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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-02-23 · 195 added, 281 removed, 318 unchanged (60% of the section changed)

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

All references to years, unless otherwise noted, refer to our fiscal year, which ends on December 31.

For example, a reference to “2023” or “fiscal 2023” means the 12-month period that ended on December 31, 2023.

All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year.

Cautionary Note Regarding Forward-Looking Statements

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These factors include but are not limited to:

• our ability to maintain and grow client demand for our services and solutions, including anticipating and incorporating the latest technology into our offerings;

• our ability to maintain and grow client demand for our services and solutions, including anticipating and incorporating the latest technologies, for instance, artificial intelligence (“AI”), including generative AI into our offerings;

• impact on client demand by the selling cycle and terms of our client contracts;

• fluctuations in our earnings;

• our ability to hire and retain enough sufficiently trained employees to support our operations or any changes in the senior management team;

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

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

• our ability to adjust our pricing terms or effectively manage our asset utilization levels to meet the changing demands of our clients and potential clients;

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• reliance on third parties to deliver services and infrastructure for client critical services;

• employee wage increases;

• failure to protect our intellectual property;

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• our ability to successfully consummate or integrate strategic acquisitions including the impact from the impairment of goodwill and other intangible assets, if any;

• legal liability arising out of customer and third party contracts;

• increasing competition in our industry;

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

• legal liability arising out of customer and third party contracts;

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

• our financial condition could be negatively affected if governments in the countries we operate in introduces new unfavorable tax legislation;

• changes in tax laws or decisions regarding repatriation of funds held abroad;

• exposure to currency exchange rate fluctuations in the various currencies in which we do business including the potential effects of Russian-Ukraine conflict, rising inflation, high interest rates and economic recessionary trends on currency exchange rates;

• the introduction of new or unfavorable tax legislation, including legal restrictions on repatriation of funds held abroad;

• exposure to currency exchange rate fluctuations in the various currencies in which we do business including the potential effects of Russian-Ukraine and Israel-Hamas conflicts, rising inflation, high interest rates and economic recessionary trends on currency exchange rates;

• restrictions on immigration;

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

• regulatory, legislative and judicial developments, including our ability to adhere to regulations or accreditation or licensing standards that govern our business;

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

Inception of interest rate swaps to hedge interest rate risk;

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

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

• our ability to meet our sustainability-related goals and targets.

In particular, you should consider the numerous risks outlined in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.

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The forward-looking statements made by us in this Annual Report on Form 10-K, or elsewhere, speak only as of the date on which they were made.

New risks and uncertainties may come up from time to time, and it is impossible for us to predict those events or how they may affect us.

New risks and uncertainties may occur from time to time, and it is impossible for us to predict those events or how they may affect us.

We have no obligation to update any forward-looking statements in this Annual Report on Form 10-K after the date of this Annual Report on Form 10-K, except as required by federal securities laws.

Executive Overview

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 are a leading data analytics and digital operations and solutions company.

We partner with clients using a data and AI-led approach to reinvent business models, drive better business outcomes and unlock growth with speed.

We harness the power of data, analytics, AI, and deep industry knowledge to transform operations for the world’s leading corporations in industries including insurance, healthcare, banking and financial services, media and retail, among others.

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

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• 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 Republic of Ireland, the Philippines, Bulgaria, Colombia, South Africa, Romania and the Czech Republic.

On June 10, 2022, we acquired certain assets of Inbound Media Group, LLC (“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.

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.

Impact of COVID-19 on Our Business

During 2022, we continued to recover from the COVID-19 pandemic.

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, which has led to increased demand for digital capabilities.

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, 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.

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 2022, however the impact of the pandemic for the period beyond 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.”

For the year ended December 31, 2022, we generated revenues of $1,412.0 million compared to revenues of $1,122.3 million for the year ended December 31, 2021, an increase of $289.7 million, or 25.8%.

We serve clients mainly in the United States and the United Kingdom, with these two regions generating 85.9% and 9.5%, respectively, of our total revenues for the year ended December 31, 2022 and 85.9% and 9.4%, respectively, of our revenues for the year ended December 31, 2021.

For the years ended December 31, 2022 and 2021, our total revenues from our top ten clients accounted for 34.9% and 38.1% of our total revenues, respectively.

Our global delivery network, which includes highly trained industry and process specialists across the United States, the United Kingdom, 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 Philippines, South Africa, Colombia, Bulgaria, Romania, the United Kingdom, the Czech Republic, Mexico and the Republic of Ireland.

For fiscal 2023, we generated revenues of $1,630.7 million compared to revenues of $1,412.0 million for fiscal 2022, an increase of $218.7 million, or 15.5%.

We serve clients mainly in the United States and the United Kingdom, with these two regions generating 84.1% and 10.9%, respectively, of our total revenues for fiscal 2023 and 85.9% and 9.5%, respectively, of our revenues for fiscal 2022.

For fiscal 2023 and 2022, our total revenues from our top ten clients accounted for 34.0% and 34.9% of our total revenues, respectively.

Although 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.

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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 challenges such as the insurance claims life cycle, financial transactions processing and provider and member experiences.

This typically involves 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.

We provide our clients with a range of data and AI-led digital operations and solutions from our Insurance, Healthcare and Emerging Business strategic business units, which are focused on solving complex industry challenges, which include:

a) multi-modal data ingestion using AI, and converting unstructured content into curated and usable data, b) real-time and comprehensive data insights including end-to-end data management and building a 360-degree view of our clients’ customers, c) omni-channel and frictionless customer experience including self-service, conversational AI and smart agent assist, d) intelligent and AI-powered redesign and automation of transaction processing and e) automated quality, compliance and audit.

Some of our clients’ operations that we have transformed using the above solutions include underwriting operations, claims processing, accounts payables processing, utilization management, member and provider contact center services and collections and accounts receivables.

We either manage and digitally transform these operations for our clients by deploying our solutions through a software-as-a-service model via our partners’ cloud network or a client’s on-cloud deployment model, to digitally transform their retained operations.

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.

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A multi-vendor relationship allows a client to seek more favorable pricing and other contract terms from each vendor, which can result in significantly reduced gross margins from the provision of services to such client for each vendor.

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 aim to drive better business outcomes for our clients by unlocking deep insights from data and creating data-led solutions across all parts of our clients’ business.

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 aim to drive better business outcomes for our clients by unlocking deep insights from data and creating data and AI-led solutions across all parts of our clients’ business.

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

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Our Analytics teams deliver predictive and prescriptive analytics in the areas of customer acquisition and life cycle management, risk underwriting and pricing, operational effectiveness, credit and operational risk monitoring and governance, regulatory reporting 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 AI and ML capabilities and proprietary solutions to create insights, improve decision making for our clients and address a range of complex industry-wide priorities.

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

We enhance, modernize and enrich structured and unstructured data and use a spectrum of advanced analytical tools and techniques, including our in-house and third-party AI, generative AI, and ML capabilities and proprietary solutions to create insights, improve decision making for our clients and address a range of complex industry-wide priorities.

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.

In addition, our projects-based analytics services are documented in contracts with terms generally not exceeding one year and may not produce ongoing or recurring business for us once the project is completed.

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

In addition, our project-based analytics services are documented in contracts with terms generally not exceeding one year and may not produce ongoing or recurring business for us once the project is completed.

These contracts also usually contain provisions permitting termination of the contract after a short notice period.

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rewards and recognition for certain employees;

and non-cash stock compensation expense;

and non-cash stock-based compensation expense;

• costs relating to our facilities and communications network, which include telecommunication and IT costs;

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operational expenses for our operations centers;

rent expenses;

• Outsourced/subcontractors and professional services costs;

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As our existing competitors continue to grow, and as new competitors enter the market, we expect competition for skilled professionals in each of these areas to continue to increase, with corresponding increases in our cost of revenues to reflect increased compensation levels for such professionals.

We also expect that we will continue to incur additional costs to monitor and improve operational efficiency of our hybrid and remote working models, invest in information technology solutions, including adaption to evolving modes of seeking such solutions through cloud-based hosting arrangements and security measures to safeguard against information security risks and costs to protect the health and safety of our employees as they gradually return to the office.

We also expect that we will continue to incur additional costs to monitor and improve operational efficiency of our hybrid working model, invest in information technology solutions, including adaption to evolving modes of seeking such solutions through cloud-based hosting arrangements and security measures to

safeguard against information security risks and costs to protect the health and safety of our employees as they gradually return to the office.

See Part I, Item 1A, “Risk Factors” under “Risks Related to Our Business––Employee wage increases may prevent us from sustaining our competitive advantage and may reduce our profit margin.” However, a significant portion of our client contracts include inflation-based adjustments to our billing rates year over year which partially offset such increase in cost of revenues.

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The cost of revenues as a percentage of revenues improves as we scale up, achieve operational efficiencies and complete the migration.

Operating expenses

Selling, General and Administrative Expenses ("SG&A")

Our General and Administrative expenses (“G&A”) comprise of expenses relating to salaries and benefits (including stock-based compensation), retirement benefits as well as costs related to recruitment, training and retention of senior management and other support personnel in enabling functions, telecommunications, utilities, travel and other miscellaneous administrative costs.

G&A expenses also include acquisition-related costs, legal and professional fees (which represent the costs of third party legal, tax, accounting, immigration and other advisors), cost of technology solutions sought through evolving modes of cloud-based hosting arrangements, investment in product development, digital technology, advanced automation and robotics, cloud, AI and MI, bad debt allowance and stock-based compensation expenses related to grant of our equity awards to members of our board of directors.

G&A expenses also include acquisition-related costs, legal and professional fees (which represent the costs of third party legal, tax, accounting, immigration and other advisors), litigation claims, cost of technology solutions sought through evolving modes of cloud-based hosting arrangements, investment in product development, digital technology, advanced automation and robotics, cloud, AI and ML, bad debt allowance and stock-based compensation expenses related to grant of our equity awards to members of our board of directors.

We expect our G&A costs to increase as we continue to strengthen our support and enabling functions and invest in leadership development, performance management and training programs.

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Depreciation and amortization pertains to depreciation of our property and equipment, including network equipment, cabling, computers, office furniture and equipment, motor vehicles and leasehold improvements and amortization of intangible assets acquired in business combinations.

As part of our ongoing evaluation of our business needs, we continually optimize our

operations centers and expect depreciation to decrease on assets related to operations centers, such as office furniture and equipment and leasehold improvements.

As our business continues to expand we expect additional investments in digital technologies and equipment, including laptops, desktop computers, servers and other infrastructure, and increased reliance on hybrid and remote working models, we expect increases in depreciation on assets-related to such investments.

The property and equipment that are evaluated as being used differently than as originally intended are assessed for revision of their useful life, thereby revising their future depreciation to reflect the actual use of such property and equipment over the remaining shortened life.

As part of our ongoing evaluation of our business needs, we continually optimize our operations centers and expect depreciation to decrease on assets related to operations centers, such as office furniture and equipment and leasehold improvements.

As our business continues to expand we expect additional investments in digital technologies and equipment, including laptops, desktop computers, servers and other infrastructure, and increased reliance on hybrid working model, we expect increases in depreciation on assets-related to such investments.

Property and equipment, if evaluated as being used differently than as originally intended are assessed for revision of their useful life, thereby revising their future depreciation to reflect the actual use of such property and equipment over the remaining shortened life.

We expect amortization of intangible assets to increase further as we pursue strategic relationships and acquisitions.

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We report our financial results in U.S.

However, a significant portion of our total revenues are earned in the U.K.

pound sterling (8.6% for each of the years ended December 31, 2022 and 2021), while a significant portion of our expenses are incurred and paid in the Indian rupee, the Philippine peso and the U.K.

pound sterling, representing 29.1%, 8.2% and 3.0%, respectively, of our total expenses in the year ended December 31, 2022, compared to 29.4%, 9.5% and 3.4%, respectively, of our total expenses in the year ended December 31, 2021.

Our revenues are primarily denominated in the U.S.

dollar, however, a portion of our revenues are earned in the U.K.

pound sterling representing 10.1% and 8.6% of our total revenues in fiscal 2023 and 2022, respectively.

We also incur a significant portion of our expenses in the Indian rupee, the Philippine peso and the U.K.

pound sterling, representing 28.5%, 8.2% and 3.1%, respectively, of our total expenses in fiscal 2023, compared to 29.1%, 8.2% and 3.0%, respectively, of our total expenses in fiscal 2022.

The exchange rates among the Indian rupee, the Philippine peso, the U.K.

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pound sterling appreciate or depreciate against the U.S.

See Note 2 - Summary of Significant Accounting Policies and Note 17 - Derivatives and Hedge Accounting to our consolidated financial statements and Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk-Components of Market Risk-Foreign Currency Risk.”

See Part I, Item 1A, “Risk Factors” under “Risks Related to the International Nature of Our Business––Currency exchange rate fluctuations in the various currencies in which we do business, or the failure of our hedging strategies to mitigate such fluctuations, could have a material adverse effect on our results of operations,” as well as Note 2 - Summary of Significant Accounting Policies and Note 17 - Derivatives and Hedge Accounting to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data” and Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk-Components of Market Risk-Foreign Currency Risk.”

Interest Expense

Interest expense primarily consist of interest on our borrowings under our revolving credit facility and convertible senior notes, finance leases and notional interest implicit in the purchase of property and equipment.

Other Income/(Loss), net

Other income/(loss), net primarily consists of gain/(loss) on sale, mark to market, dividend income and interest income on our short-term and long-term investments, cash equivalents, as applicable.

Other income/(loss), net also consists of changes in fair value of contingent consideration related to business combinations, interest on refunds received from income tax authorities in India on completion of tax assessments, profit or loss on disposal of long-lived assets and components of net periodic benefit cost such as interest cost, expected return on plan assets and amortization of actuarial gain or loss.

Other Income/(Expense), net

Other income/(expense), net primarily consists of gain/(loss) on sale, mark to market, dividend income and interest income on our short-term and long-term investments, cash equivalents, as applicable.

Other income/(expense), net also consists of changes in fair value of contingent consideration related to business combinations, interest on refunds received from income tax authorities in India on completion of tax assessments, profit or loss on disposal of long-lived assets and components of net periodic benefit cost such as interest cost, expected return on plan assets and amortization of actuarial gain or loss.

We are subject to taxes in the countries we operate in.

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We continuously monitor such changes to assess and quantify the potential impacts on our consolidated financial statements.

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.

We periodically evaluate opportunities to distribute cash among our group entities to fund our operations in the United States and other countries, 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.

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

We recognize deferred tax assets and liabilities for temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry forwards.

We determine if a valuation allowance is required on the basis of an assessment of whether it is more likely than not that a deferred tax asset will be realized.

We currently benefit from corporate tax holidays in our qualified Philippines Economic Zone Authority operations centers in the Philippines.

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We continuously monitor such changes to assess and quantify any potential impacts on our consolidated financial statements.

We determine if a valuation allowance is required on the basis of an assessment of whether it is more likely than not that a deferred tax asset will be realized.

During 2023, we established a headquarters for international business in Dublin, the Republic of Ireland qualifying for the reduced tax rate of 12.5%, resulting in a nominal reduction in our effective tax rate for 2023.

We anticipate that Ireland’s business and related tax rate benefit, net of Pillar Two impact discussed below, will increase in the future.

In October 2021, more than 130 countries tentatively signed on to the Organization for Economic Co-operation and Development (“OECD”) Pillar Two Framework that imposes a minimum tax rate of 15%, among other provisions.

The OECD continues to release additional guidance on the Pillar Two Framework, with implementation generally effective for 2024.

The countries where we do business impacted by the Pillar Two Framework are the Philippines and the Republic of Ireland.

We do not anticipate any significant impact attributable to the Philippines, and any unfavorable impact attributable to the Republic of Ireland will be offset against the reduced Ireland tax rate benefit discussed above.

We continue to evaluate the potential impact of the Pillar Two Framework on our consolidated financial statements.

Forward Stock Split

On June 20, 2023, subsequent to the approval and recommendation of our board of directors, our stockholders approved an amendment to our amended and restated certificate of incorporation, which upon filing with the Secretary of State of the State of Delaware on August 1, 2023, and effectiveness thereof, effected a 5-for-1 forward stock split of our common stock and an increase in the number of authorized shares of our common stock from 100,000,000 shares to 400,000,000 shares.

The par value of each share of common stock, $0.001, remained unchanged.

See Note 19 - Capital Structure to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data” for further details.

All prior period information has been adjusted to reflect the forward stock split.

Subsequent Event

On February 26, 2024, our board of directors authorized a $500 million common stock repurchase program (the “2024 Repurchase Program”), effective March 1, 2024, for a two-year period, in line with our capital allocation strategy.

Under the 2024 Repurchase Program, shares may be purchased by us from time to time from the open market and through private transactions, or otherwise, as determined by our management as market conditions warrant.

Repurchases may be discontinued

at any time by the management.

The 2024 Repurchase Program replaces the prior $300 million stock repurchase program, which was terminated effective February 29, 2024.

Critical Accounting Policies and Estimates

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generally accepted accounting principles (“U.S.

A summary of our significant accounting policies is included in Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements.

A summary of our significant accounting policies is included in Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data.”

We consider the policies discussed below to be critical to an understanding of our consolidated financial statements, as their application places the most significant demands on management’s judgment regarding matters that are inherently uncertain at the time an estimate is made.

These policies include revenue recognition, allowance for expected credit losses, business combinations, goodwill, other intangible assets and long-lived assets, stock-based compensation, employee benefits, derivative financial instruments and hedging, leases and income taxes.

The significant estimates and assumptions that affect the financial statements include, but are not limited to, estimates of the fair value of the derivative financial instruments, stock-based awards, identifiable intangible assets and contingent consideration, assumptions related to credit risk of customers, the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, and variable consideration in a customer contract, expected recoverability from customers with contingent fee arrangements, estimated costs to complete fixed price contracts, assets and obligations related to employee benefit plans, determination of incremental borrowing for measuring lease liabilities, deferred tax assets and liabilities, deferred tax valuation allowances, income-tax contingencies, purchase price allocation, revenue projections and discount rate applied within the discounted cash flow model.

These policies include revenue recognition, allowance for expected credit losses, business combinations, goodwill, stock-based compensation, employee benefits, leases and income taxes.

The significant estimates and assumptions that affect the consolidated financial statements include, but are not limited to, estimates of the fair value of stock-based awards, identifiable intangible assets and contingent consideration, assumptions related to credit risk of customers, the nature and timing of the satisfaction of performance obligations, the standalone selling price of performance obligations, and variable consideration in a customer contract, expected recoverability from customers with contingent fee arrangements, estimated costs to complete fixed price contracts, assets and obligations related to employee benefit plans, determination of incremental borrowing for measuring lease liabilities, deferred tax assets and liabilities, deferred tax valuation allowances, income-tax contingencies, purchase price allocation, revenue projections and discount rate applied within the discounted cash flow model for business acquisitions.

These accounting policies, estimates and the associated risks are set out below.

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Revenue Recognition

Revenue is recognized when services are provided to our clients, in an amount that reflects the consideration which we expect to be entitled to in exchange for the services provided.

Revenue is recognized when services are provided to our customers, in an amount that reflects the consideration which we expect to be entitled to in exchange for the services provided.

We recognize revenue when we satisfy a performance obligation by providing services to a customer.

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Arrangements with Multiple Performance Obligations

We sometimes enter into contracts with our clients which include promises to transfer multiple products and services to the client.

We sometimes enter into contracts with our customers which include promises to transfer multiple products and services to the customer.

Determining whether products and services are considered as distinct performance obligations that should be accounted for separately rather than as one performance obligation may require significant judgment.

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In instances where the standalone selling price is not directly observable, it is determined using information that may include market conditions and other observable inputs.

The contracts with our clients may be modified to add, remove or change existing performance obligations, which requires judgment to evaluate and determine whether such performance obligations are to be accounted for on a prospective basis as a separate contract or as a termination of an existing contract and creation of a new contract.

The contracts with our customers may be modified to add, remove or change existing performance obligations, which requires judgment to evaluate and determine whether such performance obligations are to be accounted for on a prospective basis as a separate contract or as a termination of an existing contract and creation of a new contract.

Variable Consideration

Variability in the transaction price arises primarily due to service level agreements and volume discounts.

We consider our experience with similar transactions and expectations regarding the contract in estimating the amount of variable consideration that should be recognized during a period.

Variability in the transaction price arises primarily due to service level agreements, volume discounts entailing variability in revenue earned, and contracts under our reimbursement optimization services whereby variability in revenue is attributable to the amount we enable our customers to recover.

We consider our historical experience, including trends with similar transactions and expectations regarding the contract in estimating the amount of variable consideration that should be recognized during a period.

We believe that the expected value method is most appropriate for determining the variable consideration since we have a large number of contracts with similar nature of transactions/services.

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Revenues for our fixed-price contracts are recognized using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations.

Incurred cost represents work performed, which corresponds with, and thereby reasonably reflects transfer of control to the client.

The use of this method requires significant judgment to estimate the cost required to complete the contracted scope of work, including

assumptions and estimates relative to the length of time to complete the project and the nature and complexity of the work to be performed and resources engaged.

Incurred cost represents work performed, which corresponds with, and thereby reasonably reflects transfer of control to the customer.

The use of this method requires significant judgment to estimate the cost required to complete the contracted scope of work, including assumptions and estimates relative to the length of time to complete the project and the nature and complexity of the work to be performed and resources engaged.

We regularly monitor these estimates throughout the execution of the project and record changes in the period in which a change in an estimate is determined.

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Revenues from reimbursement optimization services having contingent fee arrangements are recognized by us at the point in time when a performance obligation is satisfied, which is when we identify an overpayment claim.

In such contracts, our consideration is contingent upon the actual collections made by our clients and net of any subsequent retraction claims.

Based on guidance on “variable consideration” in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), we use our historical experience and projections to determine the expected recoveries from our clients and recognize revenue based upon such expected recoveries.

In such contracts, our consideration is contingent upon the actual collections made by our customers and net of any subsequent retraction claims.

Based on guidance on “variable consideration” in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), we use our historical experience and projections to determine the expected recoveries from our customers and recognize revenue based upon such expected recoveries.

Any adjustment required due to change in estimates are recorded in the period in which such change is identified.

For additional information, see Note 4 - Revenues, net to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data.”

Unbilled Receivables

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Unbilled receivables also include revenues recognized from reimbursement optimization services where we identify an overpayment claim.

In such contracts, our consideration is contingent upon and collectable only when the actual collections are made by our clients.

Based on guidance on “variable consideration” in ASC Topic 606, we use our historical experience and projections to determine the expected recoveries from our clients and recognize revenue and receivables based upon such expected recoveries.

Accordingly, the amounts for which services have been performed and for which invoices have not been issued to customers on the balance sheet date, (i.e.

unbilled receivables) are presented under accounts receivable, net.

Deferred Revenue and contract fulfillment costs

We have contract liabilities (deferred revenue) consisting of advance billings and billing in excess of revenues recognized.

Deferred revenue also includes the amount for which services have been rendered but other conditions of revenue recognition are not met, for example where we do not have an enforceable contract.

Further, we also defer revenues attributable to certain process transition activities, with respect to our clients where such activities do not represent separate performance obligations.

Revenues related to such transition activities are classified under “Deferred revenue” and “Other non-current liabilities” in our consolidated balance sheets and are recognized ratably over the period during which the related services are performed.

Costs related to such transition activities are contract fulfillment costs, and thereby classified under “Other current assets” and “Other assets” in the consolidated balance sheets, and are recognized over the expected duration of the relationship with customers, under “Cost of revenues” in our consolidated statements of income.

Contract Acquisition Costs

Direct and incremental costs incurred for acquiring contracts, such as sales commissions are contract acquisition costs and thereby classified under “Other current assets” and “Other assets” in our consolidated balance sheets.

Such costs are amortized over the expected duration of the relationship with customers and recorded under Selling and marketing expenses in our consolidated statements of income.

Upfront Payment Made to Customers

Upfront payments in nature of deal signing discount or deal signing bonuses made to customers are contract assets and classified under “Other current assets” and “Other assets” in our consolidated balance sheets.

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

In such contracts, our consideration is contingent upon and collectable only when the actual collections are made by our customers.

Based on guidance on “variable consideration” in ASC Topic 606, we use our historical experience and projections to determine the expected recoveries from our customers and recognize revenue and receivables based upon such expected recoveries.

Allowance for Expected Credit Losses

We record accounts receivable net of allowances for expected credit losses.

Allowances for credit losses are established through the evaluation of aging of accounts receivables, prior collection experience, current market conditions, forecasts about future economic conditions, clients’ financial condition and the amount of accounts receivable in dispute to estimate the collectability of these accounts receivable.

Allowances for credit losses are established through the evaluation of aging of accounts receivables, prior collection experience, current market conditions, forecasts about future economic conditions, customers’ financial condition and the amount of accounts receivable in dispute to estimate the collectability of these accounts receivable.

Accounts receivable balances are written-off against the allowance for expected credit losses after all means of collection have been exhausted and the potential for recovery is considered remote.

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We subsequently re-evaluate the assets acquired and liabilities assumed, including additional assets and liabilities identified subsequent to acquisition date, with any adjustments to our preliminary estimates being recorded to goodwill within the measurement period (up to one year from the acquisition date).

Goodwill, Other Intangible Assets and Long-lived Assets

Goodwill represents the cost of the acquired businesses in excess of the fair value of identifiable tangible and intangible net assets purchased in a business combination.

Goodwill is not amortized but is tested for impairment at least on an annual basis, relying on a number of factors including operating results, business plans and estimated future cash flows of the reporting units to which it is assigned.

We undertake studies to determine the fair values of assets and liabilities acquired and allocate purchase consideration to assets and liabilities, including property and equipment, goodwill and other identifiable intangibles.

We examine the carrying value of the goodwill annually in the fourth quarter, or more frequently, as circumstances warrant, to determine whether there are any impairment losses.

We test for goodwill impairment at the reporting unit level.

The goodwill quantitative impairment test involves a comparison of the fair value of a reporting unit with its carrying amount.

We estimate the fair value of a reporting unit using a combination of the income approach, using discounted cash flow analysis (“DCF model”) and the market approach, using market multiples for reporting units whereby the fair value is not substantially in excess of carrying value.

Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate.

We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business.

Actual results may differ from those assumed in our forecasts.

The discount rate is based on judgment of the specific risk inherent in the future cash flows of the respective reporting units.

The variables within the discount rate, many of which are outside of our control, provide us best estimate of all assumptions applied within the DCF model.

Under the market approach, we estimate fair value based on market multiples of revenues and earnings derived from comparable publicly-traded companies with characteristics similar to the reporting unit and comparable market transactions.

The market approach is used to corroborate the results of the income approach.

The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions and other factors.

Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit.

Determining fair value requires the use of estimates and exercise of significant judgment, including assumptions about appropriate discount rates, perpetual growth rates, amount and timing of expected future cash flows, market multiples of revenues and earnings and comparable market transactions.

These estimates and judgements may not be within our control and accordingly it is reasonably possible that the estimates and judgments described above could change in future periods.

There can be no assurance that operations will achieve the future cash flows reflected in the projections.

If the carrying amount of the reporting unit exceeds its fair value, an impairment loss shall be recognized, in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

We review long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In general, we will recognize an impairment loss when the sum of discounted expected future cash flows is less than the carrying amount of such asset.

The estimate of discounted cash flows and the fair value of assets require several assumptions and estimates like the weighted average cost of capital, discount rates, risk-free rates, market rate of return and risk premiums and can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our internal forecasts.

Although we believe the historical assumptions and estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results.

See Note 2 - Summary of Significant Accounting Policies - Business Combinations, Goodwill and Other Intangible Assets to our consolidated financial statements for more information.

We examine the carrying value and fair value of the reporting unit that includes goodwill as and when the circumstances warrant, to determine whether there are any impairment losses.

We perform an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

Based on the assessment of events or circumstances, we perform a quantitative assessment of goodwill impairment if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If, based on the quantitative impairment analysis, the carrying value of the goodwill of a reporting unit exceeds the fair value of such goodwill, an impairment loss is recognized in an amount equal to the excess, limited to the total amount of goodwill allocated to that reporting unit.

In addition, we perform a quantitative assessment of goodwill impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Stock-based Compensation

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Determining the fair value of stock-based awards at the grant date requires significant judgment, including estimating the expected term over which the stock awards will be outstanding before they are exercised and the expected volatility of our stock.

We also grant performance-based restricted stock units (“PRSUs”) to executive officers and other specified employees.

Generally, we grant PRSUs cliff vest based on an aggregated revenue target (“PUs”) for a three-year period, while grants based on market conditions (“MUs”) are contingent on meeting or exceeding the total shareholder return relative to a group of peer companies specified under the 2018 Plan, and are measured over a three-year performance period.

The award recipient may earn up to 200% of the PRSUs granted based on the actual achievement of both targets.

However, the features of our equity incentive compensation program are subject to change by the Compensation and Talent Management Committee of our board of directors.

We grant performance-based restricted stock units (“PRSUs”) to executive officers and other specified employees.

Generally, we grant PRSUs cliff vest based on an aggregated revenue target (“PUs”) for a three-year period, while grants based on market conditions (“MUs”) are contingent on meeting or exceeding the total shareholder return relative to a group of peer companies specified under our 2018 Omnibus Incentive Plan (the “2018 Plan”), and are measured over a three-year performance period.

The fair value of each PU is determined based on the market price of one share of our common stock on the day prior to the date of grant.

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Stock-based compensation expense associated with our 2022 Employee Stock Purchase Plan is measured at fair-value using a Black-Scholes option-pricing model at commencement of each offering period and recognized over that offering period.

Derivative Instruments

In the normal course of business, we use derivative instruments to mitigate the exposure from risk of foreign currency and interest rate fluctuations.

We enter into foreign currency forward contracts to hedge cash flow risks from forecasted transactions denominated in certain foreign currencies, and interest rate swaps to hedge cash flow risks from our revolving credit facility having variable interest rate obligations.

These contracts adhere to our treasury operations’ objectives and policies to qualify as cash flow hedges, and are with counterparties that are highly rated financial institutions.

Changes in the fair value of these cash flow hedges are recorded as a component of accumulated other comprehensive income/(loss) (“AOCI”), net of tax.

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

The accumulated changes in the fair value of interest rate swaps recognized in AOCI are reclassified to our consolidated statements of income and are presented as a part of “Interest expense” over the term of the contract.

We evaluate hedge effectiveness of cash flow hedges at the time a contract is entered into as well as on an ongoing basis.

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

We also use derivative instruments consisting of foreign currency forward contracts to hedge intercompany balances and other monetary assets or liabilities denominated in currencies other than the functional currency, against the risk of foreign currency fluctuations associated with remeasurement of such assets and liabilities to functional currency.

These derivatives do not qualify as fair value hedges.

Changes in the fair value of these derivatives are recognized in our consolidated statements of income and are included in foreign exchange gain, net.

We also use foreign currency forward contracts designated as net investment hedges to hedge the foreign currency risks related to our investment in foreign subsidiaries.

Fair value changes on these forward contracts and gains and losses on settlement of such forward contracts are recognized in AOCI as part of the foreign currency translation adjustments and are reclassified to consolidated statements of income when a foreign operation is disposed or partially disposed.

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

These master netting arrangements generally provide for net settlement of all outstanding contracts

with the counterparty in the case of an event of default or a termination event.

We present all of the assets and liabilities related to these contracts on a gross basis, with no offsets, in our consolidated statements of financial position.

There is no financial collateral (including cash collateral) provided or received by us related to these contracts.

We determine the fair value of our derivatives based on market observable inputs including both forward and spot prices for currencies.

Derivative assets and liabilities included in Level 2 primarily represent foreign currency forward contracts.

The quotes are taken primarily from independent sources, including highly rated financial institutions.

We account for income tax using the asset and liability method.

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We recognize the effect of a change in tax rates on deferred tax assets and liabilities during the period in which the new tax rate was enacted or the change in tax status was filed or approved.

We release (reclassify) the tax effects from AOCI to the consolidated statements of income at the time of settlement of cash flows hedges and amortization of deferred actuarial gain/(loss) on retirement benefits.

Deferred tax assets are recognized in full, subject to a valuation allowance that reduces the amount recognized to that which is more likely than not to be realized.

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We also evaluate potential exposures related to tax contingencies or claims made by the tax authorities in various jurisdictions in order to determine whether a reserve may be required.

A reserve is recorded if we believe that a loss is probable and if the amount of such loss can be reasonably estimated.

A reserve is recorded if we believe that a loss is more likely than not, and if the amount of such loss can be reasonably estimated.

Such reserves are based on estimates and, consequently, are subject to changing facts and circumstances, including the progress of ongoing audits, changes in case law and the passage of new legislation.

We have established adequate reserves to cover any potential tax contingencies or claims.

We have adopted an accounting policy to treat Global Intangible Low-Taxed Income as a period cost.

Financial Accounting Standards Board Interpretation No.

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We have established adequate reserves to cover all uncertain tax positions.

We base our decision to continue to indefinitely reinvest earnings from our foreign subsidiaries on our estimate of the working capital required to support operations in these geographies.

In addition, we 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 in these geographies, as compared to those made in the United States.

Employee Benefits

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If actual results differ significantly from our estimates, current service costs for defined benefit plans and our results of operations could be materially impacted.

We include the service cost component of the net periodic benefit cost in the same line item or items as other compensation costs arising from services rendered by the respective employees during the period.

The interest cost, expected return on plan assets and amortization of actuarial gains/loss, are included in “Other income/(loss), net.” See Note 20 - Employee Benefit Plans to our consolidated financial statements for details.

We recognize the liabilities for compensated absences dependent on whether the obligation is attributable to employee services already rendered, relates to rights that vest or accumulate and payment is probable and estimable.

We account for a lease at the inception of the contract.

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(1) the lease transfers ownership of the asset by the end of the lease term, (2) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (3) the lease term is for a major part of the remaining useful life of the asset or (4) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset.

Operating leases are recorded in “Operating lease right-of-use assets,” “Current portion of operating lease liabilities” and “Operating lease liabilities, less current portion” in our consolidated balance sheets.

Finance leases are recorded in “Property and equipment, net,” and the current and non-current portion of finance lease liabilities are presented within “Accrued expenses and other current liabilities” and “Other non-current liabilities,” respectively in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset during the lease term and lease liabilities represent our obligation to make lease payments arising from the lease arrangement.

Right-of-use (“ROU”) assets represent our right to use an underlying asset during the lease term and lease liabilities represent our obligation to make lease payments arising from the lease arrangement.

Lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Operating lease ROU assets are recognized at commencement date in an amount equal to lease liability, adjusted for any lease prepayments, initial direct costs and lease incentives.

For leases in which the rate implicit in the lease is not readily determinable, we use our incremental borrowing rate at commencement date by adjusting the benchmark reference rates, applicable to the respective geographies where the leases were entered, with appropriate financing spreads and lease specific adjustments for the effects of collateral.

We determine the incremental borrowing rate by adjusting the benchmark reference rates with appropriate financing spreads applicable to the respective geographies where we entered into leases and lease specific adjustments for the effects of collateral.

For leases in which the rate implicit in the lease is not readily determinable, we use our incremental borrowing rate at commencement date.

Lease terms includes our assessment for the effects of options to extend or terminate the lease.

We consider the extension option as part of our lease term for those lease arrangements where we are reasonably certain at commencement of the lease that we will exercise that option.

Lease expense for operating lease arrangements is recognized on a straight-line basis over the lease term.

Lease expense for operating lease arrangements is recognized on a straight-line basis over the lease term reflecting single operating lease cost.

We evaluate lease agreements to determine lease and non-lease components, which are accounted for separately.

Lease payments that depend on factors other than an index or rate are considered variable lease payments and are excluded from the operating lease assets and liabilities and are recognized as expense in the period in which the obligation is incurred.

Lease payments include payments for common area maintenance, utilities such as electricity, heating and water, among others, and property taxes, and other similar payments paid to the landlord, which are treated as non-lease component.

We account for lease-related concessions in accordance with guidance in ASC Topic 842, Leases , to determine, on a lease-by-lease basis, whether the concession provided by lessor should be accounted for as a lease modification.

We account for a modification as a separate contract when it grants an additional right of use not included in the original lease and the increase is commensurate with the standalone price for the additional right of use, adjusted for the circumstances of the particular contract.

Modifications which are not accounted for as a separate contract are reassessed as of the effective date of the modification based on its modified terms and conditions and the facts and circumstances as of that date.

The lease liability is remeasured to reflect changes to the remaining lease payments and discount rates and we recognize the amount of the remeasurement of the lease liability as an adjustment to the ROU assets.

However, if the carrying amount of the ROU assets is reduced to zero as a result of modification, any remaining amount of the remeasurement is recognized as an expense in our consolidated statements of income.

We review the ROU assets for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable.

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Results of Operations

For a discussion of our results of operations for the year ended December 31, 2020, including a year-to-year comparison between 2021 and 2020, refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021.

For a discussion of our results of operations for fiscal 2021, including a year-to-year comparison between fiscal 2022 and 2021, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for fiscal 2022, filed with the SEC on February 23, 2023.

The following table summarizes our results of operations:

Year ended December 31,

2022 2021 2020

(dollars in millions)

2023 Percentage of Revenues, net Fiscal

2022 Percentage of Revenues, net Change in percentage of Revenues, net Dollar Change

(A) (B) (C=A-B)

Revenues, net $ 1,630.7 100.0 % $ 1,412.0 100.0 % — % $ 218.7

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Other income, net 10.8 0.7 % — — % 0.7 % 10.8

Loss on settlement of convertible notes — (12.8) —

Income before income tax expense and earnings from equity affiliates 237.9 14.6 % 190.1 13.5 % 1.1 % 47.8

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Income before earnings from equity affiliates 184.4 11.3 % 142.6 10.1 % 1.2 % 41.8

Gain/(loss) from equity-method investment 0.4 — (0.2)

Gain from equity-method investment 0.2 — % 0.4 — % — % (0.2)

Net income attributable to ExlService Holdings, Inc.

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Due to rounding, the numbers presented in the tables included in this Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may not add up precisely to the totals provided.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Fiscal 2023 Compared to Fiscal 2022

The following table summarizes our revenues by reportable segments:

Year ended December 31, Percentage

2022 2021 Change

Fiscal Dollar Change Percentage

change Percentage of Total Revenues for Fiscal

2023 2022 2023 2022

(dollars in millions)

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Total revenues, net $ 1,630.7 $ 1,412.0 $ 218.7 15.5 % 100.0 % 100.0 %

Revenues for the year ended December 31, 2022 were $1,412.0 million, up $289.7 million, or 25.8%, compared to the year ended December 31, 2021, driven primarily by revenue growth from our new and existing clients in the Analytics, Emerging Business and Insurance reportable segments.

Revenues for fiscal 2023 were up by $218.7 million, or 15.5%, compared to fiscal 2022, driven primarily by revenue growth from our new and existing clients in all of our reportable segments.

Revenue growth in Insurance of $81.2 million was primarily driven by expansion of business from our new and existing clients of $83.9 million.

This was partially offset by a loss of $5.0 million mainly attributable to the depreciation of the U.K.

pound sterling, the Australian dollar and the Indian rupee against the U.S.

dollar during the year ended December 31, 2022, compared to the year ended December 31, 2021.

Insurance revenues were 31.8% and 34.0% of our total revenues during the years ended December 31, 2022 and 2021, respectively.

Revenue decline in Healthcare of $15.0 million was primarily driven by the ramp-down in certain existing clients during the year ended December 31, 2022.

Healthcare revenues were 6.9% and 10.0% of our total revenues during the years ended December 31, 2022 and 2021, respectively.

Revenue growth in Emerging Business of $51.4 million was primarily driven by expansion of business from our new clients and existing clients of $58.0 million.

This was partially offset by a loss of $6.6 million mainly attributable to the depreciation of the U.K.

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

dollar during the year ended December 31, 2022, compared to the year ended December 31, 2021.

Emerging Business revenues were 15.5% and 14.9% of our total revenues during the years ended December 31, 2022 and 2021, respectively.

Revenue growth in Analytics of $186.6 million was primarily driven by higher volumes in our annuity and project based engagements from our new and existing clients of $144.1 million, and an incremental contribution from our acquisition of Clairvoyant in December 2021 of $47.4 million.

This was partially offset by a loss of $4.9 million mainly attributable to the depreciation of the U.K.

This was partially offset by a loss of $2.7 million, mainly attributable to the depreciation of the Australian dollar, the Indian rupee and the South African rand against the U.S.

dollar during fiscal 2023, compared to fiscal 2022.

Revenue growth in Healthcare of $8.6 million was primarily driven by expansion of business from our new and existing clients during fiscal 2023.

Revenue growth in Emerging Business of $47.1 million was primarily driven by expansion of business from our new and existing clients of $47.4 million.

This was partially offset by a loss of $0.3 million, net mainly attributable to the depreciation of the Indian rupee against the U.S.

dollar during fiscal 2023, compared to fiscal 2022.

Revenue growth in Analytics of $81.8 million was primarily driven by higher volumes in our annuity and project-based engagements from our new and existing clients of $80.8 million and an increase in revenues of $1.0 million, mainly attributable to the appreciation of the U.K.

pound sterling against the U.S.

dollar during the year ended December 31, 2022, compared to the year ended December 31, 2021.

Analytics revenues were 45.8% and 41.0% of our total revenues during the years ended December 31, 2022 and 2021, respectively.

dollar during fiscal 2023, compared to fiscal 2022.

Cost of Revenues and Gross Margin:

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Cost of Revenues Gross Margin (%)

Year ended December 31, Percentage

change Year ended December 31,

2022 2021 Change 2022 2021 Change

Fiscal Dollar Change Percentage

change Fiscal Percentage

2023 2022 2023 2022

(dollars in millions)

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Total $ 1,022.9 $ 896.6 $ 126.3 14.1 % 37.3 % 36.5 % 0.8 %

For the year ended December 31, 2022, cost of revenues was $896.6 million compared to $690.9 million for the year ended December 31, 2021, an increase of $205.7 million, or 29.8%.

Our gross margin for the year ended December 31, 2022 was 36.5% compared to 38.4% for year ended December 31, 2021, a decrease of 190 basis points (“bps”) primarily driven by lower margins associated with higher costs during ramp-ups in certain new clients and higher employee-related costs during the year ended December 31, 2022, compared to the year ended December 31, 2021.

The increase in cost of revenues in Insurance of $48.2 million for the year ended December 31, 2022 was primarily due to

increases in employee-related costs of $47.3 million on account of higher headcount and wage inflation, higher technology costs of $7.3 million on account of increased leverage of the hybrid and remote working models and higher travel costs of $1.6 million, partially offset by foreign exchange gain, net of hedging of $7.3 million and lower other operating costs of $0.7 million.

Gross margin in Insurance decreased by 140 bps during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to lower margins associated with higher costs during ramp-ups in certain new clients during the year ended December 31, 2022, compared to the year ended December 31, 2021.

The increase in cost of revenues in Healthcare of $1.2 million for the year ended December 31, 2022 was primarily due to

increases in employee-related costs of $3.5 million on account of higher headcount and wage inflation, and higher technology costs of $0.6 million on account of increased leverage of the hybrid and remote working models, partially offset by lower facilities cost of $1.1 million and foreign exchange gain, net of hedging of $1.8 million.

Gross margin in Healthcare decreased by 1,080 bps during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to lower revenues associated with the ramp-down of certain existing clients and higher operating expenses associated with the ramp-down of certain existing clients during the year ended December 31, 2022, compared to the year ended December 31, 2021.

The increase in cost of revenues in Emerging Business of $36.3 million for the year ended December 31, 2022 was primarily due to increases in employee-related costs of $34.5 million on account of higher headcount and wage inflation, higher technology costs of $4.0 million on account of increased leverage of the hybrid and remote working models, higher travel costs of $2.3 million, higher facilities costs of $1.2 million, partially offset by foreign exchange gain, net of hedging of $5.7 million.

Gross margin in Emerging Business decreased by 370 bps during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to lower margins associated with higher costs during ramp-ups in certain new clients, higher employee-related costs and higher operating expenses during the year ended December 31, 2022, compared to the year ended December 31, 2021.

The increase in cost of revenues in Analytics of $120.0 million for the year ended December 31, 2022 was primarily due to increases in employee-related costs of $113.0 million on account of higher headcount 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 $4.5 million, higher technology costs of $3.5 million on account of increased leverage of the hybrid and remote working models and higher other operating costs of $9.6 million.

This was partially offset by foreign exchange gain, net of hedging of $10.6 million.

Gross margin in Analytics decreased by 40 bps during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to increases in employee-related costs and higher operating expenses during the year ended December 31, 2022, compared to the year ended December 31, 2021.

Cost of revenues for fiscal 2023 increased by $126.3 million, or 14.1% compared to fiscal 2022.

The increase in cost of revenues was primarily due to increases in employee-related costs and technology costs, partially offset by foreign exchange gain, net of hedging.

Our gross margin for fiscal 2023 was 37.3% compared to 36.5% for fiscal 2022, an increase of 80 basis points ("bps") primarily driven by higher revenues, operational efficiencies and foreign exchange gain, net of hedging during fiscal 2023, compared to fiscal 2022.

The increase in cost of revenues in Insurance of $54.1 million for fiscal 2023 was primarily due to increases in employee-related costs of $52.2 million on account of higher headcount and wage inflation, higher technology costs of $8.5 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs of $2.9 million, partially offset by foreign exchange gain, net of hedging of $7.5 million and lower travel costs

of $2.0 million.

Gross margin in Insurance decreased by 40 bps during fiscal 2023, compared to fiscal 2022, primarily due to lower margins associated with higher costs during ramp-ups in certain existing and new clients during fiscal 2023, compared to fiscal 2022.

The decrease in cost of revenues in Healthcare of $1.7 million for fiscal 2023 was primarily due to foreign exchange gain, net of hedging of $1.9 million, lower facilities costs of $1.5 million resulting from optimization of office space, lower other operating costs of $0.2 million, partially offset by increases in employee-related costs of $1.9 million on account of wage inflation.

Gross margin in Healthcare increased by 750 bps during fiscal 2023, compared to fiscal 2022, primarily due to higher revenues and operational efficiencies during fiscal 2023, compared to fiscal 2022.

The increase in cost of revenues in Emerging Business of $22.9 million for fiscal 2023 was primarily due to increases in employee-related costs of $23.5 million on account of higher headcount and wage inflation, higher technology costs of $3.5 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs $1.5 million, partially offset by foreign exchange gain, net of hedging of $3.8 million and lower travel costs of $1.8 million.

Gross margin in Emerging Business increased by 180 bps during fiscal 2023, compared to fiscal 2022, primarily due to higher revenues and foreign exchange gain, net of hedging during fiscal 2023, compared to fiscal 2022.

The increase in cost of revenues in Analytics of $51.0 million for fiscal 2023 was primarily due to increases in employee-related costs of $55.3 million on account of higher headcount and wage inflation, higher technology costs of $1.6 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs $4.0 million, partially offset by foreign exchange gain, net of hedging of $6.4 million and lower travel costs of $3.5 million.

Gross margin in Analytics increased by 10 bps during fiscal 2023, compared to fiscal 2022, primarily due to higher revenues, partially offset by increases in employee-related costs during fiscal 2023, compared to fiscal 2022.

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

Year ended December 31, Percentage

2022 2021 Change

Fiscal Dollar Change Percentage

(dollars in millions)

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Selling, general and administrative expenses $ 318.5 $ 267.0 $ 51.5 19.3 %

As a percentage of revenues 18.9 % 20.2 %

The increase in SG&A expenses of $40.6 million was primarily due to higher employee-related costs of $32.4 million on account of higher headcount and wage inflation, including incremental costs related to our acquisition of Clairvoyant in December 2021, increase in technology costs of $9.3 million on account of continued investments in digital capabilities, higher travel costs of $4.0 million and higher other operating costs of $1.3 million.

This was partially offset by foreign exchange gain, net of hedging of $3.7 million, during the year ended December 31, 2022 and COVID-19 related expenses of $2.7 million during the year ended December 31, 2021.

The increase in SG&A expenses of $51.5 million was primarily due to higher employee-related costs of $27.0 million on account of higher headcount and wage inflation, higher investments in digital and generative AI capabilities of $10.4 million, higher sales and marketing spend of $4.6 million, higher travel costs of $3.8 million, higher allowance for expected credit losses of $1.7 million, primarily related to a customer bankruptcy event, and higher other operating costs of $6.6 million.

This was partially offset by foreign exchange gain, net of hedging of $2.6 million during fiscal 2023, compared to fiscal 2022.

Depreciation and Amortization.

Year ended December 31, Percentage change

2022 2021 Change

Fiscal Dollar Change Percentage change

(dollars in millions)

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Depreciation and amortization expense $ 50.5 $ 56.3 $ (5.8) (10.3) %

As a percentage of revenues 4.0 % 4.4 %

The increase in intangibles amortization expense of $4.3 million was primarily due to amortization of intangibles associated with our acquisitions of Clairvoyant and Inbound in December 2021 and June 2022, respectively, partially offset by decrease in intangibles amortization expense due to end of useful lives for certain intangible assets during the year ended December 31, 2022, compared to the year ended December 31, 2021.

The increase in depreciation expense of $2.9 million was primarily due to depreciation of $4.3 million related to our investments in digital capabilities, computers and networking equipment, partially offset by foreign exchange gain, net of hedging of $1.4 million during the year ended December 31, 2022, compared to the year ended December 31, 2021.

The decrease in depreciation expense of $3.4 million was primarily due to lower depreciation of $2.4 million on assets related to operations centers closed as a result of optimization of office space, increased use of the hybrid working model and foreign exchange gain, net of hedging of $1.0 million during fiscal 2023, compared to fiscal 2022.

The decrease in intangibles amortization expense of $2.4 million during fiscal 2023, compared to fiscal 2022 was primarily due to end of useful lives for certain intangible assets.

Income from Operations.

Income from operations increased by $36.2 million, or 23.3%, from $155.9 million for the year ended December 31, 2021 to $192.1 million for the year ended December 31, 2022, primarily due to higher revenues, partially offset by higher cost of revenues and higher SG&A expenses during the year ended December 31, 2022.

As a percentage of revenues, income from operations decreased from 13.9% for the year ended December 31, 2021 to 13.6% for the year ended December 31, 2022.

Income from operations increased by $46.7 million, or 24.2%, from $192.1 million for fiscal 2022 to $238.8 million for fiscal 2023, primarily due to higher revenues and higher gross margins, partially offset by higher SG&A expenses during fiscal 2023.

Foreign Exchange Gain, net.

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dollar against the Indian rupee, the Philippine peso, the U.K.

pound sterling and the South African ZAR during the year ended December 31, 2022.

pound sterling and the South African rand during fiscal 2023, compared to fiscal 2022.

The average exchange rate of the U.S.

dollar against the Indian rupee increased from 73.88 during the year ended December 31, 2021 to 78.81 during the year ended December 31, 2022.

dollar against the Indian rupee increased from 78.81 during fiscal 2022 to 82.60 during fiscal 2023.

The average exchange rate of the U.S.

dollar against the Philippine peso increased from 49.36 during the year ended December 31, 2021 to 54.47 during the year ended December 31, 2022.

dollar against the Philippine peso increased from 54.47 during fiscal 2022 to 55.56 during fiscal 2023.

The average exchange rate of the U.K.

pound sterling against the U.S.

dollar decreased from 1.38 during the year ended December 31, 2021 to 1.23 during the year ended December 31, 2022.

dollar increased from 1.23 during fiscal 2022 to 1.25 during fiscal 2023.

The average exchange rate of the U.S.

dollar against the South African ZAR increased from 14.92 during the year ended December 31, 2021 to 16.44 during the year ended December 31, 2022.

We recorded a foreign exchange gain, net of $6.2 million for the year ended December 31, 2022 compared to a foreign exchange gain, net of $4.3 million for the year ended December 31, 2021.

dollar against the South African rand increased from 16.44 during fiscal 2022 to 18.51 during fiscal 2023.

We recorded a foreign exchange gain, net of $6.2 million for fiscal 2022 compared to a foreign exchange gain, net of $1.5 million for fiscal 2023.

Interest expense .

Interest expense increased from $7.6 million for the year ended December 31, 2021 to $8.2 million for the year ended December 31, 2022, primarily due to a higher average outstanding amount under our revolving credit facility, which had a higher effective interest rate of 2.9% during the year ended December 31, 2022, compared to 1.7% during the year ended December 31, 2021, partially offset by a decrease in interest expense on the Notes due to settlement of outstanding obligations under the Notes (as defined below under “Financing Arrangements (Debt Facility and Notes)”) on August 27, 2021.

Other Income/(Loss), net.

Year ended December 31, Percentage

2022 2021 Change

Interest expense increased from $8.2 million for fiscal 2022 to $13.2 million for fiscal 2023, primarily due to a higher effective interest rate of 6.3% during fiscal 2023, compared to 2.9% during fiscal 2022, partially offset by a lower average outstanding balance under our revolving credit facility during fiscal 2023, compared to fiscal 2022.

Other Income, net.

Fiscal Dollar Change Percentage

(dollars in millions)

Fair value changes of contingent consideration $ (8.3) $ — $ (8.3) (100.0) %

Gain on sale and mark-to-market on investments 4.9 4.9 — — %

Gain on sale and fair value mark-to-market on investments $ 5.0 $ 4.9 $ 0.1 2.2 %

Interest and dividend income 8.0 5.2 2.8 53.5 %

Fair value changes of contingent consideration (1.9) (8.3) 6.4 (77.0) %

Others, net (0.3) (1.8) 1.5 (83.9) %

Other income/(loss), net $ — $ 6.8 $ (6.8) (100.0) %

Other income/(loss), net decreased by $6.8 million, from a net income of $6.8 million for the year ended December 31, 2021 to $nil for the year ended December 31, 2022.

The decrease is primarily due to an increase in the fair value of contingent consideration related to our Clairvoyant acquisition by $8.5 million as a result of strong operational performance.

This was partially offset by higher interest income on our short-term and long-term investments of $1.8 million.

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 year ended December 31, 2021.

See Note 18 - Borrowings to our consolidated financial statements.

Other income, net $ 10.8 $ — $ 10.8 (100.0) %

Other income, net increased by $10.8 million, from $nil for fiscal 2022 to $10.8 million for fiscal 2023.

The increase is primarily due to a decrease of $6.4 million in contingent consideration liability related to our acquisitions as a result of fair value adjustment, higher interest and dividend income on our investments of $2.8 million and lower other expenses of $1.5 million during fiscal 2023, compared to fiscal 2022.

Income Tax Expense .

The effective tax rate increased from 21.7% during the year ended December 31, 2021 to 25.0% during the year ended December 31, 2022.

We recorded income tax expense of $47.5 million and $31.9 million for the years ended December 31, 2022 and 2021, respectively.

The increase in income tax expense was primarily as a result of higher profit during the year ended December 31, 2022, compared to the year ended December 31, 2021, an increase in state taxes and an increase in non-deductible expenses, partially offset by higher excess tax benefits related to stock-based compensation.

Net income increased from $114.7 million for the year ended December 31, 2021 to $143.0 million for the year ended December 31, 2022, primarily due to increase in income from operations of $36.2 million, loss on settlement of the Notes of $12.8 million during the year ended December 31, 2021 and higher foreign exchange gain, net of $1.9 million, partially offset by higher income tax expense of $15.6 million and lower other income, net of $6.8 million.

As a percentage of revenues, net income decreased from 10.2% during the year ended December 31, 2021 to 10.1% during the year ended December 31, 2022.

The effective tax rate decreased from 25.0% during fiscal 2022 to 22.5% during fiscal 2023.

We recorded income tax expense of $53.5 million and $47.5 million for fiscal 2023 and 2022, respectively.

While the effective tax rate decreased in 2023, the amount of income tax expense increased primarily as a result of higher profit during fiscal 2023, compared to fiscal 2022, and an increase in non-deductible expenses, partially offset by higher excess tax benefits related to stock-based compensation during fiscal 2023, compared to fiscal 2022.

Net income increased from $143.0 million for fiscal 2022 to $184.6 million for fiscal 2023, primarily due to increase in income from operations of $46.7 million and higher other income, net of $10.8 million, partially offset by higher interest expense of $5.0 million, lower foreign exchange gain, net of $4.7 million and higher income tax expense of $6.0 million.

Liquidity and Capital Resources

Year ended December 31,

2022 2021 2020

Fiscal Dollar Change

2023 2022 Percentage Change

(dollars in millions)

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We periodically evaluate opportunities to distribute cash among our group entities to fund our operations, expand our business and make strategic acquisitions 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.

For fiscal 2023, our foreign subsidiaries in India, the United Kingdom, Australia, Bulgaria and the Czech Republic repatriated an aggregate amount of $136.4 million (net of $5.9 million withholding taxes) to the United States.

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

Operating Activities:

Net cash provided by operating activities was $166.1 million for the year ended December 31, 2022, compared to $184.4 million for the year ended December 31, 2021, reflecting higher working capital needs, offset by higher cash earnings.

The major drivers contributing to the decrease of $18.3 million year-over-year included the following:

• Increase in accounts receivable, including unbilled receivable and deferred revenue, contributed to a lower cash flow of $15.2 million in 2022 compared to 2021.

Increase in accounts receivable was driven by revenue growth in 2022.

Cash flows were also affected by our accounts receivable days sales outstanding, which increased to 61 days as of December 31, 2022 from 56 days as of December 31, 2021.

• Increase in employee-related payments, partially offset by an increase in accrued expenses, accounts payable and operating lease liabilities contributed to a higher cash outflow of $23.9 million in 2022 compared to 2021.

The higher cash outflow was primarily due to higher payments for annual performance incentives and employee compensation aggregating to $40.9 million, partially offset by lower payments for operating expenses of $17.0 million in 2022.

• Increase in cash earnings including adjustments for non-cash and other items contributed higher cash flow of $19.4 million in 2022 compared to 2021.

These adjustments comprise of depreciation and amortization of long-lived assets and intangibles acquired in business combinations, share-based employee compensation, unrealized foreign currency exchange gain/loss, mark-to-market adjustments on investments, among others.

Net cash provided by operating activities was $211.2 million for fiscal 2023, compared to $166.1 million for fiscal 2022, reflecting higher cash earnings, partially offset by higher working capital needs.

The major drivers contributing to the increase of $45.1 million year-over-year included the following:

• Increase in cash earnings, including adjustments for non-cash and other items contributed higher cash flow of $60.4 million for fiscal 2023, compared to fiscal 2022.

These adjustments include fair value changes in investments, unrealized foreign currency exchange gain, deferred tax effects, stock-based employee compensation, fair value changes in contingent consideration, depreciation and amortization of long-lived assets and intangibles acquired in business combinations, among others.

• Changes in accounts receivable, including advance billings, contributed higher cash flow of $15.5 million for fiscal 2023, compared to fiscal 2022.

Collections in accounts receivable, including advance billings was driven by revenue growth for fiscal 2023.

This was partially offset by increase in our days sales outstanding which was 64 days as of December 31, 2023, compared to 61 days as of December 31, 2022.

• Higher income tax payments, net of refunds, contributed higher cash payouts of $47.7 million, partially offset by provision for income tax and changes in deferred tax assets and liabilities of $20.6 million for fiscal 2023, compared to fiscal 2022.

• Changes in other assets, accounts payables including other liabilities contributed higher cash payouts of $3.7 million for fiscal 2023, compared to fiscal 2022.

Investing Activities:

Cash used for investing activities were $96.5 million for the year ended December 31, 2022 as compared to cash used for investing activities of $114.3 million for the year ended December 31, 2021.

The decrease of $17.7 million was primarily due to lower cash paid for business acquisitions of $3.9 million during the year ended December 31, 2022 as compared to $76.8 million during the year ended December 31, 2021.

This was partially offset by higher cash paid for net purchase of investments of $48.1 million during the year ended December 31, 2022 as compared to net purchase of investments of $1.5 million during the year ended December 31, 2021, and higher cash paid for purchase of long-lived assets, including investments in infrastructure, technology assets, software and product developments of $8.6 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.

Cash used for investing activities were $12.0 million for fiscal 2023, compared to $96.5 million for fiscal 2022.

The decrease in cash used for investing activities of $84.5 million year-over-year is primarily due to net redemption of investments of $40.7 million for fiscal 2023, compared to net purchase of investments of $48.1 million for fiscal 2022.

The decrease was also due to acquisition-related payouts of $3.9 million for fiscal 2022 with no corresponding payouts for fiscal 2023.

This was partially offset by higher capital expenditures in infrastructure, technology assets, software and product developments of $8.0 million for fiscal 2023, compared to fiscal 2022.

Financing Activities:

Cash used for financing activities were $81.7 million during the year ended December 31, 2022 as compared to cash used for financing activities of $146.9 million during the year ended December 31, 2021.

The decrease of $65.2 million was primarily due to lower purchases of treasury stock by $45.7 million under our share repurchase program and net repayment of $10.0 million under our revolving credit facility during the year ended December 31, 2022 as compared to net repayments of $29.0 million during the year ended December 31, 2021.

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

We incurred $44.8 million of capital expenditures during the year ended December 31, 2022.

We expect to incur total capital expenditures of between $47 million to $52 million in 2023, 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 the relevant authorities with respect to such assessment orders (see Note 25 - Commitments and Contingencies to our consolidated financial statements herein for further details).

Cash used for financing activities were $181.4 million for fiscal 2023, compared to $81.7 million for fiscal 2022.

The increase in cash used for financing activities of $99.7 million year-over-year was primarily due to net repayment of our borrowings under our revolving credit facility of $50.0 million for fiscal 2023, compared to $10.0 million for fiscal 2022.

The increase was also due to higher purchases of treasury stock of $59.2 million under our share repurchase program for fiscal 2023, compared to fiscal 2022.

We expect to use cash from operating activities to maintain and expand our business by making investments, primarily related to building new digital capabilities, including generative AI and purchase telecommunications equipment and computer hardware and software in connection with managing client operations.

We incurred $52.8 million of capital expenditures during fiscal 2023.

We expect to incur total capital expenditures of between $50 million to $55 million in fiscal 2024, 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.

See Note 25 - Commitments and Contingencies to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data” for further details.

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.

We anticipate that we will continue to rely upon cash from operating activities to finance most of our above mentioned requirements, while 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 18- Borrowings, Note 20- Employee Benefit Plans, Note 21- Leases, Note 22- Income Taxes and Note 25- Commitments and Contingencies to our consolidated financial statements herein for further information on material cash requirements from known contractual and other obligations.

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 stock repurchases under our board-authorized stock repurchase program, which may require the use of significant cash resources and/or additional financing.

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

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

See Note 16 - Fair Value Measurements - Fair Value of Contingent Consideration, Note 18- Borrowings, Note 20- Employee Benefit Plans, Note 21- Leases, Note 22- Income Taxes and Note 25- Commitments and Contingencies to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data” 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.

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

Financing Arrangements (Debt Facility and Notes)

Financing Arrangements

The following table summarizes our debt position:

5 unchanged sentences

Total borrowings $ 200.0 $ 250.0

Unamortized debt issuance costs for our revolving credit facility of $1.2 million and $0.2 million as of December 31, 2022 and December 31, 2021, respectively, are presented under “Other current assets” and “Other assets,” as applicable in our consolidated balance sheets.

Credit Agreement

2 unchanged sentences

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

On April 18, 2022, we and each of our wholly owned material domestic subsidiaries entered into an Amendment and Restatement Agreement with Citibank, N.A.

as Administrative Agent and certain lenders (the “2022 Credit Agreement”), pursuant to which the parties thereto amended and restated the Credit Agreement.

Among other things, the 2022 Credit Agreement (a) provides for the issuance of new revolving credit commitments such that the aggregate amount of revolving

credit commitments available is equal to $400.0 million;

(b) extends the maturity date of the revolving credit facility from November 21, 2022 to April 18, 2027;

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

On April 18, 2022, we and each of our wholly owned material domestic subsidiaries entered into an Amendment and Restatement Agreement with Citibank, N.A., as Administrative Agent, and certain lenders (the “2022 Credit Agreement”), pursuant to which the parties thereto amended and restated the Credit Agreement.

Among other things, the 2022 Credit Agreement (a) provides for the issuance of new revolving credit commitments such that the aggregate amount of revolving credit commitments available is equal to $400.0 million;

(b) extends the maturity date of the revolving credit facility from

November 21, 2022 to April 18, 2027;

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

dollar borrowings.

9 unchanged sentences

The revolving credit facility carried an effective interest rate as shown below:-

Year ended December 31,

Effective interest rate 6.3 % 2.9 %

As of December 31, 2022 and 2021, we were in compliance with all financial and non-financial covenants listed under the applicable revolving credit facility.

Convertible Senior Notes

On October 1, 2018, we entered into an investment agreement with Orogen Echo LLC (the “Purchaser”), an affiliate of The Orogen Group LLC, relating to the issuance to the Purchaser of $150.0 million, in an aggregate principal amount (the “Notes”).

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

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

On August 27, 2021, we entered into a Payoff and Termination Agreement with the Purchaser, pursuant to which we prepaid and settled our outstanding obligations under the Notes for an aggregate consideration of $236.7 million in the form of a combination of cash and shares of our common stock.

See Note 18 - Borrowings to our consolidated financial statements herein for further details.

As of December 31, 2023 and 2022, we were in compliance with all financial and non-financial covenants under the 2022 Credit Agreement.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements, see Note 2 - Summary of Significant Accounting Policies - Recent Accounting Pronouncements to our 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-K

Item 7. Management’s Discussion and Analysis