What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-28 compared with 2022-04-28 · 226 added, 120 removed, 200 unchanged (63% 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 quarter ended March 31, 2022.

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

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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.

On June 10, 2022, the Company, through its wholly owned subsidiary ExlService.com, LLC, entered into an Asset Purchase Agreement to acquire certain assets of Inbound, a digital marketing business focused primarily on lead generation in the insurance space.

The acquisition expands our digital direct-to-consumer marketing services by adding proven performance marketing, lead generation and customer engagement capabilities to our suite of end-to-end marketing solutions, proprietary data sets and robust consumer analytics.

Continued Impact of COVID-19 on Our Business

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.

Over the course of 2020 and 2021, and continuing into first half 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.

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, which has led to increased demand for digital capabilities.

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

We are able to deliver a significant portion of our clients’ current requirements in a remote work model.

In 2022, we 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.

Subject to local rules and regulations, these work arrangements include working in a hybrid arrangement or a fully remote arrangement, with occasional work from the office when warranted.

We have begun to re-open our operation centers and offices globally with a focus on safety and consistency with applicable local regulations.

We continue to focus on effectively managing the unprecedented challenges and uncertainties of the pandemic on a global basis.

Management has prioritized the health and safety of our employees and their families:

we have adopted numerous safety procedures at our global facilities, including hygiene and disinfection protocols, testing and contact tracing, social distancing and wearing personal protective equipment.

We share best practices throughout our facilities globally in order to standardize effective safety guidelines and procedures across our operations.

Our safety guidelines and procedures are updated on a regular basis.

While many of the COVID-19 related restrictions have been lifted in the geographies in which we operate, there have been periodic resurgences of COVID-19 as a result of new strains and variants, which has led us to monitor our work model and / or implement additional safety procedures.

We believe our actions have been successful and that the pandemic has not significantly affected our business, results of operations, financial position and cash flow during the first half of 2022, however the impact of the pandemic for the period beyond the first half of 2022 will depend on many evolving and uncertain 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.

For the three months ended June 30, 2022, we had revenues of $346.8 million compared to revenues of $275.1 million for the three months ended June 30, 2021, an increase of $71.7 million, or 26.1%.

For the six months ended June 30, 2022, we had revenues of $676.0 million compared to revenues of $536.5 million for the six months ended June 30, 2021, an increase of $139.5 million, or 26.0%.

We serve cli ents mainly in the United States and the United Kingdom, which generated 86.1% and 9.3%, respectively, of our total revenues for the three months ended June 30, 2022, and 85.5% and 9.5%, respectively, of our total revenues for the three months ended June 30, 2021.

For the six months ended June 30, 2022, these two regions generated 85.9% and 9.6%,

respectively, of our total revenues and 85.7% and 9.5%, respectively, of our total revenues for the six months ended June 30, 2021.

For the three months ended June 30, 2022 and 2021 , our total revenues from our top ten clients accounted for 36.2% and 37.8% of our total revenues, respectively.

For the six months ended June 30, 2022 and 2021 , our total revenues from our top ten clients accounted for 36.2% and 38.5% of our total revenues, respectively.

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

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We 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.

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

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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.

Our acquisition of Clairvoyant 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.

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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 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.

There have been no significant changes in our critical accounting policies and estimates during the three and six months ended June 30, 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 ended March 31, 2022 and 2021:

Three months ended March 31,

(dollars in millions)

The following table summarizes our results of operations for the three months and six months ended June 30, 2022 and 2021:

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

2022 2021 2022 2021

(dollars in millions) (dollars in millions)

Revenues, net $ 346.8 $ 275.1 $ 676.0 $ 536.5

Cost of revenues (1)

221.2 170.7 428.7 329.5

Gross profit (1)

125.6 104.4 247.3 207.0

Operating expenses:

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Interest expense (1.5) (2.5) (2.4) (5.0)

Other income, net 2.4 1.4

Other income/(loss), net (0.2) 2.2 2.2 3.6

Income before income tax expense and earnings from equity affiliates 46.7 36.9 94.0 77.8

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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

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

The following table summarizes our revenues by reportable segments:

Three months ended June 30, Percentage

2022 2021 Change

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Total revenues, net $ 346.8 $ 275.1 $ 71.7 26.1 %

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.

Revenues for the three months ended June 30, 2022 were $346.8 million, up $71.7 million, or 26.1%, compared to the three months ended June 30, 2021, driven primarily by revenue growth in Analytics.

Revenue growth in Insurance of $13.8 million was primarily driven by expansion of business from our new and existing clients aggregating to $15.1 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.

This was partially offset by a loss of $1.3 million mainly attributable to the depreciation of the Australian dollar, the U.K.

pound sterling 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.

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.

dollar during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

Insurance revenues were 31.3% and 34.4% of our total revenues during the three months ended June 30, 2022 and June 30, 2021, respectively.

Revenue decline in Healthcare of $5.2 million was driven by the ramp-down in certain existing clients aggregating to $5.2 million during the three months ended June 30, 2022.

Healthcare revenues were 6.7% and 10.3% of our total revenues during the three months ended June 30, 2022 and June 30, 2021, respectively.

Revenue growth in Emerging Business of $13.2 million was primarily driven by expansion of business from our new and existing clients aggregating to $14.7 million.

This was partially offset by a loss of $1.5 million mainly attributable to the depreciation of the U.K.

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

dollar during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

Emerging Business revenues were 15.5% and 14.8% of our total revenues during the three months ended June 30, 2022 and June 30, 2021, respectively.

Revenue growth in Analytics of $49.9 million was attributable to the higher volumes in our annuity and project-based engagements from our new and existing clients of $40.2 million, and contributions from our acquisition of Clairvoyant in December 2021 of $11.0 million.

This was partially offset by a loss of $1.3 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.

dollar during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

Analytics revenues were 46.5% and 40.5% of our total revenues during the three months ended June 30, 2022 and June 30, 2021, respectively.

Cost of Revenues and Gross Margin :

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Cost of Revenues Gross Margin

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

Three months ended June 30, Change Percentage

change Three months ended June 30, Change

2022 2021 2022 2021

(dollars in millions)

Insurance $ 70.6 $ 59.4 $ 11.2 19.0 % 34.9 % 37.3 % (2.4) %

Healthcare 17.7 17.7 — — % 23.2 % 37.4 % (14.2) %

Emerging Business 31.2 22.3 8.9 39.7 % 42.1 % 45.1 % (3.0) %

Analytics 101.7 71.3 30.4 42.6 % 37.0 % 36.0 % 1.0 %

Total $ 221.2 $ 170.7 $ 50.5 29.6 % 36.2 % 37.9 % (1.7) %

For the three months ended June 30, 2022, cost of revenues was $221.2 million compared to $170.7 million for the three months ended June 30, 2021, an increase of $50.5 million, or 29.6%.

Our gross margin for the three months ended June 30, 2022 was 36.2%, compared to 37.9% for the three months ended June 30, 2021, a decrease of 170 basis points (“bps”).

The increase in cost of revenues in Insurance of $11.2 million during the three months ended June 30, 2022 was primarily due to increases in employee-related costs of $11.3 million on account of higher headcount, performance incentives and wage inflation, and higher technology costs of $1.6 million on account of increased leverage of the remote work model, partially offset by foreign exchange gain, net of hedging of $1.7 million.

Gross margin in Insurance decreased by 240 bps during the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to increases in employee-related costs and lower margins in certain new clients due to ramp-ups during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

The cost of revenues in Healthcare remained unchanged at $17.7 million during the three months ended June 30, 2022 and 2021.

This was driven by increases in employee-related costs of $0.4 million on account of higher headcount, performance incentives and wage inflation, offset by lower travel costs and optimization of office space aggregating to $0.4 million.

Gross margin in Healthcare decreased by 1,420 bps during the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to lower revenues.

The increase in cost of revenues in Emerging Business of $8.9 million during the three months ended June 30, 2022 was primarily due to increases in employee-related costs of $9.2 million on account of higher headcount, performance incentives and wage inflation, and higher technology costs of $1.0 million on account of increased leverage of the remote work model, partially offset by foreign exchange gain, net of hedging of $1.3 million.

Gross margin in Emerging Business decreased by 300 bps during the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to lower margins associated with ramp-ups in certain new clients during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

The increase in cost of revenues in Analytics of $30.4 million during the three months ended June 30, 2022 was primarily due to increases in employee-related costs of $27.7 million on account of higher headcount, performance incentives and wage inflation, including incremental cost related to our acquisition of Clairvoyant in December 2021.

The remaining increase was attributable to higher travel costs of $1.1 million, higher technology costs of $0.7 million on account of increased leverage of the remote work model, and higher other operating costs of $3.2 million.

This was partially offset by foreign exchange gain, net of hedging of $2.3 million.

Gross margin in Analytics increased by 100 bps during the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to higher revenues during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

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

Three months ended June 30, Change Percentage

(dollars in millions)

General and administrative expenses $ 40.5 $ 36.5 $ 4.0 10.8 %

Selling and marketing expenses 24.0 19.8 4.2 21.6 %

Selling, general and administrative expenses $ 64.5 $ 56.3 $ 8.2 14.6 %

As a percentage of revenues 18.6 % 20.4 %

The increase in SG&A expenses of $8.2 million was primarily due to higher employee-related costs of $6.8 million on account of a higher headcount, performance incentives and wage inflation, including incremental costs related to our acquisition of Clairvoyant in December 2021, increase in technology cost of $1.9 million on account of continued investments in digital capabilities, higher travel costs $1.0 million and other operating costs of $1.8 million, partially offset by higher COVID-19 related expenses of $2.2 million during the three months ended June 30, 2021 and foreign exchange gain, net of hedging of $1.1 million, during the three months ended June 30, 2022.

Depreciation and Amortization.

Three months ended June 30, Change Percentage

(dollars in millions)

Depreciation expense $ 10.0 $ 8.9 $ 1.1 11.4 %

Intangible amortization expense 4.1 3.4 0.7 22.0 %

Depreciation and amortization expense $ 14.1 $ 12.3 $ 1.8 14.3 %

As a percentage of revenues 4.1 % 4.5 %

The increase in intangibles amortization expense of $0.7 million was primarily due to amortization of intangibles associated with our acquisition of Clairvoyant in December 2021, during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

The increase in depreciation expense of $1.1 million was primarily due to depreciation related to our investments in digital capabilities and computer and networking equipment of $1.3 million, partially offset by foreign exchange gain, net of hedging of $0.2 million during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

Income from Operations.

Income from operations increased by $11.2 million, or 31.4%, from $35.8 million for the three months ended June 30, 2021 to $47.0 million for the three months ended June 30, 2022, primarily due to higher revenues, partially offset by higher cost of revenues and higher SG&A expenses during the three months ended June 30, 2022.

As a percentage of revenues, income from operations increased from 13.0% for the three months ended June 30, 2021 to 13.6% for the three months ended June 30, 2022.

Foreign Exchange Gain/(Loss).

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 June 30, 2022.

The average exchange rate of the U.S.

dollar against the Indian rupee increased from 73.67 during the three months ended June 30, 2021 to 77.68 during the three months ended June 30, 2022.

The average exchange rate of the U.K.

pound sterling against the U.S.

dollar decreased from 1.40 during the three months ended June 30, 2021 to 1.24 during the three months ended June 30, 2022.

The average exchange rate of the U.S.

dollar against the Philippine peso increased from 48.20 during the three months ended June 30, 2021 to 53.18 during the three months ended June 30, 2022.

The average exchange rate of the U.S.

dollar against the South African ZAR increased from 14.15 during the three months ended June 30, 2021 to 15.94 during the three months ended June 30, 2022.

We recorded a net foreign exchange gain of $1.4 million, each, for the three months ended June 30, 2022 and 2021.

Interest expens e.

Interest expense decreased from $2.5 million for the three months ended June 30, 2021 to $1.5 million for the three months ended June 30, 2022, primarily due to the 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, partially offset by higher outstanding obligations under our Credit Facility bearing a relatively lower effective interest rate as compared to the Notes during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

Other Income/(Loss), net.

Three months ended June 30, Percentage

2022 2021 Change

(dollars in millions)

Gain on sale and mark-to-market of mutual funds and money market funds $ 0.7 $ 1.6 $ (0.9) (61.7) %

Interest income 0.8 0.7 0.1 22.9 %

Other, net (1.7) (0.1) (1.6) 1,182.9 %

Other income/(loss), net $ (0.2) $ 2.2 $ (2.4) (107.9) %

Other income/(loss), net decreased by $2.4 million, from an income of $2.2 million for the three months ended June 30, 2021 to an expense of $0.2 million for the three months ended June 30, 2022.

The decrease is primarily due to a fair value adjustment to recognize an increase in contingent consideration liability of $1.0 million related to our acquisition of Clairvoyant in December 2021, and lower return on mutual fund investments of $0.9 million during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

Income Tax Expense.

The effective tax rate decreased from 24.0% during the three months ended June 30, 2021 to 23.8% during the three months ended June 30, 2022.

We recorded income tax expense of $11.1 million and $8.9 million for the three months ended June 30, 2022 and 2021, respectively.

The increase in income tax expense was primarily a result of higher profit during the three months ended June 30, 2022, compared to the three months ended June 30, 2021.

Net income increased from $28.0 million for the three months ended June 30, 2021 to $35.8 million for the three months ended June 30, 2022, primarily due to increase in income from operations of $11.2 million, lower interest expense of $1.0 million and higher gain from equity-method investment of $0.2 million, partially offset by lower other income/(loss), net of $2.4 million and higher income tax expense of $2.2 million.

As a percentage of revenues, net income increased marginally from 10.2% for the three months ended June 30, 2021 to 10.3% for the three months ended June 30, 2022.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

The following table summarizes our revenues by reportable segments:

Six months ended June 30, Percentage

2022 2021 Change

(dollars in millions)

Insurance $ 211.8 $ 185.8 $ 26.0 14.0 %

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Analytics 310.3 213.7 96.6 45.2 %

Total revenues, net $ 676.0 $ 536.5 $ 139.5 26.0 %

Revenues for the six months ended June 30, 2022 were $676.0 million, up $139.5 million, or 26.0%, compared to the six months ended June 30, 2021, driven primarily by revenue growth in Analytics.

Revenue growth in Insurance of $26.0 million was primarily driven by expansion of business from our new and existing clients aggregating to $27.8 million.

This was partially offset by a loss of $1.8 million mainly attributable to the depreciation of the Australian dollar, U.K.

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

dollar during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

Insurance revenues were 31.3% and 34.7% of our total revenues during the six months ended June 30, 2022 and June 30, 2021, respectively.

Revenue decline in Healthcare of $9.3 million was driven by the ramp-down in certain existing clients aggregating to $9.3 million during the six months ended June 30, 2022.

Healthcare revenues were 7.3% and 10.9% of our total revenues during the six months ended June 30, 2022 and June 30, 2021, respectively.

Revenue growth in Emerging Business of $26.2 million was primarily driven by expansion of business from our new and existing clients of $28.3 million.

This was partially offset by a loss of $2.1 million mainly attributable to the depreciation of the U.K.

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

dollar during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

Emerging Business revenues were 15.5% and 14.6% of our total revenues during the six months ended June 30, 2022 and June 30, 2021, respectively.

Revenue growth in Analytics of $96.6 million was attributable to the higher volumes in our annuity and project based engagements from our new and existing clients of $77.1 million, and contributions from our acquisition of Clairvoyant in December 2021 of $21.2 million.

This was partially offset by a loss of $1.7 million mainly attributable to the depreciation of the U.K.

pound sterling against the U.S.

dollar during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

Analytics revenues were 45.9% and 39.8% of our total revenues during the six months ended June 30, 2022 and June 30, 2021, 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

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

2022 2021 Change 2022 2021

(dollars in millions)

Insurance $ 135.7 $ 115.5 $ 20.2 17.6 % 35.9 % 37.9 % (2.0) %

Healthcare 35.3 35.1 0.2 0.8 % 28.2 % 40.1 % (11.9) %

Emerging Business 60.4 43.1 17.3 39.9 % 42.2 % 44.9 % (2.7) %

Analytics 197.3 135.8 61.5 45.2 % 36.5 % 36.5 % 0.0 %

Total $ 428.7 $ 329.5 $ 99.2 30.1 % 36.6 % 38.6 % (2.0) %

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.

For the six months ended June 30, 2022, cost of revenues was $428.7 million compared to $329.5 million for the six months ended June 30, 2021, an increase of $99.2 million, or 30.1%.

Our gross margin for the six months ended June 30, 2022 was 36.6% compared to 38.6% for six months ended June 30, 2021, a decrease of 200 bps.

The increase in cost of revenues in Insurance of $20.2 million during the six months ended June 30, 2022 was primarily due to increases in employee-related costs of $19.1 million on account of higher headcount, performance incentives and wage inflation, and higher technology costs of $3.0 million on account of increased leverage of the remote work model, partially offset by foreign exchange gain, net of hedging of $1.9 million.

Gross margin in Insurance decreased by 200 bps during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to increases in employee-related costs during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

The increase in cost of revenues in Healthcare of $0.2 million during the six months ended June 30, 2022 was primarily due to increases in employee-related costs of $1.1 million on account of wage inflation, partially offset by lower travel costs of $0.5 million and foreign exchange gain, net of hedging of $0.4 million.

Gross margin in Healthcare decreased by 1,190 bps during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to lower revenues and higher operating expenses associated with the ramp-down of certain existing clients during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

The increase in cost of revenues in Emerging Business of $17.3 million during the six months ended June 30, 2022 was primarily due to increases in employee-related costs of $16.2 million on account of higher headcount, performance incentives and wage inflation, higher technology costs of $2.2 million on account of increased leverage of the remote work model and higher travel costs of $0.9 million, partially offset by foreign exchange gain, net of hedging of $2.0 million.

Gross margin in Emerging Business decreased by 270 bps during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to lower margins associated with ramp-ups in certain new clients during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

The increase in cost of revenues in Analytics of $61.5 million during the six months ended June 30, 2022 was primarily due to increases in employee-related costs of $56.1 million on account of higher headcount, performance incentives and wage inflation, including incremental cost related to our acquisition of Clairvoyant in December 2021.

The remaining increase was attributable to higher travel costs of $2.1 million, higher technology costs of $1.2 million on account of increased leverage of the remote work model and higher other operating costs of $5.3 million.

This was partially offset by foreign exchange gain, net of hedging of $3.2 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.

Gross margin in Analytics remained unchanged during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

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

Three months ended March 31, Change Percentage

Six months ended June 30, Percentage change

2022 2021 Change

(dollars in millions)

3 unchanged sentences

As a percentage of revenues 19.0 % 19.6 %

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.

The increase in SG&A expenses of $23.4 million was primarily due to higher employee-related costs of $17.4 million on account of a higher headcount, performance incentives and wage inflation, including incremental costs related to our acquisition of Clairvoyant in December 2021, increase in technology cost of $5.3 million on account of continued investments in digital capabilities, higher other operating costs of $3.2 million and travel costs of $1.3 million, partially offset by higher COVID-19 related expenses of $2.2 million during the six months ended June 30, 2021 and foreign exchange gain, net of hedging of $1.6 million, during the six months ended June 30, 2022.

Depreciation and Amortization.

Three months ended March 31, Change Percentage

Six months ended June 30, Percentage change

2022 2021 Change

(dollars in millions)

3 unchanged sentences

As a percentage of revenues 4.1 % 4.6 %

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.

The increase in intangibles amortization expense of $1.8 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 six months ended June 30, 2022, compared to the six months ended June 30, 2021.

The increase in depreciation expense of $1.5 million was primarily due to depreciation related to our investments in digital capabilities and computer and networking equipment of $1.8 million, partially offset by foreign exchange gain, net of hedging of $0.3 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

Income from Operations.

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.

Income from operations increased by $13.6 million, or 17.7%, from $77.4 million for the six months ended June 30, 2021 to $91.0 million for the six months ended June 30, 2022, primarily due to higher revenues, partially offset by higher cost of revenues and higher SG&A expenses during the six months ended June 30, 2022.

As a percentage of revenues, income from operations decreased from 14.4% for the six months ended June 30, 2021 to 13.5% for the six months ended June 30, 2022.

Foreign Exchange Gain/(Loss).

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dollar against the Indian rupee, the U.K.

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

pound sterling, the Philippine peso and the South African ZAR during the six months ended June 30, 2022.

The average exchange rate of the U.S.

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.

dollar against the Indian rupee increased from 73.42 during the six months ended June 30, 2021 to 76.46 during the six months ended June 30, 2022.

The average exchange rate of the U.K.

pound sterling against the U.S.

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

dollar decreased from 1.39 during the six months ended June 30, 2021 to 1.29 during the six months ended June 30, 2022.

The average exchange rate of the U.S.

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.

dollar against the Philippine peso increased from 48.29 during the six months ended June 30, 2021 to 52.25 during the six months ended June 30, 2022.

The average exchange rate of the U.S.

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.

dollar against the South African ZAR increased from 14.58 during the six months ended June 30, 2021 to 15.54 during the six months ended June 30, 2022.

We recorded a net foreign exchange gain of $3.2 million for the six months ended June 30, 2022, compared to the net foreign exchange gain of $1.8 million for the six months ended June 30, 2021.

Interest expense.

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.

Three months ended March 31, Percentage

Interest expense decreased from $5.0 million for the six months ended June 30, 2021 to $2.4 million for the six months ended June 30, 2022, primarily due to the 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, partially offset by higher outstanding obligations under our Credit Facility bearing a relatively lower effective interest rate as compared to the Notes during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

Other Income/(Loss), net.

Six months ended June 30, Percentage change

2022 2021 Change

(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 %

Gain on sale and mark-to-market of mutual funds and money market funds $ 1.9 $ 2.7 $ (0.8) (32.2) %

Interest and dividend income 2.2 1.3 0.9 71.7 %

Other, net (1.9) (0.4) (1.5) 336.3 %

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

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.

Other income/(loss), net $ 2.2 $ 3.6 $ (1.4) (38.3) %

Other income/(loss), net decreased by $1.4 million, from $3.6 million for the six months ended June 30, 2021 to $2.2 million for the six months ended June 30, 2022.

The decrease is primarily due to a fair value adjustment to recognize an increase in contingent consideration liability of $1.0 million related to our acquisition of Clairvoyant in December 2021, and lower return on mutual fund investments of $0.8 million, partially offset by interest on income tax refunds of $0.7 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

Income Tax Expense.

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.

The effective tax rate increased from 22.9% during the six months ended June 30, 2021 to 23.7% during the six months ended June 30, 2022.

We recorded income tax expense of $22.3 million and $17.9 million for the six months ended June 30, 2022 and 2021, respectively.

The increase in income tax expense was primarily as a result of higher profit during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, and an increase in non-deductible expenses, partially offset by higher excess tax benefits during the six months ended June 30, 2022.

Net income increased from $59.9 million for the six months ended June 30, 2021 to $72.0 million for the six months ended June 30, 2022, primarily due to increase in income from operations of $13.6 million, lower interest expense of $2.6 million, higher foreign exchange gain, net of $1.4 million and higher gain from equity-method investment of $0.3 million, partially offset by higher income tax expense of $4.4 million and lower other income/(loss), net of $1.4 million.

As a percentage of revenues, net income decreased from 11.2% for the six months ended June 30, 2021 to 10.7% for the six months ended June 30, 2022.

Liquidity and Capital Resources

Three months ended March 31,

Six months ended June 30,

(dollars in millions)

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

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)

Net cash provided by operating activities 53.1 53.9

Net cash (used for)/provided by investing activities (41.0) 11.7

Net cash used for financing activities (35.3) (131.4)

Effect of exchange rate changes (5.4) (2.2)

Closing cash, cash equivalents and restricted cash $ 115.2 $ 157.5

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.

As of June 30, 2022 and 2021, we had $265.2 million and $294.7 million, respectively, in cash, cash equivalents and short-term investments, of which $241.1 million and $254.2 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 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.

Net cash provided by operating activities was $53.1 million for the six months ended June 30, 2022 as compared to net cash provided by operating activities of $53.9 million for the six months ended June 30, 2021, reflecting our cash earnings and effective management of working capital needs.

The major drivers contributing to the decrease of $0.8 million year-over-year included the following:

• A decrease in accrued employee costs, offset by an increase in accrued expenses and other liabilities contributed to a lower cash flow of $33.0 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

The decrease was primarily due to higher payments (net of accruals) of annual performance incentives of $39.7 million, offset by higher employee costs accruals of $3.2 million and higher accrued expenses due to an increase in our cost base to support revenue growth of $3.5 million.

• Changes in accounts receivable, including advance billings, contributed higher cash flow of $15.5 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

The increase was a result of lower cash flows during the six months ended June 30, 2021 due to higher advance collections during the three months ended December 31, 2020.

This was partially offset by higher accounts receivable resulting from revenue growth during the six months ended June 30, 2022 and increase in our accounts receivable days sales outstanding which was 60 days as of June 30, 2022 as compared to 58 days as of June 30, 2021.

• An increase in net income of $12.1 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021, primarily due to an increase in income from operations of $13.6 million driven by higher revenues, lower interest expense of $2.6 million and higher gain from equity-method investment of $0.3 million, partially offset by higher income tax expense of $4.4 million.

• Other drivers increasing cash flows during the six months ended June 30, 2022 compared to the six months ended June 30, 2021 included:

lower income tax payments, net of refunds, of $4.4 million, primarily due to withholding tax payments during the six months ended June 30, 2021, offset by higher advance income tax payments on higher net income during the six months ended June 30, 2022.

Investing Activities:

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.

Cash flows used for investing activities were $41.0 million for the six months ended June 30, 2022 as compared to cash flows provided by investing activities of $11.7 million for the six months ended June 30, 2021.

The increase in cash flows used for investing activities of $52.7 million is mainly due to higher net purchase of investments of $13.5 million during six months ended June 30, 2022 as compared to net redemption of investments of $31.0 million during the six months ended June 30, 2021.

The increase is also due to higher capital expenditures in infrastructure, technology assets, software and product developments of $5.5 million and acquisitions related payouts of $2.6 million during the six months ended June 30, 2022.

Financing Activities:

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.

Cash flows used for financing activities were $35.3 million during the six months ended June 30, 2022 as compared to cash flows used for financing activities of $131.4 million during the six months ended June 30, 2021.

The decrease of $96.1 million was primarily due to net proceeds of our borrowings under our revolving Credit Facility of $25.0 million during the six months ended June 30, 2022 as compared to net repayment of our borrowings of $74.0 million during the six months ended June 30, 2021.

This was partially offset by higher purchases of treasury stock by $2.8 million under our share repurchase program during the six months ended June 30, 2022 as compared to the six months ended June 30, 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 $16.1 million of capital expenditures in the three months ended March 31, 2022.

We incurred $25.1 million of capital expenditures in the six months ended June 30, 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.

5 unchanged sentences

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.

In the ordinary 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.

1 unchanged sentence

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.

As of June 30, 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.

3 unchanged sentences

(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.

Our deferred contributions, net of payments to FICA was $3.1 million as of June 30, 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 facility balances as of March 31, 2022 and December 31, 2021.

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

The following tables summarizes our debt position:

As of June 30,2022 As of December 31, 2021

(dollars in millions) (dollars in millions)

Revolving Credit

facility Total Revolving Credit

facility Total

Revolving Credit Facility Total Revolving Credit Facility Total

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

1 unchanged sentence

Total borrowings $ 285.0 $ 285.0 $ 260.0 $ 260.0

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.

Unamortized debt issuance costs for our revolving Credit Facility of $1.3 million and $0.2 million as of June 30, 2022 and December 31, 2021, respectively, is 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.

Recent Accounting Pronouncements

1 unchanged sentence

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