanding convertible notes that are anti-dilutive are excluded from the computation of weighted average shares outstanding.

Diluted earnings per share is computed using the weighted average number of common shares plus the potentially dilutive effect of common stock equivalents (outstanding stock options, restricted stock and restricted stock units) issued and outstanding at the reporting date, and an assumed conversion premium of outstanding convertible notes, using the treasury stock method (as discussed further in the subsequent paragraph).

Common stock equivalents that are anti-dilutive are excluded from the computation of weighted average shares outstanding.

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 the Company's 3.5 % per annum Convertible Senior Notes due October 1, 2024 (the “Notes”).

In 2021, diluted weighted-average shares outstanding was 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 Company 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.

During the third quarter of 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.

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

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

Three months ended March 31,

Net income $ 36,178 $ 31,931

9 unchanged sentences

Weighted average potentially dilutive shares considered anti-dilutive and not included in computing diluted earnings per share 1,082 —

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

Cash, Cash Equivalents and Restricted Cash

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

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

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

March 31, 2022 March 31, 2021 December 31, 2021

Cash and cash equivalents $ 106,540 $ 177,121 $ 135,337

4 unchanged sentences

Other income, net consists of the following:

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

2021 2020 2021 2020

Gain on sale and mark-to-market of mutual funds $ 1,233 $ 1,965 $ 3,991 $ 7,131

Three months ended March 31,

Gain on sale and mark-to-market of mutual funds and money market funds $ 1,236 $ 1,103

Interest and dividend income 1,370 602

3 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

March 31, 2022

(In thousands, except per share amount and share count)

Property and Equipment, net

1 unchanged sentence

Estimated useful lives As of

(Years) September 30, 2021 December 31, 2020

(Years) March 31, 2022 December 31, 2021

Owned Assets:

21 unchanged sentences

Property and equipment, net $ 85,610 $ 86,008

*Depreciation on assets held under finance leases are computed using the straight-line method over the shorter of the assets estimated useful lives or the lease term.

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

During the three months ended March 31, 2022, 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 September 30, Nine months ended September 30,

2021 2020 2021 2020

Three months ended March 31,

Depreciation and amortization expense $ 9,116 $ 8,740

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

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

2021 2020 2021 2020

Effect of foreign exchange gain/(loss) $ 120 $ 18 $ 443 $ ( 31 )

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

Three months ended March 31,

Effect of foreign exchange gain $ 67 $ 165

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

March 31, 2022

(In thousands, except per share amount and share count)

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Cost $ 25,977 $ 19,289

2 unchanged sentences

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

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

2021 2020 2021 2020

Three months ended March 31

Amortization expense $ 1,033 $ 1,024

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;

As of March 31, 2022 and December 31, 2021, 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.

2 unchanged sentences

The duration and severity of COVID-19 and continued market volatility is highly uncertain and, as such, the impact on undiscounted cash flows is subject to significant judgment and may cause variability in the Company’s assessment of the existence of any impairment.

Goodwill and Intangible Assets

The Company transitioned to new segment reporting structure effective January 1, 2020, which resulted in certain changes to its operating segments and reporting units.

The Company reallocated goodwill to its reporting units using a relative fair value approach.

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.

Business Combination, Goodwill and Intangible Assets

Clairvoyant AI Inc.

On December 16, 2021, the Company, through its wholly owned subsidiary ExlService.com, LLC (“Buyer”), completed the acquisition of Clairvoyant, a Delaware corporation, pursuant to an equity securities purchase agreement dated December 16, 2021 (the "Purchase Agreement").

The Company purchased 100 % of the issued and outstanding equity securities in Clairvoyant.

Clairvoyant is a global technology consulting and services company that helps organizations in their business transformation by maximizing the value of data through actionable insights.

It provides data engineering, analytics, machine learning, product engineering, and cloud-based solutions.

The acquisition strengthens the Company’s capabilities by adding additional expertise in data engineering and cloud enablement, further supporting its clients in insurance, healthcare, banking and financial services, and retail.

The base purchase consideration payable at Closing was $ 80,080 , excluding cash and cash equivalents acquired, debt and other estimated post-closing adjustments.

As of March 31, 2022 and December 31, 2021, of the total purchase consideration, the Company has paid $ 78,198 and $ 76,831 , respectively, net of cash and cash equivalents acquired.

The Purchase Agreement also allows sellers the ability to earn up to $ 20,000 in earn-out payments, based on the achievement of certain performance goals by Clairvoyant during 2022 and 2023 calendar years.

The earn-out has an estimated fair value of $ 9,000 and has been presented as contingent consideration under “Other non-current liabilities” and “Accrued expenses and other current liabilities,” as applicable, as of March 31, 2022 and December 31, 2021 in the consolidated balance sheets.

A portion of the purchase consideration otherwise payable was placed into escrow as security for the post-closing working capital adjustments and the indemnification obligations under the Purchase Agreement.

To finance the acquisition at Closing, the Company utilized its revolving Credit Facility in the amount of $ 75,000 and paid the balance with available cash on hand.

The Company accounted for the business combination using the acquisition method of accounting.

The measurement period will not exceed one year from the acquisition date.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

Pursuant to the Company’s business combinations accounting policy, the aggregate purchase consideration for Clairvoyant was allocated to identifiable net tangible and intangible assets based upon their preliminary fair values.

The excess of the estimated purchase consideration over fair value of identifiable net tangible and intangible assets was recorded as goodwill.

In order to allocate the consideration transferred for Clairvoyant, the fair values of all identifiable assets and liabilities must be established.

For accounting and financial reporting purposes, fair value is defined under ASC No.

820, Fair Value Measurement and Disclosure, as the price that would be received upon sale of an asset or the amount paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability.

Additionally, fair value measurements for an asset assume the highest and best use of that asset by market participants.

Use of different estimates and judgments could yield different results.

The Company’s preliminary purchase price allocation to net tangible and intangible assets of Clairvoyant as of December 16, 2021 was as follows:

Cash and cash equivalents

Accounts receivable, net

Other current assets

Property and equipment, net

Intangible assets, net

Customer relationships

Developed technology

Trade names and trademarks

Non-compete agreements

Accounts payable

Accrued expenses and other current liabilities

Deferred tax liabilities

Other non-current liabilities

Total liabilities

Net assets acquired

Total purchase consideration*

* Includes contingent consideration of $ 9,000 recognized at fair value.

The fair value of assets acquired and liabilities assumed from the acquisition of Clairvoyant is based on a preliminary valuation and, as such, the Company's estimates and assumptions are subject to change within the measurement period.

The primary areas of the purchase price allocation that are not yet finalized are related to post-closing working capital and debt adjustments and reflect management’s best estimates and assumptions as of the reporting date.

During the three months ended March 31, 2022, the Company recognized measurement period adjustments, which led to increase in goodwill in an amount of $ 1,148 .

The adjustments related to measurement of favorable lease intangibles of $ 160 included under “other assets” and reserves for various tax matters of $ 988 included under “other current liabilities.”

The fair values of customer relationships were determined by using an “income approach,” specifically the Multi-Period Excess Earnings Method.

The customer relationship assets are being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of 7 years .

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

The fair values of the developed technology intangible assets were determined by using the “cost approach,” specifically the replacement cost method.

The technology assets are being amortized on a straight-line basis (which approximates the economic pattern of benefits) over the estimated economic life of 3 years.

The goodwill recognized represents the acquired capabilities, operating synergies and other benefits expected to result from combining the acquired operations with the Company’s existing operations.

The amount of goodwill recognized from Clairvoyant’s acquisition is not deductible for tax purposes.

The goodwill has been assigned to the Company’s Analytics reportable segment based upon the Company’s assessment of nature of services rendered by Clairvoyant.

Acquisition-related costs are being expensed as incurred and are included in general and administrative expenses in the consolidated statements of income.

The Company recognized acquisition-related costs of $ 134 and $ 761 during the three months ended and year ended March 31, 2022 and December 31, 2021, respectively.

The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company’s consolidated financial statements with effect from the date of the acquisition.

The acquisition did not materially impact the Company's financial position, results of operations or cash flows, and therefore, the Company has not provided supplemental pro forma results.

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

1 unchanged sentence

Balance at January 1, 2022 $ 50,428 $ 21,942 $ 49,020 $ 282,512 $ 403,902

Measurement period adjustments — — — 1,148 1,148

Currency translation adjustments ( 116 ) ( 12 ) ( 361 ) — ( 489 )

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

Balance at March 31, 2022 $ 50,312 $ 21,930 $ 48,659 $ 283,660 $ 404,561

During the fourth quarter of 2021, 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 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.

As of March 31, 2022, 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 certain improvements in current and forecasted economic and market conditions and qualitative factors, such as the Company’s performance in the first quarter and business forecasts for the remainder of the year, stock price movements and expansion plans.

The Company reviewed key assumptions, including revisions of projected future revenues for reporting units against the results of the annual impairment test performed during the fourth quarter of 2021.

The Company did not identify any triggers or indications of potential impairment for its reporting units as of March 31, 2022.

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

6 unchanged sentences

The Company continues to maintain its focus on cultivating long-term client relationships as well as attracting new clients.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

Intangible Assets

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

As of September 30, 2021

As of March 31, 2022

Carrying Amount Accumulated

4 unchanged sentences

Trade names and trademarks 1,700 ( 1,085 ) 615

Non-compete agreements 300 ( 22 ) 278

$ 125,264 $ ( 49,586 ) $ 75,678

8 unchanged sentences

Trade names and trademarks 1,700 ( 1,006 ) 694

Non-compete agreements 300 — 300

$ 130,056 $ ( 49,874 ) $ 80,182

3 unchanged sentences

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

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

2021 2020 2021 2020

Three months ended March 31,

Amortization expense $ 4,486 $ 3,361

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) 2.2

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

Non-compete agreements

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

Estimated future amortization expense related to finite-lived intangible assets as of March 31, 2022 was as follows:

2022 (April 1 - December 31) $ 12,514

2027 and thereafter 16,011

2 unchanged sentences

Other current assets consist of the following:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Receivables from statutory authorities $ 14,509 $ 18,023

7 unchanged sentences

Other assets consist of the following:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Lease deposits $ 9,772 $ 9,649

Deposits with statutory authorities 7,277 6,417

Derivative instruments 5,390 6,933

Deferred contract fulfillment costs 5,848 4,312

Derivative instruments 5,531 6,307

Contract assets 1,010 1,205

Receivable from Statutory authorities 223 222

Term deposits 184 186

3 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

March 31, 2022

(In thousands, except per share amount and share count)

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Accrued expenses $ 45,626 $ 44,405

9 unchanged sentences

Other non-current liabilities consist of the following:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Retirement benefits $ 10,518 $ 9,604

Contingent consideration 6,600 9,000

Deferred transition revenue 2,069 995

Derivative instruments 1,613 1,785

Unrecognized tax benefits 2,056 1,068

Deferred transition revenue 509 924

Finance lease liabilities 237 229

Accrued capital expenditures — 3,486

Others 103 120

Other non-current liabilities $ 23,196 $ 22,801

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss (“AOCL”) consists of actuarial gain/(loss) on retirement benefits and foreign currency translation adjustments.

Accumulated Other Comprehensive Income/(Loss)

Accumulated other comprehensive income/(loss) (“AOCI”) consists of actuarial gain/(loss) on retirement benefits and foreign currency translation adjustments.

In addition, the Company enters into foreign currency exchange contracts, which are designated as cash flow hedges and net investment hedges in accordance with ASC 815.

Cumulative changes in the fair values of these foreign currency exchange contracts are recognized in AOCL on the Company's unaudited consolidated balance sheets.

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 September 30, 2021 and 2020 are as follows:

Cumulative changes in the fair values of these foreign currency exchange contracts are recognized in AOCI on the Company's unaudited consolidated balance sheets.

Upon settlement of foreign exchange contracts designated as cash flow hedges, fair value changes are reclassified from AOCI 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 March 31, 2022 and 2021 are as follows:

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

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

March 31, 2022

(In thousands, except per share amount and share count)

Accumulated Other Comprehensive Income/(Loss)

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

Balance as of January 1, 2022 $ ( 95,437 ) $ 8,420 $ ( 2,457 ) $ ( 89,474 )

Losses recognized during the period ( 7,445 ) ( 517 ) — ( 7,962 )

Losses on net investment hedges ( 1,134 ) — — ( 1,134 )

Reclassification to net income (1)

2 unchanged sentences

499 512 ( 47 ) 964

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

Accumulated other comprehensive income/(loss) as of March 31, 2022 $ ( 102,383 ) $ 6,426 $ ( 2,349 ) $ ( 98,306 )

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

4 unchanged sentences

284 ( 9 ) ( 51 ) 224

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

Accumulated other comprehensive income/(loss) as of March 31, 2021 $ ( 87,812 ) $ 11,529 $ ( 2,470 ) $ ( 78,753 )

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.

1 unchanged sentence

Refer to Note 21 - Income Taxes to the unaudited consolidated financial statements.

Fair Value Measurements

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

September 30, 2021 and December 31, 2020.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

Quoted Prices

Identical Assets Significant

Inputs Significant

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

March 31, 2022

(In thousands, except per share amount and share count)

Fair Value Measurements

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 March 31, 2022 and December 31, 2021:

Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Unobservable Inputs

As of March 31, 2022 (Level 1) (Level 2) (Level 3) Total

Cash and cash equivalents (money market funds)* $ 137 $ — $ — $ 137

Mutual funds** 109,438 — — 109,438

2 unchanged sentences

Derivative financial instruments $ — $ 3,387 $ — $ 3,387

Contingent consideration*** — — 9,000 9,000

Total $ — $ 3,387 $ 9,000 $ 12,387

Quoted Prices

Identical Assets Significant

Inputs Significant

Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Other Unobservable Inputs

As of December 31, 2021 (Level 1) (Level 2) (Level 3) Total

Cash and cash equivalents (money market funds)* $ 5,374 $ — $ — $ 5,374

Mutual funds** 127,551 — — 127,551

2 unchanged sentences

Derivative financial instruments $ — $ 3,637 $ — $ 3,637

Contingent consideration*** — — 9,000 9,000

Total $ — $ 3,637 $ 9,000 $ 12,637

* Represents money market funds which are carried at the fair value option under ASC 825 “Financial Instruments”.

** Represents those short-term investments which are carried at the fair value option under ASC 825 “Financial Instruments”.

*** Contingent consideration is presented under “Accrued Expenses and Other Current Liabilities” and “Other Non-Current Liabilities,” as applicable, in the consolidated balance sheets.

Derivative Financial Instruments:

The Company’s derivative financial instruments consist of foreign currency forward exchange contracts.

Fair values for derivative financial instruments are based on independent sources including highly rated financial institutions and are classified as Level 2.

Fair values for derivative financial instruments are based on independent sources including highly rated financial institutions and are classified

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

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

Fair Value of Contingent Consideration:

The fair value measurement of contingent consideration is determined using Level 3 inputs.

The Company’s contingent consideration represents a component of the total purchase consideration for its acquisition of Clairvoyant.

The measurement is calculated using unobservable inputs based on the Company’s own assessment of achievement of certain performance goals by Clairvoyant during 2022 and 2023 calendar years.

The Company estimated the fair value of the contingent consideration to be $ 9,000 , based on Monte Carlo simulation model and scenario-based method.

Financial Instruments Not Carried at Fair Value :

The Company’s other financial instruments not carried at fair value consist primarily of cash and cash equivalents, short-term investments (except investments in mutual funds, as disclosed above), restricted cash, accrued interest on term deposits, accrued capital expenditures, accrued expenses and interest payable on borrowings for which fair values approximate their carrying amounts due to their short-term nature.

The Company’s other financial instruments not carried at fair value consist primarily of cash and cash equivalents (except investments in money market funds, as disclosed above), short-term investments (except investments in mutual funds, as disclosed above), restricted cash, accrued interest on term deposits, accrued capital expenditures, accrued expenses and interest payable on borrowings for which fair values approximate their carrying amounts due to their short-term nature.

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)

September 30, 2021

(In thousands, except share and per share amounts)

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 $ 515,850 as of September 30, 2021 and $ 451,935 as of December 31, 2020.

The Company had outstanding cash flow hedges totaling $ 566,940 as of March 31, 2022 and $ 514,580 as of December 31, 2021.

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 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,” and “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 $ 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 estimates that approximately $ 5,443 of derivative gains, net, excluding tax effects, included in AOCI, 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 March 31, 2022.

At March 31, 2022, the maximum outstanding term of the cash flow hedges was approximately 39 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 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.

Outstanding foreign currency forward contracts amounted to USD 163,442 , GBP 7,948 and EUR 1,630 as of March 31, 2022 and USD 134,612 , GBP 6,763 , EUR 1,343 and COP 2,541,902 as of December 31, 2021.

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

Gains and losses on these net investment hedges are recognized in AOCL as part of foreign currency translation adjustments.

Gains and losses on these net investment hedges are recognized in AOCI as part of foreign currency translation adjustments.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

All of the assets and liabilities related to our foreign exchange forward contracts are subject to master netting arrangements with each individual counterparty.

3 unchanged sentences

The following tables set forth the fair value of the foreign currency exchange contracts and their location on the unaudited consolidated financial statements:

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

Derivatives designated as hedging instruments:

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

Foreign currency exchange contracts March 31, 2022 December 31, 2021

Other current assets $ 7,198 $ 8,669

3 unchanged sentences

Derivatives not designated as hedging instruments:

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

Foreign currency exchange contracts March 31, 2022 December 31, 2021

Other current assets $ 201 $ 13

Accrued expenses and other current liabilities $ 19 $ 528

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 nine months ended September 30, 2021 and 2020:

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

The following tables set forth the effect of foreign currency exchange contracts on accumulated other comprehensive income/(loss) and the unaudited consolidated statements of income for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

Forward Exchange Contracts:

2021 2020 2021 2020

Unrealized gain/(loss) recognized in AOCL

Unrealized gain/(loss) recognized in AOCI

Derivatives in cash flow hedging relationships $ ( 517 ) $ 568

Gain/(loss) recognized in consolidated statements of income

Derivatives not designated as hedging instruments $ ( 464 ) $ 3,372 $ ( 1,054 ) $ 2,429

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

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 September 30,

As per unaudited consolidated

statements of

income Gain/(loss)

on foreign currency exchange contracts As per unaudited consolidated

statements of

income Gain/(loss) on foreign currency exchange contracts

Cash flow hedging relationships

Location in unaudited consolidated statements of income where gain/(loss) was reclassed from AOCL

Cost of revenues $ 177,743 $ 1,801 $ 152,087 $ ( 233 )

General and administrative expenses $ 36,167 223 $ 26,810 ( 132 )

Selling and marketing expenses $ 21,672 11 $ 15,290 ( 4 )

Depreciation and amortization expense $ 12,305 115 $ 12,425 ( 66 )

Total before tax 2,150 ( 435 )

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

Net of tax $ 1,780 $ ( 388 )

Gain/(loss) recognized in unaudited consolidated statements of income

Derivatives not designated as hedging instruments $ ( 899 ) $ 215

Location in unaudited consolidated statements of income where gain/(loss) was recognized

Foreign exchange gain/(loss), net $ 1,171 $ ( 464 ) $ 716 $ 3,372

$ 1,171 $ ( 464 ) $ 716 $ 3,372

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

March 31, 2022

(In thousands, except per share amount and share count)

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

Nine months ended September 30,

As per unaudited consolidated

statements of

income Gain/(loss) on foreign currency exchange contracts As per unaudited consolidated

statements of

income Gain/(loss)

on foreign currency exchange contracts

Three months ended March 31,

As per unaudited consolidated statements of income Gain on foreign currency exchange contracts As per unaudited consolidated statements of income Gain on foreign currency exchange contracts

Cash flow hedging relationships

Location in unaudited consolidated statements of income where gain/(loss) was reclassed from AOCL

Location in unaudited consolidated statements of income where gain was reclassed from AOCI

Cost of revenues $ 207,516 $ 1,583 $ 158,821 $ 2,424

3 unchanged sentences

Total before tax 1,989 2,829

Income tax benefit/(expense) relating to above ( 1,186 ) 69

Income tax expense relating to above ( 515 ) ( 389 )

Net of tax $ 1,474 $ 2,440

3 unchanged sentences

$ 1,756 $ ( 899 ) $ 434 $ 215

Effect of net investment hedges on accumulated other comprehensive loss:

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

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

Net investment hedging relationships 2021 2020 2021 2020

Foreign exchange contracts $ — $ — $ 1,134 $ —

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

September 30, 2021

(In thousands, except share and per share amounts)

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

As of September 30, 2021

The following tables summarizes the Company’s debt position as of March 31, 2022 and December 31, 2021:

As of March 31, 2022

As of December 31, 2021

Revolving Credit Facility Total Revolving Credit Facility Notes Total

Revolving Credit Facility Total Revolving Credit Facility Total

Current portion of long-term borrowings $ 35,000 $ 35,000 $ 260,016 $ 260,016

Long-term borrowings $ 260,000 $ 260,000 $ — $ —

Unamortized debt discount — — — ( 11,236 ) ( 11,236 )

Unamortized debt issuance costs* — — — ( 803 ) ( 803 )

Long-term borrowings

$ 170,000 $ 170,000 $ 64,000 $ 137,961 $ 201,961

Total borrowings $ 295,000 $ 295,000 $ 260,016 $ 260,016

*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.

Unamortized debt issuance costs for the Company’s revolving Credit Facility of $ 198 and $ 232 as of March 31, 2022 and December 31, 2021, respectively, are presented under “Other current assets” and “Other assets,” as applicable in the consolidated balance sheets.

Credit Agreement

The Company’s $ 300,000 revolving credit facility pursuant to its credit agreement (the “Credit Agreement”) with certain lenders and Citibank N.A.

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

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

2021 2020 2021 2020

The Company held a $ 300,000 revolving credit facility pursuant to its credit agreement (the “Credit Agreement”), dated as of November 21, 2017 with certain lenders and Citibank N.A.

as Administrative Agent (the “Credit Facility”).

The Credit Facility had a maturity date of November 21, 2022 and was voluntarily pre-payable from time to time without premium or penalty.

On April 18, 2022, the Company entered into an Amendment and Restatement Agreement with Citibank, N.A.

as Administrative Agent and certain lenders (the “2022 Credit Agreement”).

Refer to Note 24 – Subsequent Events to the unaudited consolidated financial statements.

The Credit Facility carried an effective interest rate as shown below:

Three months ended March 31

Effective Interest Rate 1.3 % 2.0 %

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.

As of March 31, 2022 and December 31, 2021, 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 the Notes.

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

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:

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 %

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

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

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

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

The Company had the option to redeem the principal amount of the Notes, at its option, 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).

On August 27, 2021, the Company entered into a Payoff and Termination Agreement with the Purchaser, pursuant to which the Company prepaid and settled its outstanding obligations under the Notes, by electing a combination of cash and shares of the Company’s common stock.

During the three months ended March 31, 2021, the Company recognized interest expense and amortization of debt discount of $ 1,986 on the Notes.

Expected payments for all of the Company's borrowings as of March 31, 2022 were as follows:

Revolving Credit Facility Interest Payments

2022 (April 1 - December 31) $ 35,000 $ 2,723

2027 and thereafter 260,000 419

Total $ 295,000 $ 16,590

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 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)

September 30, 2021

(In thousands, except share and per share amounts)

As of March 31, 2022 and December 31, 2021, the Company had outstanding letters of credit of $ 461 , each, that were not recognized in the consolidated balance sheets.

Capital Structure

2 unchanged sentences

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

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

Three months ended March 31, 2022 27,219 $ 3,191 $ 117.23

Three months ended March 31, 2021 25,450 $ 2,015 $ 79.18

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").

Under the 2019 Repurchase Program, shares may be purchased by the Company from time to time from the open market and through private transactions, or otherwise, as determined by the Company’s management as market conditions warrant.

On October 5, 2021, the Company’s Board of Directors authorized a $ 300,000 common stock repurchase program beginning January 1, 2022 (the “2022 Repurchase Program”), and terminated the 2019 Repurchase Program on December 31, 2021.

Under the 2022 Repurchase Program and 2019 Repurchase Program, shares may be purchased by the Company from time to time from the open market and through private transactions, or otherwise, as determined by the Company’s management as market conditions warrant.

Repurchases may be discontinued at any time by the management.

The Company purchased shares of its common stock, including commissions, under the 2019 Repurchase Program, as below:

The Company purchased shares of its common stock, including commissions, under repurchase programs, as below:

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

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

Three months ended March 31, 2022 221,333 $ 28,194 $ 127.38

Three months ended March 31, 2021 313,032 $ 27,000 $ 86.25

(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.

Repurchased shares have been recorded as treasury shares and will be held until the Company’s Board of Directors designates that these shares be retired or used for other purposes.

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)

March 31, 2022

(In thousands, except per share amount and share count)

Components of net periodic benefit costs, were as follows:

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

2021 2020 2021 2020

Three months ended March 31,

Service cost $ 990 $ 889

3 unchanged sentences

Net gratuity cost $ 1,240 $ 1,102

Income tax benefit on amortization of actuarial loss ( 32 ) ( 32 ) ( 154 ) ( 96 )

Income tax effects on amortization of actuarial loss ( 47 ) ( 51 )

Amortization of actuarial loss, net of tax $ 108 $ 128

10 unchanged sentences

Effect of exchange rate changes ( 260 )

Plan assets at September 30, 2021 $ 14,123

Plan assets at March 31, 2022 $ 13,149

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 September 30, Nine months ended September 30,

2021 2020 2021 2020

Three months ended March 31,

Contribution to the 401(k) Plans $ 2,017 $ 1,299

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

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,

Three months ended March 31,

Contributions to the defined benefit plans

$ 4,213 $ 3,294

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.

1 unchanged sentence

The lease agreements do not contain any covenants to impose any restrictions except for market-standard practice for similar lease arrangements.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

The Company had performed an evaluation of its contracts with suppliers in accordance with Topic 842, Leases , and had determined that, except for leases for office facilities, motor vehicles and other equipment as described above, none of the Company’s contracts contain a lease.

1 unchanged sentence

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 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 Company recognizes changes to the lease term by remeasuring lease liabilities as of the date of such modification with the resultant 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

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

March 31, 2022 December 31, 2021

Operating Lease

10 unchanged sentences

Total finance lease liabilities $ 374 $ 370

Finance lease liabilities are presented as a part of “Accrued expenses and other current liabilities” and “Other non-current liabilities,” as applicable, in the Company’s consolidated balance sheets.

Finance lease liabilities are presented as a part of “Accrued expenses and other current liabilities” and “Other non-current liabilities,” as applicable, in the Company’s unaudited consolidated balance sheets.

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

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

Lease cost Three months ended March 31, 2022 Three months ended March 31, 2021

Finance lease:

2021 2020 2021 2020

Amortization of right-of-use assets $ 38 $ 52

1 unchanged sentence

Operating lease (a)

Variable lease costs 1,121 1,840

$ 7,164 $ 8,601

1 unchanged sentence

(a) Includes short-term leases, which are immaterial.

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

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,

March 31, 2022

(In thousands, except per share amount and share count)

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

Three months ended March 31,

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

11 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 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:

The Company modified certain of its operating leases, resulting in an increase of its lease liabilities by $ 367 and $ 169 during the three months ended March 31, 2022 and 2021, respectively, with a corresponding adjustment to ROU assets.

As of March 31, 2022 and December 31, 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 March 31, 2022 were as follows:

Operating Leases Finance Leases

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

2022 (April 1 - December 31) $ 18,480 $ 142

2023 23,220 164

6 unchanged sentences

Present value of lease liabilities $ 85,481 $ 374

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)

March 31, 2022

(In thousands, except per share amount and share count)

Maturities of lease liabilities as of December 31, 2021 were as follows:

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 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.

The Company bases its decision to continue to indefinitely reinvest earnings in India and the Philippines on its estimate of the working capital required to support its operations in these geographies and periodically reviews its capital initiatives to support and expand the Company’s global operations, as well as an economically viable rate of return on its investments made in India and the Philippines as compared to those made in the United States.

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

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

The Company's effective tax rate increased from 21.9 % during the three months ended March 31, 2021 to 23.7 % during the three months ended March 31, 2022.

The Company recorded income tax expense of $ 11,202 and $ 8,958 for the three months ended March 31, 2022 and 2021, respectively.

The increase in the income tax expense was primarily as a result of higher profit during the three months ended March 31, 2022 compared to the three months ended March 31, 2021, and an increase in non-deductible expenses, partially offset by higher excess tax benefits during the three months ended March 31, 2022.

Income tax (deferred) recognized in AOCI were as follows:

Three months ended March 31,

Deferred taxes benefit / (expense) recognized on:

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

Unrealized gain/(loss) on cash flow hedges $ ( 3 ) $ ( 398 )

Reclassification adjustment for cash flow hedges 515 389

Reclassification adjustment for retirement benefits ( 47 ) ( 51 )

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

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

Foreign currency translation loss 499 284

Total Income tax benefit recognized in AOCI $ 964 $ 224

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 September 30, Nine months ended September 30,

2021 2020 2021 2020

Three months ended March 31,

Cost of revenues $ 2,641 $ 1,536

2 unchanged sentences

Total $ 11,224 $ 7,832

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

Income tax benefit related to share-based compensation, including excess tax benefits $ 2,806 $ 2,358

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

As of March 31, 2022, the Company had 1,256,384 shares available for grant under the 2018 Omnibus Incentive Plan.

Stock Options

7 unchanged sentences

Forfeited — — — —

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

Outstanding at March 31, 2022 3,093 $ 27.62 $ 358 1.8

Vested and exercisable at March 31, 2022 3,093 $ 27.62 $ 358 1.8

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:

Restricted Stock

Restricted Stock Units

Number Weighted-Average

3 unchanged sentences

Forfeited ( 11,413 ) 95.72

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.

Outstanding at March 31, 2022* 1,055,269 $ 97.07

* As of March 31, 2022 and December 31, 2021 restricted stock units vested for which the underlying common stock is yet to be issued are 163,130 and 162,481 respectively.

As of March 31, 2022, unrecognized compensation cost of $ 92,797 is expected to be expensed over a weighted average period of 2.9 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 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.

During the three months ended March 31, 2022, the Company granted 40 % of each award recipient’s equity grants in the form of PRSUs that cliff vest at the end of a three-year period based on an aggregated revenue target for a three year period.

The remaining 60 % of each award recipient’s equity grants are PRSUs that are 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.

However, the features of the equity incentive compensation program are subject to change by the Compensation Committee of our Board of Directors.

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

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

Performance restricted stock unit activity under the Company’s stock plans is shown below:

6 unchanged sentences

Forfeited — — — —

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.

Outstanding at March 31, 2022 111,566 $ 97.98 251,043 $ 126.93

As of March 31, 2022, unrecognized compensation cost of $ 33,048 is expected to be expensed over a weighted average period of 2.3 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.

Related Party Disclosures

On October 1, 2018, the Company entered into the Investment Agreement with the Purchaser relating to the issuance to the Purchaser of $ 150,000 aggregate principal amount of the Notes.

In connection with the investment, Vikram S.

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

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

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

At March 31, 2022, the Company had committed to spend approximately $ 6,300 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.”

Other Commitments

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

Certain units of the Company’s Indian subsidiaries were established as 100 % Export-Oriented units or under the Software Technology Parks of India (STPI) or Special Economic Zone (SEZ) scheme promulgated by the Government of India.

These units are exempt from customs, central excise duties, and levies on imported and indigenous capital goods, stores, and spares.

3 unchanged sentences

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

to meet certain performance and investment criteria.

The Company believes that these centers have in the past satisfied and will continue to satisfy the required criteria.

to meet certain performance, investment and certain other criteria.

The Company believes that these centers have in the past complied with the requirements.

Contingencies

Transfer pricing regulations generally require that any controlled intercompany transactions involving related entities be at an arm’s-length price.

Accordingly, the Company determines the appropriate transfer prices for transactions among its related entities on the basis of a detailed functional and economic analysis involving benchmarking against transactions among entities that are unrelated.

Tax authorities have jurisdiction to review transfer pricing results, and in the event that they determine that the transfer price applied was not appropriate, the Company may incur additional tax, interest and penalties.

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

Further, the Company and a U.S.

In addition, 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 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 $ 6,229 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

The aggregate amount demanded by Indian tax authorities (net of advance payments) 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 March 31, 2022 and December 31, 2021 is $ 30,711 and $ 34,276 , respectively.

The Company has made

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.

The Company does not expect any impact from these assessments on its future income tax expense.

March 31, 2022

(In thousands, except per share amount and share count)

payments and/or provided bank guarantees against these demands in the amounts of $ 8,760 and $ 7,954 , respectively.

Amounts paid as deposits in respect of such assessments aggregating to $ 7,012 and $ 6,172 as of March 31, 2022 and December 31, 2021, respectively, are included in “Other assets” and amounts deposited for bank guarantees aggregating to $ 1,748 and $ 1,782 as of March 31, 2022 and December 31, 2021, respectively, are included in “Restricted cash” in the non-current assets section of the Company’s unaudited consolidated balance sheets.

It is possible that the Company might receive similar orders or assessments from tax authorities for subsequent years.

Accordingly, even if these disputes are resolved, the Indian tax authorities may still serve additional orders or assessments.

India’s Value Added Tax ("VAT") regime ended in June 2017 and was replaced by the current Goods and Service Tax ("GST") regime.

Pursuant to reviewing the Company’s annual VAT filings, the Indian tax authorities raised aggregate VAT tax demands for tax years 2015 and 2017 in an amount of $ 6,031 and $ 6,387 as of March 31, 2022 and December 31, 2021, respectively.

Beginning in the first quarter of 2020, the GST authorities rejected the Company’s refunds claims in an amount of $ 3,259 and $ 3,322 as of March 31, 2022 and December 31, 2021, respectively.

The Company has filed appeals against these matters and believes that it is more likely than not that upon final examination its position will be sustained based on its technical merits.

Accordingly, no provision was recognized as of March 31, 2022 and December 31, 2021.

In February 2019, there was a judicial pronouncement in India with respect to defined social security contribution benefits payments interpreting certain statutory defined contribution obligations of employees and employers.

16 unchanged sentences

Based on the Company’s assessment, including the availability of insurance recoveries, the Company’s management does not believe that currently pending litigation, individually or in aggregate, will have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

EXLSERVICE HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(continued)

March 31, 2022

(In thousands, except per share amount and share count)

Subsequent Events

On April 18, 2022, the Company and each of the Company’s wholly owned material domestic subsidiaries entered into the 2022 Credit Agreement, pursuant to which the parties thereto amended and restated the Credit Agreement.

Among other things, the 2022 Credit Agreement (a) provides for the issuance of new revolving credit commitments such that the aggregate amount of revolving credit commitments available to the Company is equal to $ 400,000 ;

(b) extends the maturity date of the Credit Facility from November 21, 2022 to April 18, 2027;

and (c) replaces LIBOR with Secured Overnight Financing Rate (“SOFR”) as the reference rate for the U.S.

dollar borrowings.

The 2022 Credit Agreement provides an option to increase the commitments by up to $ 200,000 , subject to certain approvals and conditions.

The 2022 Credit Agreement includes a letter of credit sub facility and is voluntarily pre-payable from time to time without premium or penalty.

Borrowings under the 2022 Credit Agreement can be used for working capital and general corporate purposes, including permitted acquisitions.

Obligations under the 2022 Credit Agreement are guaranteed by the Company’s material domestic subsidiaries and are secured by all or substantially all of the assets of the Company and our material domestic subsidiaries.

The 2022 Credit Agreement contains customary affirmative and negative covenants, including, but not limited to, restrictions on the ability to incur indebtedness, create liens, make certain investments, make certain dividends and related distributions, enter into, or undertake, certain liquidations, mergers, consolidations or acquisitions and dispose of certain assets or subsidiaries.

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