What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-28 compared with 2021-11-02 · 169 added, 326 removed, 151 unchanged (77% of the section changed)

2 unchanged sentences

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

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

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

We have described in this Quarterly Report on Form 10-Q, the impact of the global Coronavirus Disease 2019 pandemic (“COVID-19”) on our financial results for the quarter ended March 31, 2022.

See "Cautionary Note Regarding Forward-Looking Statements" below, and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for further information regarding risks and uncertainties relating to COVID-19.

Cautionary Note Regarding Forward-Looking Statements

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

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

• worldwide political, economic or business conditions;

• our dependence on a limited number of clients in a limited number of industries and our ability to withstand the loss of a significant client;

• negative public reaction in the U.S.

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• our ability to successfully consummate or integrate strategic acquisitions;

• our ability to accurately estimate and/or manage the costs and/or timing of winding down businesses;

• our ability to accurately estimate and/or manage the costs;

• restrictions on immigration;

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• increasing competition in our industry;

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

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

• telecommunications or technology disruptions or breaches, natural or other disasters, medical epidemics or pandemics, or acts of violence or war;

• our ability to realize the entire book value of goodwill and other intangible assets from acquisitions;

• our ability to make accurate estimates and assumptions in connection with the preparation of our consolidated financial statements;

• failure to protect our intellectual property;

• regulatory, legislative and judicial developments, including changes to or the withdrawal of governmental fiscal incentives;

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• ability to service debt or obtain additional financing on favorable terms;

• credit risk fluctuations in the market values of our investment and derivatives portfolios;

• legal liability arising out of customer contracts;

• technological innovation;

• political or economic instability in the geographies in which we operate;

• our ability to meet our environmental, social and governance-related goals and targets;

• effects of political and economic conditions globally, particularly in the geographies where we operate;

• operational and information security failures arising as a result of remote work solutions adopted due to COVID-19;

• cyber security incidents, data breaches, or other unauthorized disclosure of sensitive or confidential client and customer data;

• adverse outcome of our disputes with the Indian tax authorities.

• cyber security incidents, data breaches, or other unauthorized disclosure of sensitive or confidential client and employee data;

• adverse outcome of our disputes with the tax authorities, in the geographies where we operate.

These and other factors are more fully discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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Executive Overview

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

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

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

We are 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, AI and ML, we create agile, scalable solutions and execute complex operations for the world’s leading corporations in industries including insurance, healthcare, banking and financial services, media, and retail, among others.

We deliver data analytics and digital operations and solutions to our clients, driving enterprise-scale business transformation initiatives that leverage our deep expertise in advanced analytics, AI, ML and cloud.

We manage and report financial information through our four strategic business units:

Insurance, Healthcare, Analytics and Emerging Business.

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

Our reportable segments are as follows:

• Healthcare,

• Analytics, and

• Emerging Business.

Our global delivery network, which includes highly trained industry and process specialists across the United States, Latin America, South Africa, Europe and Asia (primarily India and the Philippines), is a key asset.

We have operations centers in India, the United States, the United Kingdom, the Philippines, Bulgaria, Colombia, South Africa, Romania and the Czech Republic.

On December 16, 2021, we completed the acquisition of Clairvoyant, a global data, AI, ML, and cloud services firm that helps organizations in their business transformation by maximizing the value of data through actionable insights.

It provides data engineering, analytics, AI, ML, product engineering, and cloud-based solutions.

The acquisition strengthens our Analytics capabilities by adding additional expertise in data engineering and cloud enablement, further supporting our clients in the insurance, healthcare, banking and financial services, and retail industries.

Continued impact of COVID-19 on Our Business

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

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

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

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

In addition, the U.S.

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

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

We remain committed to helping our clients adapt and

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

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

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

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

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

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

In addition, we have also worked, and continue to work with national, state, and local authorities to comply with applicable rules and regulations related to COVID-19.

There continues to be volatility and economic and geopolitical uncertainty in many markets around the world due to the emergence and spread of new variants of COVID-19 across geographies.

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

In late March 2021, a new serious outbreak of the COVID-19 virus began affecting India with an exorbitant spike in the number of COVID patients.

The Indian government reinstated lockdowns limiting in certain cases the movement of our employees to offices, however these lockdowns were lifted as the situation in India improved.

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

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

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

Our Indian, Philippines and U.S.

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

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

In the geographies most affected by the recent COVID-19 variants, these actions included healthcare support including securing and administering vaccines for our employees, facilitating our employees’ access to medical equipment, providing ambulance services and online medical consultations, extending medical insurance to our employees’ family members and enhancing the dollar value of such coverage.

We also instituted a one-time employee compensation payment to beneficiaries of employees, facilitated voluntary contributions from our clients and employees to support the family members of deceased employees and providing financial support for their children's education.

Other actions included disseminating guidance and information to our employees, facilitating work from home, implementing best practices for employees while working from home, periodic CEO messaging, various programs aimed at employee wellness, including a global wellness program, enhanced leave for employees affected by COVID-19, enhanced awareness towards information security, and updated cyber security and data privacy policies, among others.

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

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

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

We continue to incur additional costs in order to ensure the continuity of our operations and support our work from home model.

Such costs include purchase of desktops and laptops for our employees, software and internet connectivity devices, technology tools for productivity enhancement, accommodation, meal, overtime, transportation and regular sanitization and cleaning costs of our offices and facilities.

We also expect that we will continue to incur additional costs to monitor and improve operational efficiency of our work from home model, implement new information technology solutions and security measures to safeguard against information security risks and protect the health and safety of our employees as they gradually return to the office.

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

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

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

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

the duration and scope of the pandemic;

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

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

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

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

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

global economic conditions and levels of economic growth;

and the pace of recovery when COVID-19 subsides.

Due to the above circumstances and as described generally in this Quarterly Report on Form 10-Q, our financial results, including but not limited to net revenues, income from operations, net income, cash flow and earnings per share, are not necessarily indicative of the results to be expected for the full fiscal year of 2021.

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

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

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

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

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

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

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

For the nine months ended September 30, 2021 and 2020, our total revenues from our top ten clients accounted for 38.6% and 37.3% of our total revenues, respectively.

Over the course of 2020 and 2021, and continuing into first quarter of 2022, our clients, contractors, suppliers, and other partners adapted in order to conduct business activities in a COVID-19 environment.

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

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

Our remote working delivery capability steadily improved throughout 2021 and the first quarter of 2022.

We are able to deliver a significant portion of our clients’ current requirements in a remote work model given the intermittent lockdown restrictions in the locations in which we operate.

However, certain clients have not authorized us to perform certain work remotely due to its sensitive nature.

As of March 31, 2022, there have been minimal interruptions in our ability to provide our services and support to our clients.

Working remotely has had relatively little impact on the productivity of our employees.

We continue to work closely with our clients to provide consistent access to our services and have remained flexible to achieve client priorities.

We continue to incur additional costs in order to ensure the continuity of our operations and support our remote work model.

Such costs include purchase of desktops and laptops for our employees, software and internet connectivity devices, technology tools for productivity enhancement, transportation, and sanitization and cleaning costs of our offices and facilities.

We also expect that we will continue to incur additional costs to monitor and improve operational efficiency of our remote work model, implement new information technology solutions and security measures to safeguard against information security risks and protect the health and safety of our employees as they gradually return to the office.

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

Based on our success of remote work model during the COVID-19 pandemic, we have implemented a new work standard under which employees in many of our locations, where permitted by local laws and regulations, and where the role and client requirements permit, will have the opportunity to choose between different work arrangements.

These include working in a hybrid arrangement, where an employee can split time between working from the office and working from a pre-approved remote location, or a fully remote arrangement, where an employee can work entirely from a pre-approved remote location.

We have begun to re-open some of our operation centers and offices globally with a focus on safety, while acting consistently with applicable local regulations.

We anticipate that the ability to open these operations centers and offices will vary significantly from region to region based on a number of factors, including the availability of COVID-19 vaccines and the spread of future COVID-19 variants.

Our operations centers and offices will not re-open fully until local authorities permit us to do so and our own criteria and conditions to ensure employee health and safety are satisfied.

We believe our actions have been successful and that the pandemic, and our responses, have not significantly affected our business, results of operations, financial position and cash flow during the first quarter of 2022, however the full extent of the impact of the pandemic for the period beyond the first quarter of 2022 is currently uncertain and will depend on many factors that are not within our control.

For additional information and risks related to COVID-19, see Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

For the three months ended March 31, 2022, we had revenues of $329.2 million compared to revenues of $261.4 million for the three months ended March 31, 2021, an increase of $67.8 million, or 25.9%.

We serve clients mainly in the United States and the United Kingdom, with these two regions generating 85.8% and 10.0%, respectively, of our total revenues for the three months ended March 31, 2022, and 85.8% and 9.5%, respectively, of our revenues for the three months ended March 31, 2021.

For the three months ended March 31, 2022 and 2021, our total revenues from our top ten clients accounted for 36.2% and 39.3% of our total revenues, respectively.

Our revenue concentration with our top clients remains largely consistent year-over-year and we continue to develop relationships with new clients to diversify our client base.

We believe that the loss of any of our top ten clients could have a material adverse effect on our financial performance.

We provide operations management and analytics services.

We provide data analytics and digital operations and solutions to our clients.

We market our services to our existing and prospective clients through our sales and client management teams, which are aligned by key industry verticals and cross-industry domains such as finance and accounting.

Our sales and client management teams operate from the United States, Europe and Australia.

Operations Management Services:

We provide our clients with a range of operations management services from our Insurance, Healthcare and Emerging Business operating segments, which typically involve the transfer by our clients to EXL of certain of their business operations, such as claims processing, clinical operations, or financial transaction processing, after which we administer and manage those operations on an ongoing basis.

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

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

Our sales and client management teams operate primarily from the United States, Europe and Australia.

Digital Operations and Solutions:

We provide our clients with a range of digital operations and solutions from our Insurance, Healthcare and Emerging Business strategic business units, which are focused on solving complex industry problems such as the insurance claims lifecycle and financial transactions processing, and typically involve the use of agile delivery models to implement digital technologies and interventions like hyper-automation, customer experience transformation, advanced automation, robotics, enterprise architecture, end-to-end business function management and transformations.

We either administer and manage these functions on an ongoing basis via longer-term arrangements or project work.

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

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

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

We also provide consulting services related to digital operations and solutions that include industry-specific digital transformational services as well as cross-industry finance and accounting services as part of the Emerging Business strategic business unit.

We provide our services under contracts with our clients, which typically have terms of three or more years, with some being rolling contracts with no end dates.

Typically, our clients can terminate these contracts with or without cause and with short notice periods.

These contracts provide us with a relatively predictable revenue base for a substantial portion of our operations management business.

These contracts provide us with a relatively predictable revenue base for a substantial portion of our digital operations and solutions business.

However, we have a long selling cycle for our services and the budget and approval processes of prospective clients make it difficult to predict the timing of entering into definitive agreements with new clients.

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We continue to observe a shift in the industry pricing models toward transaction-based pricing, outcome-based pricing and other alternative pricing models.

We believe this trend will continue and we use such alternative pricing models with some of our current clients and are seeking to move certain other clients from a full-time-equivalent pricing model to a transaction-based or other alternative pricing model.

alternative pricing model.

These alternative pricing models place the focus on operating efficiency in order to maintain or improve our gross margins.

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To the extent our large clients expand their use of multi-vendor relationships and are able to extract more favorable contract terms from other vendors, our gross margins and revenues may be reduced with regard to such clients if we are required to modify the terms of our relationships with such clients to meet competition.

Our analytics services focus on driving improved business outcomes for our customers by unlocking deep insights from data and create data-driven solutions across all parts of our customers’ business.

Our analytics services focus on driving improved business outcomes for our clients by unlocking deep insights from data and create data driven solutions across all parts of our clients’ business.

We also provide care optimization and reimbursement optimization services, for our clients through our healthcare analytics solutions and services.

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Our teams deliver predictive and prescriptive analytics in the areas of customer acquisition and lifecycle management, risk underwriting and pricing, operational effectiveness, credit and operational risk monitoring and governance, regulatory reporting, payment integrity and care management and data management.

We enhance, modernize and enrich structured and unstructured data and use a spectrum of advanced analytical tools and techniques, including our in-house Machine Learning (“ML”) and Artificial Intelligence (“AI”) capabilities to create insights and improve decision making for our clients.

We actively cross-sell and, where appropriate, integrate our Analytics services with other operations management services as part of a comprehensive offering for our clients.

We enhance, modernize and enrich structured and unstructured data and use a spectrum of advanced analytical tools and techniques, including our in-house ML and AI capabilities to create insights and improve decision making for our clients.

Our Clairvoyant acquisition in December 2021 strengthens our analytics capabilities by adding additional expertise in data engineering and cloud enablement, further supporting our clients in the insurance, healthcare, banking and financial services, and retail industries.

We actively cross-sell and, where appropriate, integrate our analytics services with other digital operations and solutions as part of a comprehensive offering for our clients.

Our projects-based analytics services are cyclical and can be significantly affected by variations in business cycles.

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Critical Accounting Policies and Estimates

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

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2022, as compared to the critical accounting policies and estimates referred in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Critical Accounting Policies and Estimates” and Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Results of Operations

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

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

2021 2020 2021 2020

(dollars in millions) (dollars in millions)

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

(dollars in millions)

Revenues, net $ 329.2 $ 261.4

Cost of revenues (1)

177.7 152.1 507.2 473.1

Gross profit (1)

112.6 88.9 319.6 236.4

Operating expenses:

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Other income, net 2.4 1.4

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

Income before income tax expense and earnings from equity affiliates 47.3 40.9

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Income before earnings from equity affiliates 36.1 31.9

Loss from equity-method investment — 0.1 — 0.2

Gain from equity-method investment 0.1 —

Net income attributable to ExlService Holdings, Inc.

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(1) Exclusive of depreciation and amortization expense.

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

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

Three months ended September 30, Percentage

2021 2020 Change

(dollars in millions)

Insurance $ 98.0 $ 87.8 $ 10.2 11.6 %

Healthcare 27.3 25.1 2.2 8.9 %

Emerging Business 44.5 37.6 6.9 18.5 %

Analytics 120.5 90.5 30.0 33.1 %

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

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

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

pound sterling against the U.S.

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

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

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

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

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

pound sterling against the U.S.

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

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

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

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

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

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

Cost of Revenues and Gross Margin :

The following table sets forth cost of revenues and gross margin of our reportable segments.

Cost of Revenues Gross Margin

Three months ended September 30, Change Percentage

change Three months ended September 30, Change

2021 2020 2021 2020

(dollars in millions)

Insurance $ 61.4 $ 56.8 $ 4.6 8.1 % 37.3 % 35.3 % 2.0 %

Healthcare 17.1 18.0 (0.9) (5.0) % 37.6 % 28.4 % 9.2 %

Emerging Business 23.7 20.8 2.9 13.9 % 46.8 % 44.7 % 2.1 %

Analytics 75.5 56.5 19.0 33.6 % 37.3 % 37.6 % (0.3) %

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

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

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

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

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

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

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

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

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

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

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

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

Three months ended September 30, Change Percentage

(dollars in millions)

General and administrative expenses $ 36.2 $ 26.8 $ 9.4 35.1 %

Selling and marketing expenses 21.7 15.3 6.4 41.8 %

Selling, general and administrative expenses $ 57.9 $ 42.1 $ 15.8 37.5 %

As a percentage of revenues 19.9 % 17.5 %

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

Depreciation and Amortization.

Three months ended September 30, Change Percentage

(dollars in millions)

Depreciation expense $ 9.3 $ 9.0 $ 0.3 3.3 %

Intangible amortization expense 3.0 3.4 (0.4) (11.8) %

Depreciation and amortization expense $ 12.3 $ 12.4 $ (0.1) (0.8) %

As a percentage of revenues 4.2 % 5.2 %

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

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

Income from Operations.

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

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

Foreign Exchange Gain/(Loss).

Net foreign exchange gains and losses are primarily attributable to the movement of the U.S.

dollar against the Indian rupee, the U.K.

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

The average exchange rate of the U.S.

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

The average exchange rate of the U.K.

pound sterling against the U.S.

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

The average exchange rate of the U.S.

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

The average exchange rate of the U.S.

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

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

Interest expens e.

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

Other Income, net.

Three months ended September 30, Percentage

2021 2020 Change

(dollars in millions)

Gain on sale and mark-to-market of mutual funds $ 1.2 $ 2.0 $ (0.8) (40.0) %

Interest and dividend income 0.8 0.8 — — %

Other, net (0.3) (0.3) — — %

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

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

Loss on settlement of Notes.

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

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

Income Tax Expense.

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

We recorded income tax expense of $4.2 million and $8.5 million for the three months ended September 30, 2021 and 2020, respectively.

The decrease in income tax expense was primarily a result of (i) the recording of a one-time deferred tax benefit of $2.4 million on settlement of the Notes during the three months ended September 30, 2021, (ii) the recording of excess tax benefits related to stock awards of $0.5 million pursuant to ASU No.

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

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

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

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

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

Nine months ended September 30, Percentage

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

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The following table summarizes our revenues by reportable segments for the three months ended March 31, 2022 and 2021:

Three months ended March 31, Percentage

2022 2021 Change

5 unchanged sentences

Total revenues, net $ 329.2 $ 261.4 $ 67.8 25.9 %

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

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

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

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

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

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

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

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

Revenues for the three months ended March 31, 2022 were $329.2 million, up $67.8 million, or 25.9%, compared to the three months ended March 31, 2021, driven primarily by revenue growth in Analytics.

Revenue growth in Insurance of $12.2 million was primarily driven by expansion of business from our new and existing clients aggregating to $12.7 million.

This was partially offset by $0.5 million mainly attributable to the depreciation of the Australian dollar and the Indian rupee against the U.S.

dollar during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

Insurance revenues were 31.4% and 34.9% of our total revenues during the three months ended March 31, 2022 and March 31, 2021, respectively.

Revenue decline in Healthcare of $4.1 million was primarily driven by termination of certain client contracts aggregating to $7.2 million, partially offset by expansion of business from our existing clients aggregating to $3.1 million during the three months ended March 31, 2022.

Healthcare revenues were 7.9% and 11.6% of our total revenues during the three months ended March 31, 2022 and March 31, 2021, respectively.

Revenue growth in Emerging Business of $13.0 million was primarily driven by expansion of business from our new and existing clients of $13.6 million.

This was partially offset by $0.6 million mainly attributable to the depreciation of the U.K.

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

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

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

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

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

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

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

dollar during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

Emerging Business revenues were 15.4% and 14.4% of our total revenues during the three months ended March 31, 2022 and March 31, 2021, respectively.

Revenue growth in Analytics of $46.7 million was attributable to the higher volumes in our annuity and project based engagements from our new and existing clients of $36.9 million, and contribution from our acquisition of Clairvoyant in December 2021 of $10.2 million.

This was partially offset by $0.4 million mainly attributable to the depreciation of the U.K.

pound sterling against the U.S.

dollar during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

Analytics revenues were 45.3% and 39.1% of our total revenues during the three months ended March 31, 2022 and March 31, 2021, respectively.

Cost of Revenues and Gross Margin :

1 unchanged sentence

Cost of Revenues Gross Margin

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

Three months ended March 31, Percentage change Three months ended March 31, Change

2022 2021 Change 2022 2021

5 unchanged sentences

Total $ 207.5 $ 158.8 $ 48.7 30.7 % 37.0 % 39.2 % (2.2) %

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

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

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

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

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

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

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

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

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

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

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

For the three months ended March 31, 2022, cost of revenues was $207.5 million, compared to $158.8 million for the three months ended March 31, 2021, an increase of $48.7 million, or 30.7%.

Our gross margin for the three months ended March 31, 2022 was 37.0%, compared to 39.2% for the three months ended March 31, 2021, a decrease of 220 basis points (“bps”).

The increase in cost of revenues in Insurance of $9.0 million during the three months ended March 31, 2022 was primarily due to increases in employee-related costs of $8.2 million on account of higher headcount, performance incentives and wage inflation, and higher technology costs of $1.3 million on account of increased leverage of remote work model, partially offset by foreign exchange gain, net of hedging of $0.5 million.

Gross margin in Insurance decreased by 150 bps during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to higher employee-related costs during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

The increase in cost of revenues in Healthcare of $0.2 million during the three months ended March 31, 2022 was primarily due to increases in employee-related costs of $0.6 million on account of wage inflation and higher performance incentives, partially offset by lower travel costs of $0.4 million.

Gross margin in Healthcare decreased by 1,000 bps during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to lower revenues and higher operating expenses associated with the termination of client contracts during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

The increase in cost of revenues in Emerging Business of $8.4 million during the three months ended March 31, 2022 was primarily due to increases in employee-related costs of $7.5 million on account of higher headcount, performance incentives and wage inflation, higher technology costs of $1.2 million on account of increased leverage of remote work model and higher travel costs $0.5 million, partially offset by foreign exchange gain, net of hedging $0.8 million.

Gross margin in Emerging Business decreased by 230 bps during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to lower margins in certain new clients due to ramp-ups and higher employee-related costs during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

The increase in cost of revenues in Analytics of $31.1 million during the three months ended March 31, 2022 was primarily due to increases in employee-related costs of $28.1 million on account of higher headcount, performance incentives and wage inflation, including incremental cost related to our acquisition of Clairvoyant in December 2021 of $7.0 million.

The remaining increase was attributable to higher travel costs $1.0 million, higher technology costs of $0.5 million on account of increased leverage of remote work model and higher other operating costs of $2.4 million.

This was partially offset by foreign exchange gain, net of hedging of $0.9 million.

Gross margin in Analytics decreased by 110 bps during the three months ended March 31, 2022, compared to the three months ended March 31, 2021, primarily due to higher employee-related costs during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

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

Nine months ended September 30, Percentage change

2021 2020 Change

Three months ended March 31, Change Percentage

(dollars in millions)

3 unchanged sentences

As a percentage of revenues 19.5 % 18.7 %

The increase in SG&A expenses of $35.8 million was primarily due to higher employee-related costs of $33.4 million, COVID-19-related expenses of $2.9 million primarily related to financial support to family members of deceased employees, higher other operating costs of $4.5 million, partially offset by lower facilities costs of $4.1 million due to optimization of office space and lower travel costs of $0.9 million due to COVID-19 cost reduction measures.

The increase in SG&A expenses of $15.2 million was primarily due to higher employee-related costs of $13.0 million on account of higher headcount, performance incentives and wage inflation, including incremental cost related to our acquisition of Clairvoyant in December 2021, increase in technology cost of $0.7 million on account of continued investments in digital capabilities, higher travel costs $0.6 million and other operating costs of $1.5 million, partially offset by foreign exchange gain, net of hedging of $0.6 million.

Depreciation and Amortization.

Nine months ended September 30, Percentage change

2021 2020 Change

Three months ended March 31, Change Percentage

(dollars in millions)

3 unchanged sentences

As a percentage of revenues 4.1 % 4.6 %

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

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

The increase in intangibles amortization expense of $1.1 million was primarily due to amortization of intangibles associated with our acquisition of Clairvoyant in December 2021, partially offset by decrease in intangibles amortization expense due to end of useful lives for certain intangible assets during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

The increase in depreciation expense of $0.4 million was primarily due to depreciation related to our investments in new operating centers and internally developed software of $0.5 million, partially offset by foreign exchange gain, net of hedging $0.1 million, during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

Income from Operations.

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

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

Income from operations increased by $2.4 million, or 5.8%, from $41.6 million for the three months ended March 31, 2021 to $44.0 million for the three months ended March 31, 2022, primarily due to higher revenues, partially offset by higher cost of revenues and higher SG&A expenses during the three months ended March 31, 2022.

As a percentage of revenues, income from operations decreased from 15.9% for the three months ended March 31, 2021 to 13.4% for the three months ended March 31, 2022.

Foreign Exchange Gain/(Loss).

Net foreign exchange gains and losses are primarily attributable to the movement of the U.S.

Foreign exchange gains and losses are primarily attributable to the movement of the U.S.

dollar against the Indian rupee, the U.K.

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

pound sterling, the Philippine peso and the South African ZAR during the three months ended March 31, 2022.

The average exchange rate of the U.S.

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

dollar against the Indian rupee increased from 73.17 during the three months ended March 31, 2021 to 75.25 during the three months ended March 31, 2022.

The average exchange rate of the U.K.

pound sterling against the U.S.

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

dollar decreased from 1.38 during the three months ended March 31, 2021 to 1.33 during the three months ended March 31, 2022.

The average exchange rate of the U.S.

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

dollar against the Philippine peso increased from 48.39 during the three months ended March 31, 2021 to 51.32 during the three months ended March 31, 2022.

The average exchange rate of the U.S.

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

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

dollar against the South African ZAR increased from 15.02 during the three months ended March 31, 2021 to 15.15 during the three months ended March 31, 2022.

We recorded a net foreign exchange gain of $1.8 million for the three months ended March 31, 2022 compared to the net foreign exchange gain of $0.4 million for the three months ended March 31, 2021.

Interest expense.

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

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

Interest expense decreased from $2.5 million for the three months ended March 31, 2021 to $0.9 million for the three months ended March 31, 2022, primarily due to settlement of outstanding obligations under the Notes (as defined under Note 17 – Borrowings-Convertible Senior Notes to our unaudited consolidated financial statements”) on August 27, 2021, and lower effective interest rates of 1.3% under our Credit Facility during the three months ended March 31, 2022, compared to 2.0% during the three months ended March 31, 2021.

Other Income, net.

Nine months ended September 30, Percentage change

Three months ended March 31, Percentage

2022 2021 Change

Gain on sale and mark-to-market of mutual funds $ 3.9 $ 7.1 $ (3.2) (45.1) %

(dollars in millions)

Gain on sale and mark-to-market of mutual funds and

money market funds $ 1.2 $ 1.1 $ 0.1 12.1 %

Interest and dividend income 1.4 0.6 0.8 127.6 %

1 unchanged sentence

Other income, net $ 2.4 $ 1.4 $ 1.0 71.0 %

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

Loss on settlement of Notes.

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

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

Other income, net increased by $1.0 million, from $1.4 million for the three months ended March 31, 2021 to $2.4 million for the three months ended March 31, 2022, primarily due to interest on income tax refunds of $0.7 million during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

Income Tax Expense.

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

We recorded income tax expense of $22.1 million and $18.4 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase in the income tax expense was primarily a result of higher profit during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, and the recording of higher excess tax benefits related to stock awards of $1.8 million pursuant to ASU No.

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

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

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

The 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.

We recorded income tax expense of $11.2 million and $9.0 million for the three months ended March 31, 2022 and 2021, respectively.

The increase in 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.

Net income increased from $31.9 million for the three months ended March 31, 2021 to $36.2 million for the three months ended March 31, 2022, primarily due to increase in income from operations of $2.4 million, lower interest expense of $1.6 million, higher foreign exchange gain, net of $1.5 million, higher other income, net of $1.0 million, partially offset by higher income tax expense of $2.2 million.

As a percentage of revenues, net income decreased from 12.2% for the three months ended March 31, 2021 to 11.0% for the three months ended March 31, 2022.

Liquidity and Capital Resources

Nine months ended September 30,

Three months ended March 31,

(dollars in millions)

Opening cash, cash equivalents and restricted cash $ 143.8 $ 225.5

Net cash provided by operating activities 113.8 126.3

Net cash (used for)/provided by investing activities

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

Net cash (used for)/provided by operating activities (26.9) 15.2

Net cash used for investing activities (4.7) (26.0)

Net cash provided by/(used for) financing activities 3.6 (29.0)

Effect of exchange rate changes (0.8) (1.0)

Closing cash, cash equivalents and restricted cash $ 115.0 $ 184.7

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

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

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

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

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

We base our decision to continue to indefinitely reinvest earnings in India and the Philippines on our estimate of the working capital required to support our operations in these geographies and periodically review our capital initiatives to support and expand our global operations, as well as an economically viable rate of return on our investments made in India and the Philippines as compared to those made in the United States.

As of March 31, 2022 and 2021, we had $269.2 million and $375.8 million, respectively, in cash, cash equivalents and short-term investments, of which $232.6 million, and $337.5 million, respectively, is located in foreign jurisdictions that upon distribution may be subject to withholding and other taxes.

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

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

We base our decision to continue to indefinitely reinvest earnings in relevant foreign jurisdictions on our estimate of the working capital required to support our operations in foreign geographies and periodically review our capital initiatives to support and expand our global operations, as well as whether there

exists an economically viable rate of return on our investments made in relevant foreign jurisdictions as compared to those made in the United States.

Operating Activities:

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

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

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

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

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

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

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

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

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

Net cash used for operating activities was $26.9 million for the three months ended March 31, 2022 compared to net cash provided by operating activities of $15.2 million for the three months ended March 31, 2021, reflecting higher working capital needs, offset by higher cash earnings.

The major drivers contributing to the decrease of $42.1 million included the following:

• Changes in accounts receivable, including unbilled receivable and advance billings, contributed to a lower cash flow of $12.0 million in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

The decrease was a result of the higher accounts receivable resulting from revenue growth.

Lower cash flows were also affected by our accounts receivable days sales outstanding, which increased to 64 days as of March 31, 2022 from 54 days as of March 31, 2021.

• Decrease in accrued employee costs, offset by an increase in accrued expenses and other liabilities contributed to a lower cash flow of $31.3 million in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

The decrease was primarily due to higher payment (net of accruals) of annual performance incentives of $36.7 million, offset by higher employee costs accruals of $2.6 million and higher accrued expenses due to an increase in our cost base to support revenue growth of $2.8 million.

• Increase in net income of $4.3 million in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, was primarily due to an increase in income from operations of $2.4 million driven by higher revenues, higher other income, net of $2.4 million and lower interest expense of $1.6 million, partially offset by higher income tax expense of $2.2 million.

• Other drivers decreasing cash flows in the three months ended March 31, 2022 compared to the three months ended March 31, 2021 included:

income tax payments, net of refunds, of $3.0 million, primarily due to higher advance income tax payments on higher net income.

Investing Activities:

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

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

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

Cash flows used for investing activities were $4.7 million for the three months ended March 31, 2022 as compared to cash flows used for investing activities of $26.0 million for the three months ended March 31, 2021.

The decrease of $21.3 million was primarily due to higher net redemption of investments of $12.7 million during the three months ended March 31, 2022 as compared to net purchase of investments of $13.5 million during the three months ended March 31, 2021.

This was partially offset by higher capital expenditures for purchase of long-lived assets, including investments in infrastructure, technology assets, software and product developments of $3.5 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021, and payment of a portion of purchase consideration for our acquisition of Clairvoyant in December 2021 of $1.4 million, during the three months ended March 31, 2022.

Financing Activities:

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

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

Cash flows provided by financing activities were $3.6 million during the three months ended March 31, 2022 as compared to cash flows used for financing activities of $29.0 million during the three months ended March 31, 2021.

The increase of $32.6 million was primarily due to net proceeds of $35.0 million under our revolving Credit Facility during the three months ended March 31, 2022.

This was partially offset by higher purchases of treasury stock by $2.4 million under our share repurchase program during the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

We expect to use cash from operating activities to maintain and expand our business by making investments, primarily related to new facilities and capital expenditures associated with leasehold improvements to build our facilities, digital capabilities and purchase telecommunications equipment and computer hardware and software in connection with managing client operations.

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

We expect to incur capital expenditures of between $35.0 million and $40.0 million in 2021, primarily to meet our growth requirements, including additions to our facilities as well as investments in technology applications, product development, digital technology, advanced automation, robotics and infrastructure.

We incurred $16.1 million of capital expenditures in the three months ended March 31, 2022.

We expect to incur total capital expenditures of between $40.0 million to $45.0 million in 2022, primarily to meet our growth requirements, including additions to our facilities as well as investments in technology applications, product development, digital technology, advanced automation, robotics and infrastructure.

In connection with any tax assessment orders that have been issued or may be issued against us or our subsidiaries, we may be required to deposit additional amounts with respect to such assessment orders (see Note 23 - Commitments and Contingencies to our unaudited consolidated financial statements herein for further details).

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

We believe that our existing cash, cash equivalents and short-term investments and sources of liquidity will be sufficient to satisfy our cash requirements over the next 12 months.

Our future cash requirements will depend on many factors, including our rate of revenue growth, our investments in strategic initiatives, applications or technologies, operation centers and acquisition of complementary businesses, continued purchases under our board-authorized stock repurchase program, which may require the use of significant cash resources and/or additional financing.

Although we anticipate that we will continue to rely upon cash from operating activities to finance most of our above mentioned requirements, if we have significant growth through acquisitions, we may need to obtain additional financing.

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future.

These obligations include borrowings, including interest obligations, purchase commitments, operating and finance lease commitments, employee benefit payments under Gratuity plans and uncertain tax positions.

See Note 17 - Borrowings, Note 20 - Leases, and Note 23 - Commitments and Contingencies to our unaudited consolidated financial statements herein for further information on material cash requirements from known contractual and other obligations.

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

As of March 31, 2022 and December 31, 2021 , we had outstanding letters of credit of $0.5 million, each, that were not recognized in our consolidated balance sheets.

These are not reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

We had no other off-balance sheet arrangements or obligations.

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

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

The deferred amount will be payable as follows:

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

The deferred amount is payable as follows:

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

Our deferred contributions, net of payments to FICA was $3.1 million as of March 31, 2022 and December 31, 2021, each, which will be paid on or before December 31, 2022.

Financing Arrangements (Debt Facility)

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

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

The following tables summarizes our debt facility balances as of March 31, 2022 and December 31, 2021.

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

(dollars in millions) (dollars in millions)

Revolving Credit Facility Total Revolving Credit Facility Notes Total

Revolving Credit

facility Total Revolving Credit

facility Total

Current portion of long-term borrowings $ 35.0 $ 35.0 $ 260.0 $ 260.0

Long-term borrowings $ 260.0 $ 260.0 $ — $ —

Unamortized debt discount — — — (11.2) (11.2)

Unamortized debt issuance costs* — — — (0.8) (0.8)

Long-term borrowings

$ 170.0 $ 170.0 $ 64.0 $ 138.0 $ 202.0

Total borrowings $ 295.0 $ 295.0 $ 260.0 $ 260.0

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

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

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

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

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

Off-Balance Sheet Arrangements

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

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

These are not reasonably likely to have, a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

We had no other off-balance sheet arrangements or obligations.

Contractual Obligations

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

Payment Due by Period

Less than 1-3 4-5 After

1 year years years 5 years Total

(dollars in millions)

Finance leases $ 0.2 $ 0.2 $ 0.1 $ — $ 0.5

Operating leases (a)

24.3 43.2 20.9 28.2 116.6

Purchase obligations 5.2 — — — 5.2

Other obligations (b)

2.8 5.0 4.0 7.0 18.8

Principal payments 15.0 170.0 — — 185.0

Interest payments (c)

1.9 0.2 — — 2.1

Total contractual cash obligations (d)

$ 49.4 $ 218.6 $ 25.0 $ 35.2 $ 328.2

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

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

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

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

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

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

We have undertaken to pay custom duties, service taxes, levies, and liquidated damages payable, if any, in respect of imported and indigenous capital goods, stores, and spares consumed duty free, in the event that certain terms and conditions are not fulfilled.

We believe, however, that these units have in the past satisfied and will continue to satisfy the required conditions.

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

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

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

Unamortized debt issuance costs for our revolving Credit Facility of $0.2 million as of March 31, 2022 and December 31, 2021 , each, are presented under “Other current assets” and “Other assets,” as applicable in our consolidated balance sheets.

See Note 17 - Borrowings to our unaudited consolidated financial statements herein for further details on our debt facilities, including our amended and restated credit facility entered into subsequent to March 31, 2022.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, see Note 2—“Recent Accounting Pronouncements” to the unaudited consolidated financial statements contained herein.

For a description of recent accounting pronouncements, see Note 2—“Recent Accounting Pronouncements” to our unaudited consolidated financial statements contained herein.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis