What changed in this filing

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Item 9A. Controls and Procedures

2024-02-29 compared with 2023-02-23 · 508 added, 559 removed, 1523 unchanged (41% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosure.

In connection with the preparation of this Annual Report on Form 10-K, the Company’s management carried out an evaluation, under the supervision and with the participation of the CEO and CFO, of the effectiveness and operation of the Company’s disclosure controls and procedures as of December 31, 2022.

Based upon that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures, as of December 31, 2022, were effective.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), to allow timely decisions regarding required disclosure.

In connection with the preparation of this Annual Report on Form 10-K, our management carried out an evaluation, under the supervision and with the participation of the CEO and CFO, of the effectiveness and operation of our disclosure controls and procedures as of December 31, 2023.

Based upon that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures, as of December 31, 2023, were effective.

Management’s Responsibility for Financial Statements

2 unchanged sentences

The financial statements include amounts that are based on estimates and judgments which management believes are reasonable under the circumstances.

Deloitte & Touche LLP, an independent registered public accounting firm, is retained to audit the Company’s consolidated financial statements and the effectiveness of our internal control over financial reporting.

Deloitte & Touche LLP, an independent registered public accounting firm, has been retained to audit our consolidated financial statements and the effectiveness of our internal control over financial reporting.

Its accompanying reports are based on audits conducted in accordance with the standards of the Public Company Accounting Oversight Board.

The Audit Committee of the board of directors is composed solely of independent directors and is responsible for recommending to the board of directors the independent public accounting firm to be retained for the coming year.

The Audit Committee meets regularly and privately with the independent public accountants, with the Company’s internal auditors and with management to review accounting, auditing, internal control and financial reporting matters.

The Audit Committee meets regularly and privately with the independent public accountants, with our internal auditors and with management to review accounting, auditing, internal control and financial reporting matters.

Management’s Annual Report on Internal Control over Financial Reporting

3 unchanged sentences

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the U.S.;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.

• provide reasonable assurance that receipts and expenditures are being made only in accordance with the authorization of our management and our board of directors;

11 unchanged sentences

Other Information

Rule 10b5-1 Trading Plans

During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

5 unchanged sentences

The additional information required by this Item 10 will be set forth in the definitive proxy statement for our 2024 Annual Meeting of Stockholders (the “Proxy Statement”), including under the headings “Our board of directors,” “Our executive officers” and “Corporate governance — Committees — Audit Committee,” “— Committees — Nominating and Governance Committee” and, to the extent included, “— Delinquent Section 16(a) Reports,” and is incorporated herein by reference.

We intend to file the Proxy Statement with the SEC within 120 days after the fiscal year end of December 31, 2022.

We intend to file the Proxy Statement with the SEC within 120 days after the fiscal year ended December 31, 2023.

Executive Compensation

37 unchanged sentences

Andreas Fibig

/ S / A NNE E.

Director February 23, 2023

/ S / S OM M ITTAL

Director February 29, 2024

/ S / C LYDE W.

Director February 23, 2023

/ S / K RISTY P IPES

4 unchanged sentences

Director February 29, 2024

/ S / S ARAH K.

Director February 29, 2024

INDEX TO EXHIBITS

The following exhibits are being filed as part of this report or incorporated by reference as indicated therein:

3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K (File No.

3.1 Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q (File No.

1-33089) filed on October 26, 2023).

3.2 Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Annex A to the Company’s Definitive Proxy Statement on Schedule 14A (File No.

1-33089) filed on April 26, 2019).

3.3 Fifth Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K (File No.

3.2 Sixth Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K (File No.

1-33089) filed on June 21, 2023).

1 unchanged sentence

1-33089) filed on October 25, 2006).

4.2 Indenture, dated as of October 4, 2018, by and between the Company and Citibank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No.

1-33089) filed on October 4, 2018).

4.3 Description of Common Stock (incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K (File No.

1-33089) filed on February 27, 2020).

4.2 Description of Common Stock .

10.1+ Form of ExlService Holdings, Inc.

Employment Agreement (applicable to Executive Officers) (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q (File No.

1-33089) filed on April 27, 2023.

10.2+ Second Amended and Restated Employment and Non-Competition Agreement, dated August 3, 2020, between the Company and Rohit Kapoor (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No.

2 unchanged sentences

1-33089) filed on October 27, 2022).

10.4+ Amendment No.

2 to Second Amended and Restated Employment and Non-Competition Agreement, effective February 16, 2023, between the Company and Rohit Kapoor (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No.

1-33089) filed on April 27, 2023).

10.5+ Employment Agreement, effective as of February 3, 2020, between ExlService Holdings, Inc.

1 unchanged sentence

1-33089) filed on February 25, 2021).

10.4+ Employment Agreement, dated as of September 15, 2014, between ExlService Holdings, Inc.

and Nalin Kumar Miglani (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No.

10.6+ Employment Agreement, effective as of April 18, 2022, between exl Service (India) Private Limited and Vikas Bhalla (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q (File No.

1-33089) filed on April 27, 2023.

10.5+ Employment Agreement, dated April 28, 2001, between ExlService Holdings, Inc.

and Vikas Bhalla (incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K (File No.

1-33089) filed on February 25, 2021).

10.6+ Employment Agreement, effective November 5, 2018, between ExlService Holdings, Inc.

and Samuel Meckey (incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K (File No.

10.7+ ExlService Holdings, Inc.

40 unchanged sentences

1-33089) filed on April 29, 2021).

10.22+ Form of Option Agreement (applicable to U.S.

Executive Officers) under the 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No.

1-33089) filed on July 27, 2023).

10.23+ Form of Option Agreement (applicable to International Executive Officers) under the 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No.

1-33089) filed on July 27, 2023).

10.24+ ExlService Holdings, Inc.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97 ExlService Holdings, Inc.

Clawback Policy.

101.INS Inline XBRL Instance Document*

43 unchanged sentences

Revenues under time-and-material, transaction and outcome-based contracts are recognized as the services are performed.

Total revenues were $1,412 million for the year ended December 31, 2022.

At the inception of a new contract with a customer, the Company evaluates the revenue recognition principles, including judgments in identifying performance obligations in a contract and determining the timing of revenue recognition.

41 unchanged sentences

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

December 31, 2022 December 31, 2021

Notes December 31, 2023 December 31, 2022

Current assets:

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Deferred tax assets, net 22 82,927 55,791

Intangible assets, net 64,819 81,082

Goodwill 10 405,639 405,637

Other intangible assets, net 10 50,164 64,819

Long-term investments 8 4,430 34,779

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Total liabilities 552,535 587,940

Commitments and contingencies (Refer to Note 25)

Commitments and contingencies 25

ExlService Holdings, Inc.

5 unchanged sentences

Additional paid-in capital (1)

508,028 444,948

Retained earnings 1,083,663 899,105

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Total liabilities and stockholders’ equity $ 1,441,972 $ 1,346,119

(1) Prior period information has been adjusted to reflect the 5 -for-1 forward stock split of the Company’s common stock effected in August 2023.

Refer to Note 19 – Capital Structure to the consolidated financial statements for further details.

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Year ended December 31,

2022 2021 2020

Notes 2023 2022 2021

Revenues, net 3, 4 $ 1,630,668 $ 1,412,044 $ 1,122,293

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Interest expense 18 ( 13,180 ) ( 8,252 ) ( 7,561 )

Other income/(loss), net ( 10 ) 6,773 12,065

Other income/(expense), net 6 10,834 ( 10 ) 6,773

Loss on settlement of convertible notes 18 — — ( 12,845 )

2 unchanged sentences

Income before earnings from equity affiliates 184,405 142,534 114,711

Gain/(loss) from equity-method investment 434 47 ( 227 )

Gain from equity-method investment 153 434 47

Net income attributable to ExlService Holdings, Inc.

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(1) Exclusive of depreciation and amortization expense.

(2) Prior period information has been adjusted to reflect the 5 -for-1 forward stock split of the Company’s common stock effected in August 2023.

Refer to Note 19 – Capital Structure to the consolidated financial statements for further details.

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Year ended December 31,

2022 2021 2020

Notes 2023 2022 2021

Net income $ 184,558 $ 142,968 $ 114,758

2 unchanged sentences

Loss on net investment hedges 17 — — ( 1,134 )

Foreign currency translation loss ( 47,734 ) ( 11,134 ) ( 540 )

Foreign currency translation gain/(loss) 652 ( 47,734 ) ( 11,134 )

Retirement benefits 20 1,337 2,574 ( 558 )

3 unchanged sentences

Retirement benefits (2)

20 ( 94 ) 592 709

Income tax effects relating to above (3)

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(1) These are reclassified to net income and are included in cost of revenues, operating expenses and interest expense, as applicable in the consolidated statements of income.

Refer to Note 17 - Derivatives and Hedge Accounting to the consolidated financial statements.

(2) These are reclassified to net income and are included in other income/(loss), net in the consolidated statements of income.

Refer to Note 20 - Employee Benefit Plans to the consolidated financial statements.

(3) These are income tax effects recognized on cash flow hedges, retirement benefits and foreign currency translation loss.

Refer to Note 22 - Income Taxes to the consolidated financial statements.

(2) These are reclassified to net income and are included in other income/(expense), net in the consolidated statements of income.

(3) These are income tax effects recognized on cash flow hedges, retirement benefits and foreign currency translation gain/(loss).

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(In thousands, except share count)

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

Shares Amount Shares Amount

Common Stock (1)

Additional Paid-in Capital (1)

Retained Earnings Accumulated Other Comprehensive Income/(Loss) Treasury Stock Total

Notes Shares Amount Shares (1)

Balance as of January 1, 2021 194,840,260 $ 195 $ 420,820 $ 641,379 $ ( 74,984 ) ( 27,043,090 ) $ ( 268,238 ) $ 719,172

2 unchanged sentences

Acquisition of treasury stock 19 — — — — — ( 5,593,170 ) ( 118,357 ) ( 118,357 )

Other comprehensive income — — — — 9,908 — — 9,908

Issuance of treasury stock — — 19,436 — — 1,551,970 17,306 36,742

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

Other comprehensive loss 15 — — — — ( 14,490 ) — — ( 14,490 )

Net income — — — 114,758 — — — 114,758

3 unchanged sentences

Acquisition of treasury stock 19 — — — — — ( 2,683,370 ) ( 72,642 ) ( 72,642 )

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

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

Other comprehensive loss 15 — — — — ( 54,669 ) — — ( 54,669 )

4 unchanged sentences

Acquisition of treasury stock 19 — — — — — ( 4,364,498 ) ( 133,486 ) ( 133,486 )

Other comprehensive loss — — — — ( 54,669 ) — — ( 54,669 )

Other comprehensive income 15 — — — — 17,103 — — 17,103

Net income — — — 184,558 — — — 184,558

Balance as of December 31, 2023 203,410,038 $ 203 $ 508,028 $ 1,083,663 $ ( 127,040 ) ( 38,132,158 ) $ ( 575,417 ) $ 889,437

(1) Prior period information has been adjusted to reflect the 5 -for-1 forward stock split of the Company’s common stock effected in August 2023.

Refer to Note 19 – Capital Structure to the consolidated financial statements for further details.

(2) Inclusive of excise tax for the year ended December 31, 2023.

Refer to Note 19 – Capital Structure to the consolidated financial statements for further details.

See accompanying notes to consolidated financial statements.

9 unchanged sentences

Stock-based compensation expense 58,437 49,366 38,621

Amortization of operating lease right-of-use assets 21,783 26,326 27,146

Unrealized (gain)/loss on investments ( 1,209 ) 5,139 ( 7,174 )

Unrealized foreign currency exchange (gain)/loss, net ( 16,643 ) ( 3,821 ) 402

Deferred income tax (benefit)/expense ( 19,552 ) ( 20,326 ) 2,697

Reduction in the carrying amount of operating lease right-of-use assets 20,188 21,783 26,326

Fair value mark-to-market of short-term investments 17,044 ( 1,209 ) 5,139

Unrealized foreign currency exchange gain, net ( 1,363 ) ( 16,643 ) ( 3,821 )

Deferred income tax benefit ( 31,742 ) ( 19,552 ) ( 20,326 )

Allowance/(reversal) for expected credit losses 2,453 683 ( 464 )

26 unchanged sentences

Repayments of borrowings ( 130,000 ) ( 45,000 ) ( 329,031 )

Payment of contingent consideration ( 5,000 ) — —

Acquisition of treasury stock ( 131,847 ) ( 72,642 ) ( 118,357 )

Proceeds from exercise of stock options — 710 1,501

Proceeds from ESPP contribution 1,060 — —

Proceeds from issuance of common stock 5,566 1,060 710

Net cash used for financing activities ( 181,450 ) ( 81,724 ) ( 146,879 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash 2,029 ( 6,060 ) ( 4,947 )

Net (decrease)/increase in cash, cash equivalents and restricted cash ( 18,189 ) ( 81,709 ) 98,475

Net increase/(decrease) in cash, cash equivalents and restricted cash 19,780 ( 18,189 ) ( 81,709 )

Cash, cash equivalents and restricted cash at the beginning of the period 125,621 143,810 225,519

3 unchanged sentences

Interest $ 13,895 $ 8,189 $ 6,589

Income taxes, net of refunds $ 55,592 $ 49,825 $ 20,571

Income taxes $ 104,882 $ 57,058 $ 49,997

Supplemental disclosure of non-cash investing and financing activities:

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(“ExlService Holdings”) is organized as a corporation under the laws of the State of Delaware.

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

By bringing together deep domain expertise with robust data, powerful analytics, cloud, artificial intelligence and machine learning, the Company creates agile, scalable solutions and executes complex operations for the world’s leading corporations in industries including insurance, healthcare, banking and financial services, media, and retail, among others.

The Company’s data-led value creation framework enables better and faster decision making, leveraging its end-to-end data and analytics capabilities to drive improved business outcomes, and re-designing of operating models to integrate advanced technology into operational workflows.

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

ExlService Holdings, together with its subsidiaries and affiliates (collectively, the “Company”), is a leading data analytics and digital operations and solutions company.

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

The Company harnesses the power of data, analytics, artificial intelligence (“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.

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

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Accounting policies of the respective individual subsidiaries and equity affiliates are aligned wherever necessary, so as to ensure consistency with the accounting policies that are adopted by the Company under U.S.

For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation in accordance with U.S.

(b) Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S.

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

GAAP requires management to make estimates and assumptions that affect the carrying amounts of assets and liabilities and disclosure of contingent assets and liabilities included in the consolidated financial statements.

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

The significant estimates and assumptions that affect the consolidated financial statements include, but are not limited to, estimates of the fair value of the identifiable intangible assets and contingent consideration, purchase price allocation, including revenue projections and the discount rate applied within the discounted cash

The significant estimates that affect the consolidated financial statements include, but are not limited to, estimates of the fair value of the identifiable intangible assets and contingent consideration, purchase price allocation, including revenue projections and the discount rate applied within the discounted cash flow model for business acquisitions, 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, deferred tax valuation allowances, income-tax uncertainties and other contingencies, valuation of derivative financial instruments and stock-based awards, and useful life of long-lived assets and other intangible assets.

The significant assumptions underneath these estimates include, but are not limited to assumptions to calculate stock-based compensation expense, determine incremental borrowing rate to calculate lease liabilities and right-of-use (“ROU”) assets, determine lease term to calculate single operating lease cost, determine pattern of

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

flow model for business acquisitions, 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, recoverability of dues from statutory authorities, assets and obligations related to employee benefit plans, deferred tax valuation allowances, income-tax uncertainties and other contingencies, valuation of derivative financial instruments, stock-based awards, and debt instruments, assumptions used to calculate stock-based compensation expense, assumptions used to determine the incremental borrowing rate to calculate lease liabilities and right-of-use (“ROU”) assets, lease term to calculate amortization of ROU, depreciation and amortization periods, and recoverability of long-lived assets, goodwill and intangibles.

generation of economic benefits to calculate depreciation and amortization for long-lived assets and other intangible assets, and recoverability of long-lived assets, goodwill and other intangible assets.

25 unchanged sentences

Revenues are recognized on a gross basis if the Company is in the capacity of principal and on a net basis if it falls in the capacity of an agent.

Revenues for the Company’s fixed-price contracts, which include business support services provided on a fixed price basis or implementation of applications or solutions, are recognized considering costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the Company’s 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 stage of completion and/or 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.

The Company regularly monitors these estimates throughout the execution of the project and records changes in the

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

estimated costs at completion to measure progress toward satisfying the Company’s performance obligations.

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

The Company regularly monitors these estimates throughout the execution of the project and records changes in the period in which a change in an estimate is determined.

period in which a change in an estimate is determined.

If a change in an estimate results in a projected loss on a project, such loss is recognized in the period in which it is first identified.

22 unchanged sentences

Variable Consideration

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

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

The Company considers its 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.

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

The Company considers its experience with similar transactions and expectations regarding the contract in estimating the amount of variable consideration that should be recognized during a period.

The Company believes that the expected value method is most appropriate for determining the variable consideration since the Company has large number of contracts with similar nature of transactions/services.

7 unchanged sentences

Deferred Revenue and Contract Fulfillment Costs

The Company has contract liabilities (deferred revenue) consisting of advance billings and billing in excess of revenues recognized.

Contract liabilities (deferred revenue) consist 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 the Company does not have an enforceable contract.

Further, the Company also defers revenues attributable to certain process transition activities, with respect to its customers 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 the Company’s consolidated balance sheets and are recognized ratably over the period during which the related services are performed.

Further, the Company also defers any upfront payments collected from its customers attributable to certain process transition activities, with respect to its customers 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 the Company’s consolidated balance sheets and are recognized as (or when) the performance obligation is fulfilled under the contract with customer.

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 the consolidated statements of income.

6 unchanged sentences

Out-of-Pocket Expenses

Reimbursements of out-of-pocket expenses received from clients are included as part of revenues.

Reimbursements of out-of-pocket expenses received from customers are included as part of revenues.

Payment terms

3 unchanged sentences

Remaining Performance Obligations

The Company does not disclose the value of remaining performance obligations as a result of applying the practical expedient provided in ASC Topic 606, for contracts that meet any of the following criteria:

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

Contracts with an original expected length of one year or less as determined under ASC Topic 606,

3 unchanged sentences

Pursuant to the Company’s investment policy, surplus funds are invested in highly-rated debt mutual funds, money market funds and time deposits to reduce its exposure to market risk with regard to these funds.

Restricted cash includes any cash and cash equivalents that are legally restricted as to withdrawal or usage.

The Company invests for a term of up to three months in money market funds, which invest in instruments of various maturities in the United States.

The Company’s investment in money market funds is considered as cash equivalents.

These investments are accounted for in accordance with the fair value option under ASC Topic 825, Financial Instruments .

The fair value is represented by original cost on the acquisition date and the net asset value (“NAV”) as quoted, at each reporting period and any changes in fair value are included in other income/(loss), net.

Gain or loss on the disposal of these investments is calculated using the weighted average cost of the investments sold and is included in other income/(loss), net.

Gain or loss on the disposal of these investments is calculated using the weighted average cost of the investments sold and is included in other income/(expense), net.

Restricted cash includes any cash and cash equivalents that are legally restricted as to withdrawal or usage for the Company’s operations.

For purposes of the statements of cash flows, the Company includes in its cash and cash-equivalent balances those amounts that have been classified as restricted cash and restricted cash equivalents.

2 unchanged sentences

The Company’s investments in term deposits with financial institutions are measured and recognized at amortized cost.

Interest earned on such investments is included in other income/(loss), net.

Interest earned on such investments is included in other income/(expense), net.

The Company’s mutual fund investments are in debt funds invested in India.

These investments are accounted for in accordance with the fair value option under ASC Topic 825, Financial Instruments .

Gain or loss on the disposal of these investments is calculated using the weighted average cost of the investments sold and is included in other income/(loss), net.

Gain or loss on the disposal of these investments is calculated using the weighted average cost of the investments sold and is included in other income/(expense), net.

Investments in equity affiliates are initially recorded at cost and any excess purchase consideration paid over proportionate share of the fair value of the net assets of the investee at the acquisition date is recognized as goodwill.

6 unchanged sentences

The Company considered current and anticipated future economic conditions relating to the industries of the Company’s customers and the countries where it operates.

In calculating expected credit loss, the Company also considered past payment trends, credit rating and other related credit information for its significant customers to estimate the probability of default in the

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.

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

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.

Accounts receivable include unbilled accounts receivable which represent revenues on contracts to be billed, in subsequent periods, as per the terms of the related contracts.

4 unchanged sentences

Advances paid towards acquisition of property and equipment and the cost of property and equipment not yet placed in service before the end of the reporting period, net of impairment, if any, are classified as capital work in progress.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets and is presented under “Depreciation and amortization expense” in the consolidated statements of income.

Property and equipment which are abandoned and disposed other than by sale, are assessed for revision of their useful life, thereby revising the future depreciation to reflect the use of property and equipment over the remaining shortened life.

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

The estimated useful life have been disclosed in Note 9 - Property and Equipment, net to the consolidated financial statements.

The estimated useful life have been disclosed in Note 9 - Property and Equipment to the consolidated financial statements.

(i) Software Development Costs

2 unchanged sentences

Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed as incurred and recorded within “General and administrative expenses” in the Company’s consolidated statements of income.

Costs incurred on internally developed software not yet ready for its intended use before the end of the reporting period, net of impairment, if any, are classified as capital work in progress.

The Company exercises judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs, and in determining the estimated useful lives over which the costs are amortized.

2 unchanged sentences

In case of the existence of such a contractual right to take possession of the software and the Company is able to run the software on its own hardware, then such implementation costs are capitalized as software development costs.

The Company amortizes capitalized implementation costs in a CCA over the life of the service contract.

Annual amortization of internally developed software products meant for sale, lease or otherwise marketing is the greater of the amount computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or the straight-line method over the remaining estimated economic life of the software product, generally estimated to be up to 5 years from the date the product became available for use.

Annual amortization of internally developed software products meant for internal-use is based on the straight-line method over the estimated useful lives of the internally developed software products.

The Company amortizes capitalized implementation costs in a CCA over the life of the service contract.

Amortization of such internally developed software is presented under “Depreciation and amortization expense” in the consolidated statements of income.

(j) Business Combinations, Goodwill and Other Intangible Assets

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

(j) Business Combinations, Goodwill and Other Intangible Assets

ASC Topic 805, Business Combinations, requires that the acquisition method of accounting be used for all business combinations.

7 unchanged sentences

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.

The Company undertakes 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.

The Company examines 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.

The Company tests for goodwill impairment at the reporting unit level, as that term is defined in U.S.

Refer to Note 10 - Business Combinations, Goodwill and Other Intangible Assets to the consolidated financial statements for discussion of the Company's goodwill impairment testing.

The Company adopted Accounting Standard Update (“ASU”) No.

2017-04, Simplifying the Test for Goodwill Impairment, effective January 1, 2018 in conjunction with our goodwill impairment assessment.

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

The Company estimates 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.

The Company uses its internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on its 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 the Company’s control, provide the Company’s best estimate of all assumptions applied within the DCF model.

Under the market approach, the Company estimates 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 the control of the Company 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.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

The Company examines 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.

Refer to Note 10 - Goodwill and Other Intangible Assets to the consolidated financial statements for discussion of the Company's goodwill impairment testing.

The Company performs 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, the Company performs a quantitative assessment of goodwill impairment if it determines 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, the Company performs 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.

Intangible assets acquired in a business combination are initially valued and recognized at fair market value using generally accepted valuation methods appropriate for the type of intangible asset.

Intangible assets with definite lives are amortized over the estimated useful lives and are reviewed for impairment, if indicators of impairment arise.

Amortization of intangible assets with definite lives is presented under “Depreciation and amortization expense” in the consolidated statements of income.

The evaluation of impairment is based upon a comparison of the carrying amount of the intangible asset to its fair value, which is calculated using the estimated future undiscounted net cash flows expected to be generated by the asset.

5 unchanged sentences

Trade names and trademarks 10

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

(k) Impairment of Long-lived Assets

15 unchanged sentences

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.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

foreign currency fluctuations associated with remeasurement of such assets and liabilities to functional currency.

The Company also uses derivatives 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 under ASC Topic 815.

6 unchanged sentences

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

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

(m) Employee Benefits

4 unchanged sentences

The Company reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so.

The effect of modifications to those assumptions is recorded in other comprehensive income (loss) and amortized to net periodic benefit cost over the expected remaining period of service of the covered employees using the corridor method.

The effect of modifications to those assumptions is recorded in other comprehensive income (loss) (“OCI”) and amortized to net periodic benefit cost over the expected remaining period of service of the covered employees using the corridor method.

The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based on its experience and market conditions.

1 unchanged sentence

The Company includes 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.

The interest cost, expected return on plan assets and amortization of actuarial gains/loss, are included in “ Other income/(expense), net.

” Refer to Note 20 - Employee Benefit Plans to the consolidated financial statements for details.

6 unchanged sentences

Generally, the Company grants PRSUs that cliff vest based on an aggregated revenue target (“PU”) for a three-year period, and PRSUs that are based on market conditions (“MU”) and cliff vest upon meeting or exceeding the Company's total shareholder return relative to a group of peer companies specified under the 2018 Plan, and are measured over a three-year performance period.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

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

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

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

The fair value of each PU is determined based on the market price of one common share of the Company on the day prior to the date of grant, and the associated compensation expense is calculated on the basis that performance targets at 100 % are probable of being achieved.

5 unchanged sentences

All compensation expense related to the MU will be recognized if the requisite performance period is fulfilled, regardless of the extent of the market condition achieved.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

Stock-based compensation expense associated with the Company's 2022 Employee Stock Purchase Plan (“ESPP”) is measured at fair-value using a Black-Scholes option-pricing model at the commencement of each offering period and recognized over that offering period.

(o) Income Taxes

(o) Forward Stock Split

The Company recognizes the effects of a forward stock split in the financial statements if there are changes in the total par value of the increased shares upon such forward stock split.

The Company reclassifies an amount equal to the par value of the increased shares resulting from the forward stock split from “Additional paid-in capital” to “Common stock.” The Company presents the effects of a forward stock split on earnings per share in the financial statements retroactively for all the periods presented.

The Company has an option to present other effects of the forward stock split, including changes in the total par value of the increased shares and count of shares of common stock, in the consolidated financial statements either retroactively for all the periods presented or only for the period in which the forward stock split of the common stock becomes effective.

The Company has elected to present the effects of the forward stock split retroactively for all the periods presented.

(p) Income Taxes

The Company accounts for income taxes using the asset and liability method of accounting for income taxes.

7 unchanged sentences

The Company intends to indefinitely reinvest earnings from its foreign subsidiaries and has not recorded deferred tax liabilities for the indefinitely reinvested earnings.

The Company accounts for the tax effects of Global Intangible Low-Taxed Income of certain foreign subsidiaries as a period cost.

(p) Concentration of Credit Risk in Financial Instruments

The Company recognizes the tax effects of Global Intangible Low-Taxed Income of certain foreign subsidiaries as a period cost.

(q) Concentration of Credit Risk in Financial Instruments

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, time deposits, mutual fund investments, accounts receivable and derivative financial instruments.

2 unchanged sentences

The Company’s exposure to credit risk on account receivable is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customer s.

To mitigate this risk the Company evaluates the creditworthiness of its clients in conjunction with its revenue recognition

To mitigate this risk the Company evaluates the creditworthiness of its customers in conjunction with its revenue recognition processes as well as through its ongoing collectability assessment processes for accounts receivable.

The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

(r) Fair value measurements

ASC Topic 820, Fair Value Measurements and Disclosures defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.

The fair value should be calculated based on

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

processes as well as through its ongoing collectability assessment processes for accounts receivable.

The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

(q) Fair value measurements

The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability as against assumptions specific to the entity.

assumptions that market participants would use in pricing the asset or liability as against assumptions specific to the entity.

In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company’s own credit risk.

10 unchanged sentences

(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 the Company's consolidated balance sheets.

Long-lived assets underlying finance leases are recorded in “Property and equipment” 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 the Company's consolidated balance sheets.

Operating leases are presented within “Operating lease right-of-use assets,” “Current portion of operating lease liabilities” and “Operating lease liabilities, less current portion” in the Company's consolidated balance sheets.

Long-lived assets underlying finance leases are presented within “Property and equipment” and the current and non-current portion of finance lease liabilities are presented within “Accrued expenses and other current liabilities - others” and “other non-current liabilities - others,” respectively, in the Company's consolidated balance sheets.

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

1 unchanged sentence

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, the Company uses its incremental borrowing rate based on the information available at commencement date for determining the present value of lease payments.

The Company determines the incremental borrowing rate by adjusting the benchmark reference rates with appropriate financing spreads applicable to the respective geographies where the leases are entered and lease specific adjustments for the effects of collateral.

For leases in which the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date.

Lease terms includes the effects of options to extend or terminate the lease when it is reasonably certain at commencement of the lease that the Company 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.

The Company evaluates lease agreements to determine lease and non-lease components, which are accounted for separately.

2 unchanged sentences

The Company accounts for lease-related concessions in accordance with guidance in 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.

The Company accounts 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

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.

Upon modification, the Company remeasures the lease liability to reflect changes to the remaining lease payments and discount rates and recognizes 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 consolidated statements of income.

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

circumstances of the particular contract.

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

(s) Government Grants

Government grants are recognized at their fair value when there is a reasonable assurance that the conditions attached to them have been satisfied and the grants have been received.

(t) Government Grants

Government grants are recognized at their fair value when there is a reasonable assurance that the conditions attached to them shall be complied with and the grants will be received.

Government grants relating to income are recognized as a reduction of expenses in the consolidated statements of income.

1 unchanged sentence

The grant is subsequently measured in the consolidated statements of income over the life of the property and equipment in the form of reduced depreciation expense.

(t) Earnings per share

Basic earnings per share is computed using the weighted average number of common shares outstanding, adjusted for outstanding shares that are subject to repurchase during the period.

Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period.

(u) Earnings per share

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

Diluted earnings per share is computed using the weighted average number of common shares issued and outstanding during the period plus the potentially dilutive effect of common stock equivalents, including, outstanding stock options, restricted stock, restricted stock units and employee stock purchase plans.

For the purposes of calculating diluted earnings per share, the treasury stock method is used for stock-based awards and outstanding convertible notes except where the results would be anti-dilutive.

1 unchanged sentence

The Company calculates the dilutive effect of convertible notes using the treasury stock method through the maturity date of the convertible notes, if it has the intent and ability to settle the principal amount of the outstanding convertible notes in cash.

Under the treasury stock method, the convertible notes shall have a dilutive impact related to the conversion premium, if any, on diluted earnings per share to the extent the issuance is dilutive based on the average market price of our common stock for a reporting period being greater the conversion price.

(u) Commitments and contingencies

Under the treasury stock method, the convertible notes shall have a dilutive impact related to the conversion premium, if any, on diluted earnings per share to the extent the issuance is dilutive based on the average market price of the Company’s common stock for a reporting period being greater the conversion price.

(v) Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recognized when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

3 unchanged sentences

Capital commitments are disclosed in the financial statements.

(v) Recent Accounting Pronouncements

In October 2021, FASB (“Financial Accounting Standard Board”) issued ASU No.

2021-08, Business Combinations (“ASC Topic 805”) :

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

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

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

(w) Recent Accounting Pronouncements

In March 2023, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2023-01, Leases (“Accounting Standards Codification (“ASC”) Topic 842”) :

Common Control Arrangements .

This ASU provides guidance in ASC Topic 842 that leasehold improvements associated with common control leases should be (i) amortized by the lessee over the useful life of the leasehold improvements to the common control group, regardless of the lease term, as long as the lessee controls the use of the underlying asset through a lease, and (ii) accounted for as a transfer between entities under common control through an adjustment to equity if and when the lessee no longer controls the use of the underlying asset.

The ASU is effective for fiscal years beginning after December 15, 2023.

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

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

(w) Recently Adopted Accounting Pronouncements

Early adoption is permitted for both interim and annual financial statements that have not yet been issued.

When adopted in an interim period, it must be adopted from the beginning of the year that includes that interim period.

The Company does not have any lease arrangements with entities under common control and the adoption of this ASU is not expected to have a material impact on its consolidated financial statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements :

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative .

This ASU modifies the disclosure or presentation requirements of a variety of Topics in the Codification.

Certain of the amendments represent clarifications to or technical corrections of the current requirements.

For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

In March 2020, FASB issued ASU No.

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This ASU provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as interbank offered rates and London Inter-Bank Offered Rate (“LIBOR”).

The ASU provides practical expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments are elective and are effective upon issuance for all entities through December 31, 2022.

subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

The amendments in this ASU should be applied prospectively.

For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity.

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

The Company will continue to monitor for SEC action, and plan accordingly for adoption.

In November 2023, FASB issued ASU No.

2023-07, Segment Reporting (“ASC Topic 280”) :

Improvements to Reportable Segment Disclosures .

This ASU improves reportable segment disclosure requirements on an annual and interim basis for all public entities by requiring disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment's profit or loss and assets.

The ASU also allows, in addition to the measure that is most consistent with U.S.

GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources.

The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

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

In December 2023, FASB issued ASU No.

2022-06, Reference Rate Reform (Topic 848) :

Deferral of the Sunset Date of Topic 848 , to defer the sunset date of Topic 848 until December 31, 2024.

The adoption of these ASUs did not have a material impact on the Company’s consolidated financial statements.

2023-09, Income Taxes (“ASC Topic 740”) , Improvements to Income Tax Disclosures.

This ASU expands disclosures relating to the entity’s income tax rate reconciliation, income taxes paid and certain other disclosures related to income taxes.

The ASU will be effective for annual periods beginning after December 15, 2024.

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

(x) Recently Adopted Accounting Pronouncements

In October 2021, FASB issued ASU No.

2021-08, Business Combinations (“ASC Topic 805”) :

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

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

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

The adoption of this ASU is applicable for future business combinations.

In July 2023, the FASB issued ASU No.

2023-03, Presentation of Financial Statements (“ASC Topic 205”) , Income Statement-Reporting Comprehensive Income (“ASC Topic 220”) , Distinguishing Liabilities from Equity (“ASC Topic 480”) , Equity (“ASC Topic 505”) , and Compensation-Stock Compensation (“ASC Topic 718”) pursuant to SEC Staff Accounting Bulletin No.

120 and amends various SEC paragraphs in the ASC.

The ASU is effective immediately upon issuance and did not have a material impact on the Company’s consolidated financial statements.

Segment and Geographical Information

3 unchanged sentences

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

The chief operating decision maker (“CODM”) generally reviews financial information such as revenues, cost of revenues and gross profit, disaggregated by the operating segments to allocate an overall budget among the operating segments.

The CODM generally reviews financial information such as revenues, cost of revenues and gross profit, disaggregated by the operating segments to allocate an overall budget among the operating segments.

The Company does not allocate and therefore the CODM does not evaluate, certain operating expenses, interest expense or income taxes by segment.

Many of the Company’s assets are shared by multiple operating segments.

The Company manages these assets on a total Company basis, not by operating segment, and therefore asset information and capital expenditures by operating segment are not presented.

The December 2021 and June 2022 acquisitions of Clairvoyant AI, Inc.

(“Clairvoyant”) and Inbound Media Group, LLC (“Inbound”), respectively, are both included in the Analytics reportable segment.

Refer to Note 10 - Business Combinations, Goodwill and Other Intangible Assets to the consolidated financial statements for further details.

The Company manages

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

these assets on a total Company basis, not by operating segment, and therefore asset information and capital expenditures by operating segment are not presented.

Revenues and cost of revenues for the years ended December 31, 2023, 2022 and 2021, respectively, for each of the reportable segments, are as follows:

7 unchanged sentences

Operating expenses 369,011

Foreign exchange gain, net, interest expense and other loss, net ( 2,063 )

Foreign exchange gain, net, interest expense and other income, net ( 814 )

Income tax expense 53,536

2 unchanged sentences

(1) Exclusive of depreciation and amortization expense.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

Year ended December 31, 2022

6 unchanged sentences

Operating expenses 323,287

Loss on settlement of convertible notes, foreign exchange gain, net, interest expense and other income, net ( 9,320 )

Foreign exchange gain, net, interest expense and other expense, net ( 2,063 )

Income tax expense 47,565

2 unchanged sentences

(1) Exclusive of depreciation and amortization expense.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

Year ended December 31, 2021

6 unchanged sentences

Operating expenses 275,478

Foreign exchange gain, net, interest expense and other income, net 5,307

Loss on settlement of convertible notes, foreign exchange gain, net, interest expense and other income, net ( 9,320 )

Income tax expense 31,850

Loss from equity-method investment 227

Gain from equity-method investment 47

Net income $ 114,758

10 unchanged sentences

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

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

Year ended December 31,

1 unchanged sentence

Revenues, net

United States $ 1,213,477 $ 964,059 $ 814,672

The United States $ 1,370,707 $ 1,213,477 $ 964,059

Non-United States

United Kingdom 134,630 105,734 88,659

The United Kingdom 177,479 134,630 105,734

Rest of World 82,482 63,937 52,500

1 unchanged sentence

Revenues, net $ 1,630,668 $ 1,412,044 $ 1,122,293

Long-lived assets by geographic area, which consist of property and equipment, net and operating lease right-of-use assets were as follows:

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

Long-lived assets by geographic area, which consist of property and equipment, net and operating lease ROU assets were as follows:

December 31, 2023 December 31, 2022

Long-lived assets

United States $ 60,709 $ 50,095

The United States $ 61,592 $ 60,709

India 53,813 50,118

Philippines 18,406 22,011

The Philippines 21,952 18,406

South Africa 20,890 3,980

Rest of World 6,982 4,962

Long-lived assets $ 165,229 $ 138,175

Revenues, net

Revenues, net and Accounts Receivable, net

Refer to Note 3 - Segment and Geographical Information to the consolidated financial statements for revenues disaggregated by reportable segments and geography.

9 unchanged sentences

The Company has accrued the unbilled receivables for work performed in accordance with the terms of contracts with customers and considers no significant performance risk associated with its unbilled receivables.

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

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

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

reduced from revenues.

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

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

The Company also defers revenues attributable to certain process transition activities for which costs have been capitalized by the Company as contract fulfillment costs.

Consideration received from customers, if any, relating to such transition activities are classified under contract liabilities and are included within “Deferred revenues” and “Other non-current liabilities” in the consolidated balance sheets.

The revenues are recognized as (or when) the performance obligation is fulfilled under the contract with customer.

There was no significant impairment of contract assets as of December 31, 2023 and 2022.

Revenue recognized during the years ended December 31, 2023 and 2022, which was included in the contract liabilities balance at the beginning of the respective periods:

4 unchanged sentences

$ 1,762 $ 1,635

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

Contract acquisition and fulfillment costs

7 unchanged sentences

Closing Balance $ 2,122 $ 1,095 $ 24,673 $ 13,871

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

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

There was no significant impairment for contract acquisition and contract fulfillment costs as of December 31, 2023 and 2022.

Allowance for expected credit losses

The Company evaluates the credit risk of its customers based on a combination of various financial and qualitative factors that may affect the ability of each customer to pay.

The Company considered current and anticipated future economic conditions relating to the industries of the Company’s customers and the countries where it operates.

The following table provides information about accounts receivable, net of allowance for expected credit losses:

December 31, 2023 December 31, 2022

2 unchanged sentences

Accounts receivable, net $ 308,108 $ 259,222

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

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

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

Year ended December 31,

Opening Balance $ 1,332 $ 573

Additions / (reductions) 815 ( 496 )

Additions 2,450 815

Reductions due to write-off of accounts receivables ( 79 ) ( 60 )

Translation adjustment 4 9

Currency translation adjustments — 4

Closing Balance $ 3,703 $ 1,332

Concentration of credit risk

To reduce the credit risk, the Company conducts ongoing credit evaluations of its customers.

No client accounted for more than 10% of accounts receivable, net as of December 31, 2022 and 2021.

To reduce credit risk, the Company conducts ongoing credit evaluations of its customers.

No customer accounted for more than 10% of accounts receivable, net, as of December 31, 2023 and 2022.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

Earnings Per Share

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

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

In 2021, diluted weighted-average shares outstanding was affected by the treatment of the Company’s 3.5 % per annum Convertible Senior Notes due October 1, 2024 (the “Notes”).

The Company had a choice to settle the Notes in cash, shares or any combination of the two.

The Company had the ability to settle the principal balance of the Notes in cash, and as such, the Company applied the treasury stock method.

The dilution related to the conversion premium, if any, of the Notes is included in the calculation of diluted weighted-average shares outstanding for the portion of the period until actual settlement and to the extent the issuance is dilutive based on the average stock price during the reporting period being greater than the conversion price of $ 75 .

During the third quarter of 2021, the Company settled the Notes by electing a combination of cash and shares of the Company’s common stock and as such included the count of shares issued on settlement in the calculation of basic earnings per share for the portion of the period outstanding.

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

4 unchanged sentences

Basic weighted average common shares outstanding 166,341,213 166,651,585 167,746,375

Dilutive effect of share-based awards 503,541 408,693 254,717

Dilutive effect of stock-based awards 1,820,158 2,517,705 2,043,465

Dilutive effect of conversion premium on the Notes (2)

— — 1,432,550

Diluted weighted average common shares outstanding 168,161,371 169,169,290 171,222,390

4 unchanged sentences

Weighted average potentially dilutive shares considered anti-dilutive and not included in computing diluted earnings per share (1)

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

Other Income/(Loss), net

Other income/(loss), net consists of the following:

1,628,932 2,830 53,525

(1) Prior period information has been adjusted to reflect the 5 -for-1 forward stock split of the Company’s common stock effected in August 2023.

Refer to Note 19 – Capital Structure to the consolidated financial statements for further details.

(2) Represents dilution effect related to the conversion premium of the convertible senior notes in the calculation of diluted weighted average shares outstanding for the portion of the period until actual settlement during the third quarter of 2021.

Refer to Note 18 – Borrowings to the consolidated financial statements for further details.

Other Income/(Expense), net

Other income/(expense), net consists of the following:

Year ended December 31,

2023 2022 2021

Gain on sale and mark-to-market on investments $ 4,907 $ 4,891 $ 9,615

Gain on sale and fair value mark-to-market on investments $ 5,013 $ 4,907 $ 4,891

Interest and dividend income 8,027 5,229 2,726

Fair value changes of contingent consideration (1)

( 1,900 ) ( 8,250 ) —

Others, net ( 306 ) ( 1,896 ) ( 844 )

Other income/(loss), net $ ( 10 ) $ 6,773 $ 12,065

* Refer to Note 10 - Business Combinations, Goodwill and Other Intangible Assets to the consolidated financial statements for further details.

Other income/(expense), net $ 10,834 $ ( 10 ) $ 6,773

(1) Refer to Note 16 - Fair Value Measurements to the consolidated financial statements for further details.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

Cash, Cash Equivalents and Restricted Cash

5 unchanged sentences

Cash, cash equivalents and restricted cash $ 145,401 $ 125,621 $ 143,810

Restricted cash (current) primarily represents funds held on behalf of clients in dedicated bank accounts.

Restricted cash (current) primarily represents funds held on behalf of customers in dedicated bank accounts.

The corresponding liability against the same is included under “Accrued expenses and other current liabilities.” Restricted cash (non-current) represents amounts on deposit with banks against bank guarantees issued through banks in favor of relevant statutory authorities for equipment imports, deposits for obtaining indirect tax registrations and for demands against pending income tax assessments.

These deposits with banks have maturity dates after December 31, 2022.

These deposits with banks will mature one year after the balance sheet date.

Investments consist of the following:

8 unchanged sentences

Total Long-term investments $ 4,430 $ 34,779

Refer to Note 16 - Fair Value Measurements to the consolidated financial statements for further details.

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

Refer to Note 16 - Fair Value Measurements to the consolidated financial statements for further details.

Property and Equipment, net

Property and equipment, net consists of the following:

Property and Equipment

Property and equipment consists of the following:

Estimated useful lives (Years) December 31, 2023 December 31, 2022

14 unchanged sentences

$ 99,596 $ 82,328

Right-of-use assets under finance leases*:

ROU assets under finance leases:

Network equipment and computers 58 82

2 unchanged sentences

Motor vehicles 1,020 742

Accumulated depreciation and amortization ( 1,999 ) ( 2,339 )

Accumulated depreciation ( 1,332 ) ( 1,999 )

Property and equipment, net $ 100,373 $ 82,828

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

Capital work in progress represents advances paid towards acquisition of property and equipment and costs incurred on internally developed software not yet ready to be placed in service.

During the years ended December 31, 2022 and 2021 there were no changes in estimated useful lives of property and equipment during the ordinary course of operations.

During the years ended December 31, 2023 and 2022, there were no material changes in estimated useful lives of property and equipment during the ordinary course of operations.

The depreciation and amortization expense, excluding amortization of acquisition-related intangibles, recognized in the consolidated statements of income was as follows:

3 unchanged sentences

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

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

Year ended December 31,

2023 2022 2021

Effect of foreign exchange gain/(loss) $ ( 210 ) $ ( 180 ) $ 524

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

Year ended December 31,

2022 2021 2020

Effect of foreign exchange gain/(loss) $ ( 180 ) $ 524 $ 51

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

9 unchanged sentences

however, there can be no assurance that long-lived assets will not be impaired in future periods.

Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which undiscounted cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount, the asset’s residual value, if any, and estimates relating to the possible effects resulting from COVID-19.

It is reasonably possible that the judgments and estimates described above could change in future periods.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

Business Combinations, Goodwill and Other Intangible Assets

Clairvoyant AI, Inc.

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

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

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

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

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

The base purchase consideration payable at closing of the acquisition (the “Closing”) was $ 80,080 , excluding cash and cash equivalents acquired, debt and estimated other post-closing adjustments.

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

The contingent consideration had an estimated fair value of $ 17,500 and $ 9,000 , as of December 31, 2022 and 2021, respectively, and has been presented as contingent consideration under “Accrued expenses and other current liabilities” and “Other non-current liabilities,” as applicable, in the consolidated balance sheets.

Changes in the fair value of contingent consideration were recognized in the consolidated statements of income and presented as a part of “Other income/(loss), net.”

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

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

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

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

The tables below presents the fair value of the consideration exchanged and the allocation of purchase consideration to the major classes of assets and liabilities of Clairvoyant as of December 16, 2021:

Cash and cash equivalents $ 5,598

Accounts receivable, net 8,709

Other current assets 360

Property and equipment, net 398

Intangible assets, net

Customer relationships 31,600

Developed technology 2,070

Trade names and trademarks 300

Non-compete agreements 300

Other assets 217

Total assets $ 49,552

Accounts payable $ ( 1,199 )

Accrued expenses and other current liabilities

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

Deferred tax liabilities ( 9,383 )

Other non-current liabilities ( 1,226 )

Total liabilities ( 16,681 )

Net assets acquired 32,871

Goodwill 57,454

Total purchase consideration* $ 90,325

* Includes contingent consideration of $ 9,000 recognized at fair value as of the date of acquisition .

During the years ended December 31, 2022 and 2021, the Company recognized measurement period adjustments, which led to increase in goodwill in an amount of $ 2,229 and $ nil , respectively.

These adjustments primarily relate to an increase in income tax liabilities of $ 988 included under “other non-current liabilities” and post-closing purchase adjustments.

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

The MPEEM is a specific application of the discounted cash flow method.

The principle behind the MPEEM is that the value of an intangible asset is equal to the present value of the incremental after-tax cash flows attributable only to the subject intangible asset after deducting Contributory Asset Charges (“CAC”).

The principle behind a CAC is that an intangible asset ‘rents’ or ‘leases’ from a hypothetical third party all the assets it requires to produce the cash flows resulting from its development, that each project rents only those assets it needs (including elements of goodwill) and not the ones that it does not need, and that each project pays the owner of the assets a fair return on (and of, when appropriate) the value of the rented assets.

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

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

In the replacement cost approach, the fair value of an asset is based on the cost of a market participant to reconstruct a substitute asset of comparable utility, adjusted for any obsolescence.

The fair value of the asset would include the seller’s expected profit margin in the market and any opportunity costs lost over the period to reconstruct the substitute asset.

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

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

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

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

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

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

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

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

Inbound Media Group, LLC

On June 10, 2022, the Company, through its wholly owned subsidiary ExlService.com, LLC, entered into an Asset Purchase Agreement to acquire certain assets of Inbound, a Wyoming limited liability company, which is a digital marketing business focused primarily on lead generation in the insurance space, for cash consideration of $ 1,469 and contingent consideration with an estimated fair value of $ 1,439 as of the date of acquisition based on the achievement of certain performance goals by Inbound during the 2022 to 2024 calendar years.

The contingent consideration had an estimated fair value of $ 1,189 as of December 31, 2022, and has been presented as contingent consideration under “Other non-current liabilities,” in the consolidated balance sheets.

Changes in the fair value of contingent consideration were recognized in the consolidated statements of income and presented as a part of “Other income/(loss), net.”

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

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

Goodwill and intangible assets of $ 1,992 and $ 916 , respectively, were recognized by the Company as a result of this transaction.

The goodwill recognized for this business is deductible for income tax purposes.

The acquisition strengthens the Company’s capabilities in digital direct-to-consumer marketing by adding performance marketing, lead generation and customer engagement capabilities to its suite of end-to-end marketing solutions, proprietary data sets and robust consumer analytics.

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

Goodwill and Other Intangible Assets

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

2 unchanged sentences

Acquisition — — — 1,992 1,992

Measurement period adjustments — — — 2,229 2,229

Currency translation adjustments ( 499 ) ( 67 ) ( 1,919 ) ( 1 ) ( 2,486 )

Balance as of December, 2022 49,929 21,875 47,101 286,732 405,637

Acquisition — — — 1,992 1,992

Measurement period adjustments — — — 2,229 2,229

Currency translation adjustments 106 ( 3 ) ( 100 ) ( 1 ) 2

Balance as of December 31, 2023 $ 50,035 $ 21,872 $ 47,001 $ 286,731 $ 405,639

During the fourth quarter of 2022, the Company performed its annual goodwill quantitative impairment test for those reporting units that had goodwill recorded.

Key assumptions used in determining the fair value of the Company’s reporting units were, a long-term revenue growth rate in the terminal year of 3.0 %, which was based upon expected long-term inflation rate and real gross domestic product growth over a long-term, and discount rate of up to 10.0 %, which vary based upon the risks and uncertainties inherent in each individual reporting unit.

Based on the results, the fair value of each of the Company’s reporting units exceeded their carrying value and the Company’s goodwill was not impaired.

During the fourth quarter of 2021, the Company performed its annual goodwill impairment test, as it has done this year, and also concluded goodwill was not impaired.

During 2023 and 2022, the Company performed an assessment to determine whether events or circumstances exist that may lead 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 such assessment, the Company concluded that it is not more likely than not that the fair values of any of the Company’s reporting units are less than their carrying amounts.

The recoverability of goodwill is dependent upon the continued growth of cash flows from the Company’s business activities.

This growth is based on business forecasts and improvement in profitability of its reporting units.

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

The Company believes there are significant opportunities for additional growth within its existing clients, and can expand these relationships by:

• Increasing the depth and breadth of the services the Company provides across its clients’ value chains and geographies;

• Offering the full suite of the Company's services, which includes digital operations and solutions and data and analytics;

• Supporting the Company's clients’ geographic expansion leveraging its global footprint.

The Company also considers selective strategic relationships with industry leaders that add new long-term client relationships, enhance the depth and breadth of its services and solutions, and complement its business strategy.

Through its various Partnership programs, the Company expands its technology and innovation ecosystem with select partnerships, alliances or investments that the Company expects will enhance go-to-market opportunities and expand the scope and

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

The Company believes there are significant opportunities for adding new customers and additional growth and expansion within its existing customers by:

• Increasing the depth and breadth of the services, including adoption of new technology, for instance, generative AI, the Company provides across its customers’ value chains and geographies;

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

effectiveness of the Company’s services and solutions by adding digital assets and intellectual property, which will help the Company to win new clients or allowing it to enter new industry verticals and geographic markets.

• Offering the full suite of the Company's services, which includes AI-powered digital operations and solutions and data and analytics;

• Supporting the Company's customers’ geographic expansion leveraging its global footprint.

Through its various partnership programs, the Company expands its technology and innovation ecosystem with select partnerships, alliances or investments that the Company expects will enhance go-to-market opportunities and expand the scope and effectiveness of the Company’s services and solutions by adding digital assets and intellectual property, which will help the Company to win new customers or allowing it to enter new industry verticals and geographic markets.

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

17 unchanged sentences

Total intangible assets $ 105,238 $ ( 55,074 ) $ 50,164

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

As of December 31, 2022

14 unchanged sentences

Amortization expense $ 14,678 $ 17,109 $ 12,778

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

The remaining weighted average life of intangible assets is as follows:

Customer relationships 5.5

Developed technology 1.4

Trade names and trademarks (finite lived) 1.5

Non-compete agreements 2.8

Estimated future amortization expense related to finite-lived intangible assets as of December 31, 2023 was as follows:

2024 $ 12,135

2028 and thereafter 6,713

Total $ 49,264

2 unchanged sentences

December 31, 2023 December 31, 2022

Prepaid expenses $ 18,132 $ 14,655

Receivables from statutory authorities 15,724 18,023

Advance income tax, net $ 23,269 $ 5,716

Advances to suppliers 1,944 1,464

Receivables from statutory authorities 18,500 15,724

Prepaid expenses 18,171 18,132

Derivative instruments 4,308 1,526

1 unchanged sentence

Contract assets 2,830 904

Advances to suppliers 1,883 1,944

Others 4,405 5,855

7 unchanged sentences

Deferred contract fulfillment costs $ 21,370 $ 12,693

Lease deposits 6,621 9,649

Deposits with statutory authorities 6,960 6,276

Contract assets 6,835 1,864

Lease deposits 5,159 6,621

Derivative instruments 3,299 820

Receivable from Statutory authorities — 222

Others 5,901 3,795

5 unchanged sentences

Payable to statutory authorities 20,591 20,430

Derivative instruments 10,059 1,852

Client liabilities 5,110 6,097

Contingent consideration 15,000 5,000

Client liabilities 6,909 5,110

Accrued capital expenditures 4,134 4,032

Interest payable 451 252

Finance lease liabilities 164 141

Other current liabilities 2,252 1,071

Derivative instruments 2,009 10,059

Others 5,521 2,867

Accrued expenses and other current liabilities $ 112,900 $ 95,352

2 unchanged sentences

December 31, 2023 December 31, 2022

Contingent consideration $ 13,689 $ 9,000

Retirement benefits $ 16,666 $ 12,982

Derivative instruments 6,218 1,785

Deferred transition revenue 10,195 4,408

Unrecognized tax benefits 1,262 2,329

Income taxes payable — 1,790

Finance lease liabilities 355 229

Contingent consideration 589 13,689

Derivative instruments 216 6,218

Others 2,534 1,666

6 unchanged sentences

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

In addition, the Company enters into foreign currency forward contracts and interest rate swaps, which are designated as cash flow hedges and net investment hedges, as applicable, in accordance with ASC Topic 815.

Cumulative changes in the fair values of cash flow hedges are recognized in AOCI on the Company’s consolidated balance sheets.

3 unchanged sentences

Accumulated Other Comprehensive Income/(Loss)

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

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

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

Gains / (losses) recognized during the year ( 11,134 ) 4,663 ( 558 ) ( 7,029 )

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

Reclassification to net income (1)

— ( 9,264 ) 709 ( 8,555 )

Income tax effects (2)

2 unchanged sentences

Gains / (losses) recognized during the year ( 47,734 ) ( 27,333 ) 2,574 ( 72,493 )

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

Reclassification to net income (1)

3 unchanged sentences

Accumulated other comprehensive income/(loss) as of December 31, 2022 $ ( 133,139 ) $ ( 11,303 ) $ 299 $ ( 144,143 )

Gains / (losses) recognized during the year ( 47,734 ) ( 27,333 ) 2,574 ( 72,493 )

Gains recognized during the year 652 14,403 1,337 16,392

Reclassification to net income (1)

4 unchanged sentences

(1) Refer to Note 17 - Derivatives and Hedge Accounting and Note 20 - Employee Benefit Plans to the consolidated financial statements for reclassification to net income.

These are income tax effects recognized on cash flow hedges, retirement benefits and foreign currency translation loss.

(2) These are income tax effects recognized on cash flow hedges, retirement benefits and foreign currency translation gain/(loss).

Refer to Note 22 - Income Taxes to the consolidated financial statements.

9 unchanged sentences

Cash equivalents - Money market funds (1)

$ 49,806 $ — $ — $ 49,806

Mutual funds (2)

52,650 — — 52,650

Derivative financial instruments — 7,607 — 7,607

2 unchanged sentences

Contingent consideration (3)

— — 15,589 15,589

Total $ — $ 2,225 $ 15,589 $ 17,814

2 unchanged sentences

Cash equivalents - Money market funds (1)

$ 1,137 $ — $ — $ 1,137

Mutual funds (2)

110,964 — — 110,964

Derivative financial instruments — 2,346 — 2,346

2 unchanged sentences

Contingent consideration (3)

— — 18,689 18,689

Total $ — $ 16,277 $ 18,689 $ 34,966

2 unchanged sentences

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

Derivative Financial Instruments :

Fair Value of Derivative Financial Instruments :

The Company’s derivative financial instruments consist of foreign currency forward contracts and interest rate swaps.

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

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

The Company’s derivative financial instruments consist of foreign currency forward contracts and interest rate swaps.

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

classified as Level 2.

Refer to Note 17 - Derivatives and Hedge Accounting to the consolidated financial statements for further details.

1 unchanged sentence

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

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

The measurement is calculated using unobservable inputs based on the Company’s own assessment of achievement of certain performance goals by Clairvoyant during the 2022 and 2023 calendar years and Inbound during the 2022 to 2024 calendar years.

The Company’s contingent consideration represents a component of the total purchase consideration for business acquisitions.

The measurement is calculated using unobservable inputs based on the Company’s own assessment of achievement of certain performance goals.

The Company estimated the fair value of the contingent consideration based on the Monte Carlo simulation model and scenario-based method.

Refer to Note 10 - Business Combinations, Goodwill and Other Intangible Asset s to the consolidated financial statements for further details.

The following table summarizes the changes in the fair value of contingent consideration:

3 unchanged sentences

Fair value changes 1,900 8,250

Payments ( 5,000 ) —

Closing balance $ 15,589 $ 18,689

4 unchanged sentences

Nonrecurring Fair Value Measurements of Assets:

Nonrecurring fair value measurements include impairment tests of goodwill conducted by the Company during the years ended December 31, 2022 and 2021.

Nonrecurring fair value measurements include impairment tests of goodwill conducted by the Company during the years ended December 31, 2023 and 2022, as applicable.

The fair value determination of the Company's reporting units was based on a combination of the income approach, using a DCF model, which are Level 3 inputs, and also the market approach, as applicable, using market multiples for reporting units, which are Level 2 inputs.

During the years ended December 31, 2023 and 2022, the Company did no t recognize any impairment charges on goodwill as the fair values of the reporting units exceeded their carrying value.

Refer to Note 10 - Business Combinations, Goodwill and Other Intangible Assets to the consolidated financial statements for further details.

Refer to Note 10 - Goodwill and Other Intangible Assets to the consolidated financial statements for further details.

Derivatives and Hedge Accounting

1 unchanged sentence

The Company enters 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 its revolving credit facility having variable interest rate obligations.

These contracts qualify as cash flow hedges under ASC Topic 815 and are with counterparties that are highly rated financial institutions.

For derivatives in cash flow hedging relationships as

These contracts qualify as cash flow hedges under ASC Topic 815, Derivatives and Hedging , and are with counterparties that are highly rated financial institutions.

For derivatives in cash flow hedging relationships as of December 31, 2023 and December 31, 2022, the Company had outstanding foreign currency forward contracts totaling $ 722,800 and $ 841,620 , respectively and interest rate swaps totaling $ 75,000 , each.

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

of December 31, 2022 and 2021, the Company had outstanding foreign currency forward contracts totaling $ 841,620 and $ 514,580 , respectively and interest rate swaps totaling $ 75,000 and $ nil , respectively.

The Company estimates that approximately $ 8,773 of derivative losses, net, excluding tax effects, included in AOCI, representing changes in the value of cash flow hedges based on exchange rates prevailing as of December 31, 2022, could be reclassified into earnings within the next twelve months.

The Company estimates that approximately $ 2,357 of derivative gains, net, excluding tax effects, included in AOCI, representing changes in the value of cash flow hedges based on exchange rates prevailing as of December 31, 2023, could be reclassified into earnings within the next twelve months.

As of December 31, 2023, the maximum outstanding term of the cash flow hedges was approximately 42 months.

The Company also enters into foreign currency forward contracts to hedge its intercompany balances and other monetary assets and liabilities denominated in currencies other than functional currencies, against the risk of fluctuations in foreign currency exchange rates associated with remeasurement of such assets and liabilities to functional currency.

These foreign currency forward contracts do not qualify as fair value hedges under ASC Topic 815.

These foreign currency forward contracts do not qualify as fair value hedges under ASC Topic 815, Derivatives and Hedging .

Changes in the fair value of these financial instruments are recognized in the consolidated statements of income and are included in the foreign exchange gain/(loss) line item.

The Company’s primary exchange rate exposure is with the Indian rupee, the Philippine peso and the U.K.

pound sterling (GBP).

The Company also has exposure to Colombian pesos (COP), Czech koruna, the Euro (EUR), South African ZAR, the Australian dollar (AUD) and other local currencies in which it operates.

The Company’s primary exchange rate exposure is with the Indian rupee (INR), the Philippine peso (PHP), the U.K.

pound sterling (GBP) and South African rand (ZAR).

The Company also has exposure to Colombian pesos (COP), the Euro (EUR), the Australian dollar (AUD), the Canadian dollar (CAD) and other local currencies in which it operates.

The following table sets forth the aggregate notional principal amounts of outstanding foreign currency forward contracts for derivatives not designated as hedging instruments:

5 unchanged sentences

Australian dollar (AUD) 3,452 1,951

Colombian peso (COP) — 2,541,902

South African rand (ZAR) 150,150 —

The following table sets forth the fair value of the foreign currency forward contracts and interest rate swaps and their location on the consolidated balance sheets:

5 unchanged sentences

Other non-current liabilities $ 216 $ 6,218 $ — $ —

The following tables set forth the effect of foreign currency forward contracts and interest rate swaps on AOCI and the consolidated statements of income:

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

The following table sets forth the effect of foreign currency forward contracts and interest rate swaps on AOCI and the consolidated statements of income:

Year ended December 31,

1 unchanged sentence

2023 2022 2021

Unrealized gain/(loss) recognized in AOCI

Unrealized gain/(loss) recognized in OCI

Derivatives in cash flow hedging relationships $ 14,403 $ ( 27,333 ) $ 4,663

1 unchanged sentence

Derivatives not designated as hedging instruments $ 296 $ ( 9,571 ) $ 196

Location and amount of gain/(loss) recognized in consolidated statements of income for derivatives in cash flow hedging relationships and derivatives not designated as hedging instruments:

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

The following table sets forth the location and amount of gain/(loss) recognized in consolidated statements of income for derivatives in cash flow hedging relationships and derivatives not designated as hedging instruments:

Year ended December 31,

2023 2022 2021

As per consolidated statements of income Gain/(loss) on derivative financial instruments As per consolidated statements of income Gain on derivative financial instruments As per consolidated statements of income Gain/(loss)

As per consolidated statements of income Gain/(loss) on derivative financial instruments As per consolidated statements of income Gain/(loss) on derivative financial instruments As per consolidated statements of income Gain

on derivative financial instruments

Cash flow hedging relationships

Derivatives in cash flow hedging relationships

Location in consolidated statements of income where gain/(loss) was reclassified from AOCI

9 unchanged sentences

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

Foreign exchange gain, net $ 6,199 $ ( 9,571 ) $ 4,313 $ 196 $ 4,432 $ 3,686

$ 6,199 $ ( 9,571 ) $ 4,313 $ 196 $ 4,432 $ 3,686

Effect of net investment hedges on AOCI:

Foreign exchange gain/(loss), net $ 1,532 $ 296 $ 6,199 $ ( 9,571 ) $ 4,313 $ 196

Effect of net investment hedges on OCI:

Year ended December 31,

Amount of loss recognized in AOCI

Amount of loss recognized in OCI

Net investment hedging relationships

1 unchanged sentence

Foreign currency forward contracts $ — $ — $ 1,134

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

The following tables summarizes the Company’s debt position:

4 unchanged sentences

Total borrowings $ 200,000 $ 250,000

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

Unamortized debt issuance costs for the Company’s revolving credit facility of $ 903 and $ 1,177 as of December 31, 2023 and 2022, respectively, are presented under “Other current assets” and “Other assets,” as applicable, in the consolidated balance sheets.

3 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, the Company and each of the Company’s 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.

On April 18, 2022, the Company and each of the Company’s 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 to the Company is equal to $ 400,000 ;

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

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

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

dollar borrowings.

2 unchanged sentences

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

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

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

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

4 unchanged sentences

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

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

Year ended December 31,

1 unchanged sentence

Effective Interest Rate 6.3 % 2.9 % 1.7 %

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

As of December 31, 2023 and 2022, the Company was in compliance with all financial covenants under the 2022 Credit Agreement.

Convertible Senior Notes

2 unchanged sentences

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

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

The Company had the option to redeem the principal amount of the Notes, at its option, if the closing sale price of the common stock exceeded 150 % of the then-current conversion price for 20 or more trading days in the 30 consecutive trading day period preceding the Company’s exercise of this redemption right (including the trading day immediately prior to the date of the notice of redemption).

The Notes carried an effective interest rate as shown below:

Year ended December 31,

Effective Interest Rate 3.6 % 3.6 %

During the year ended December 31, 2021, the Notes carried an effective interest rate of 3.6 %.

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

During the year ended December 31, 2021, the Company recognized a loss on settlement of the Notes of $ 12,845 , representing the difference between the fair value of the consideration allocated to the debt component and the carrying value of the debt component immediately before settlement, and is presented as “Loss on settlement of convertible notes,” in the Company’s consolidated statements of income.

During the years ended December 31, 2021 and 2020, the Company recognized interest expense and amortization of debt discount of $ 5,237 and $ 7,866 , respectively, on the Notes.

During the year ended December 31, 2021, the Company recognized interest expense and amortization of debt discount of $ 5,237 on the Notes.

Expected payments for all of the Company’s borrowings as of December 31, 2023 were as follows:

3 unchanged sentences

2027 135,000 3,205

2025 — 11,926

2026 — 11,926

2027 220,000 4,472

Total $ 200,000 $ 31,655

* Interest payments are based on effective interest rate as of December 31, 2022.

(1) Interest payments are based on interest rate prevailing as of December 31, 2023.

Letters of Credit

1 unchanged sentence

As of December 31, 2023 and 2022, the Company had outstanding letters of credit of $ 461 , each, that were not recognized in the consolidated balance sheets.

Capital Structure

The Company has one class of common stock outstanding.

Holders of the Company's common stock are entitled to one vote per share.

Upon the liquidation or dissolution of the Company, its common stockholders are entitled to receive a ratable share of the available net assets of the Company after payment of all debts and other liabilities.

The Company's shares of common stock have no preemptive, subscription, redemption or conversion rights.

Forward Stock Split

On June 20, 2023, the Company’s stockholders approved an amendment to the Company’s 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 the Company’s common stock (the “2023 Stock Split”) and an increase in the number of authorized shares of the Company’s 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.

Pursuant to the 2023 Stock Split, each stockholder of record on July 25, 2023 holding shares of the Company’s common stock received four additional shares of the Company’s common stock for every one share held.

The additional shares were distributed after the close of business on August 1, 2023.

The common shares began trading on the Nasdaq Global Select Market on a post-split basis on August 2, 2023.

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

Capital Structure

The Company has one class of common stock outstanding.

All share count and per share amounts in the consolidated financial statements have been retrospectively adjusted from January 1, 2021 to reflect the 2023 Stock Split as if it occurred at the beginning of the earliest period presented.

An amount equal to the par value of the increased shares resulting from the 2023 Stock Split was reclassified from “Additional paid-in capital” to “Common stock.”

Share Repurchases

The Company purchased shares of its common stock from employees in connection with withholding tax payments related to the vesting of restricted stock units and performance-based restricted stock units, as below:

3 unchanged sentences

Twelve months ended December 31, 2021 156,545 $ 2,752 $ 17.58

(1) The weighted average purchase price per share is based on the closing price of the Company’s common stock on the Nasdaq Global Select Market on the trading day prior to the applicable vesting date of the shares of restricted stock.

On December 16, 2019, the Company’s board of directors authorized a $ 200,000 common stock repurchase program beginning January 1, 2020 through December 31, 2022 (the “2019 Repurchase Program”).

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

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

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

Repurchases may be discontinued at any time by the management.

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

The Company purchased shares of its common stock, for a total consideration including commission and excluding excise tax, under repurchase programs, as below:

Shares repurchased Total consideration Weighted average purchase price per share

3 unchanged sentences

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

The Company has not paid or declared any cash dividends on its common stock during the years ended December 31, 2022, 2021 and 2020.

The Company’s borrowings under the revolving credit facility could restrict its ability to declare or make any dividends or similar distributions.

Pursuant to the Inflation Reduction Act, effective January 1, 2023, the Company is required to pay a 1% excise tax on the fair market value of each share of common stock repurchased, net of stock issuances.

The Company recognized excise tax of $ 217 on repurchase of common stock as a part of cost of such repurchases for the year ended December 31, 2023.

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

The Company has not paid or declared any cash dividends on its common stock during the years ended December 31, 2023, 2022 and 2021.

The Company’s borrowings under its revolving credit facility could restrict its ability to declare or make any dividends or similar distributions.

Employee Benefit Plans

7 unchanged sentences

Fund managers manage these funds and calculate the annual contribution required to be made by the Company and manage the India Plan, including any required payouts.

These funds are managed on a cash accumulation basis and interest is declared retrospectively on March 31 of each year.

These funds are managed on a cash accumulation basis, inclusive of interest which is declared periodically.

The Company earned a return of approximately 7.6 % per annum on the India Plan for the year ended December 31, 2023.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

The benefit obligation has been measured as of December 31, 2023 and 2022.

5 unchanged sentences

Benefits paid ( 1,382 ) ( 1,757 )

Acquisition adjustments — 209

Actuarial (gain)/loss* ( 2,639 ) 539

Actuarial gain (1)

( 1,166 ) ( 2,639 )

Effect of exchange rate changes ( 114 ) ( 2,346 )

5 unchanged sentences

Benefits paid (2)

( 1,343 ) ( 1,737 )

Effect of exchange rate changes ( 105 ) ( 1,490 )

6 unchanged sentences

Accumulated benefit obligation as of December 31 $ 16,655 $ 14,447

Accumulated benefit obligation in excess of plan assets as of December 31 $ ( 2 ) $ 1,189

Plan assets in excess of accumulated benefit obligation as of December 31 $ 479 $ 2

(1) During the years ended December 31, 2023 and 2022 , actuarial gain was driven by changes in actuarial assumptions, offset by experience adjustments on present value of benefit obligations.

(2) Benefits payments were substantially made through the plan assets during the years ended December 31, 2023 and 2022 .

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

*During the year ended December 31, 2022, actuarial gain was driven by changes in actuarial assumptions, offset by experience adjustments on present value of benefit obligations.

During the year ended December 31, 2021, actuarial loss was driven by experience adjustments on present value of benefit obligations offset by changes in actuarial assumptions.

Components of net periodic benefit costs recognized in consolidated statements of income and actuarial loss reclassified from AOCI, were as follows:

Components of net periodic benefit costs recognized in consolidated statements of income and actuarial (gain)/loss reclassified from AOCI, were as follows:

Year ended December 31,

3 unchanged sentences

Expected return on plan assets ( 1,048 ) ( 872 ) ( 796 )

Amortization of actuarial loss, gross of tax 592 709 394

Amortization of actuarial (gain)/loss, gross of tax ( 94 ) 592 709

Net gratuity cost $ 4,226 $ 4,722 $ 4,354

Amortization of actuarial loss, gross of tax $ 592 $ 709 $ 394

Amortization of actuarial (gain)/loss, gross of tax $ ( 94 ) $ 592 $ 709

Income tax effects on above ( 74 ) ( 179 ) ( 204 )

Amortization of actuarial loss, net of tax $ 413 $ 505 $ 267

The components of actuarial loss on retirement benefits included in AOCI, excluding tax effects, were as follows:

Amortization of actuarial (gain)/loss, net of tax $ ( 168 ) $ 413 $ 505

The components of retirement benefits included in AOCI, excluding tax effects, were as follows:

As of December 31,

2023 2022 2021

Net actuarial loss $ ( 462 ) $ ( 3,624 ) $ ( 3,772 )

Net actuarial gain/(loss) $ 777 $ ( 462 ) $ ( 3,624 )

Net prior service cost ( 5 ) ( 8 ) ( 12 )

1 unchanged sentence

The weighted average actuarial assumptions used to determine benefit obligations and net gratuity cost were:

Year ended December 31,

2023 2022 2021

4 unchanged sentences

The discount rates are either based on current market yields on government securities or yields on government securities adjusted for a suitable risk premium, if available.

Expected benefit payments during the year ending December 31,

2029 to 2033 $ 10,476

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

Expected benefit payments during the year ending December 31,

2028 to 2032 $ 8,388

The Company maintains several 401(k) plans (the “401(k) Plans”) under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), covering all eligible employees, as defined in the Code as a defined social security contribution plan.

The Company may make discretionary contributions of up to a maximum of 3.0 % of employee compensation within certain limits.

The Company’s accrual for contributions to the 401(k) Plans were as follows:

The Company’s accrual for contribution to the 401(k) Plans was as follows:

Year ended December 31,

1 unchanged sentence

Contribution to the 401(k) Plans $ 5,967 $ 5,205 $ 3,693

The Company’s contribution for various defined social security contribution plans on behalf of employees in foreign subsidiaries of the Company were as follows:

The Company’s contribution for various defined social security contribution plans on behalf of employees in foreign subsidiaries of the Company was as follows:

Year ended December 31,

4 unchanged sentences

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

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

As part of the Company’s efforts to optimize its existing network of operations centers, the Company continued to evaluate its office facilities to determine where it can exit or consolidate its use of office space.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

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

Supplemental balance sheet information

1 unchanged sentence

Operating Lease

Operating lease right-of-use assets $ 55,347 $ 76,692

Operating lease ROU assets $ 64,856 $ 55,347

Operating lease liabilities - Current

10 unchanged sentences

Total finance lease liabilities $ 804 $ 519

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

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

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

2 unchanged sentences

Finance lease:

Amortization of right-of-use assets $ 151 $ 188

Depreciation on underlying ROU assets $ 181 $ 151

Interest on lease liabilities 90 59

4 unchanged sentences

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

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

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

4 unchanged sentences

Financing cash outflows for finance leases $ 169 $ 142

Right-of-use assets obtained in exchange for new operating lease liabilities $ 734 $ 4,547

Right-of-use assets obtained in exchange for new finance lease liabilities $ 312 $ 71

ROU assets obtained in exchange for new operating lease liabilities $ 24,880 $ 734

ROU assets obtained in exchange for new finance lease liabilities $ 461 $ 312

Weighted average remaining lease term (in years)

4 unchanged sentences

Operating lease 7.7 % 6.8 %

The Company modified certain of its operating leases, resulting in a decrease of its lease liabilities by $ 2,723 , $ 2,917 and $ 3,143 , during the years ended December 31, 2022, 2021 and 2020, respectively, with a corresponding adjustment to ROU assets.

The Company modified certain of its operating leases, resulting in a net increase of its lease liabilities by $ 8,805 during the year ended December 31, 2023 and a decrease of its lease liabilities by $ 2,723 during the year ended December 31, 2022, with a corresponding adjustment to ROU assets.

As of December 31, 2023 and 2022, the Company did not have any significant leases that have not yet commenced but that create significant rights and obligations for the Company.

During the years ended December 31, 2022, 2021 and 2020, the Company recognized $ nil impairment on ROU assets.

There was no impairment of ROU assets as of December 31, 2023 and 2022.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

Maturities of lease liabilities as of December 31, 2023 were as follows:

9 unchanged sentences

Present value of lease liabilities $ 70,955 $ 804

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

Maturities of lease liabilities as of December 31, 2022 were as follows:

15 unchanged sentences

$ 237,941 $ 190,099 $ 146,561

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

Income tax expense/(benefit) consists of the following:

10 unchanged sentences

Income tax expense $ 53,536 $ 47,565 $ 31,850

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

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

Deferred income taxes recognized in OCI were as follows:

Year ended December 31,

6 unchanged sentences

Reclassification adjustment for retirement benefits ( 74 ) ( 179 ) ( 204 )

Foreign currency translation loss 10,032 3,016 1,946

Total income tax benefit recognized in AOCI $ 15,937 $ 2,228 $ 591

Foreign currency translation adjustments ( 156 ) 10,032 3,016

Total $ ( 4,403 ) $ 15,937 $ 2,228

The effective income tax rate differs from the amount computed by applying the U.S.

14 unchanged sentences

Tax expense $ 53,536 $ 47,565 $ 31,850

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.

The Company recorded income tax expense of $ 47,565 and $ 31,850 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 expense, partially offset by higher excess tax benefits related to stock-based compensation.

Effective for taxable years beginning after December 31, 2021, Internal Revenue Code Section 174, Amortization of Research and Experimental Expenditures , provides that research and experimentation expenses can no longer be currently deducted, instead such expenses are required to be capitalized.

Such capitalized expenses are to be amortized over a period of five and fifteen years for the U.S.

and foreign research, respectively.

However, this change has no net impact on the current year income statement due to offsetting a current tax expense of $ 24,743 with a corresponding deferred tax benefit.

The Company is under Internal Revenue Service audit for the years 2017 and 2018.

The audit process is substantially complete and is expected to conclude with no adjustments.

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

The effective tax rate decreased from 25.0 % during the year ended December 31, 2022 to 22.5 % during the year ended December 31, 2023.

The Company recorded income tax expense of $ 53,536 and $ 47,565 for the years ended December 31, 2023 and 2022, respectively.

While the effective tax rate decreased during the year ended December 31, 2023, the amount of income tax expense increased primarily as a result of higher profit during the year ended December 31, 2023, compared to the year ended December 31, 2022, and an increase in non-deductible expenses, partially offset by higher excess tax benefits related to stock-based compensation during the year ended December 31, 2023, compared to the year ended December 31, 2022.

During the year ended December 31, 2023, the Company’s foreign subsidiaries in India, the United Kingdom, Australia, Bulgaria and the Czech Republic repatriated an aggregate amount of $ 136,405 (net of $ 5,852 withholding taxes) to the United States.

These distributions do not constitute a change in the Company’s permanent reinvestment assertion.

Such capitalized expenses are to be amortized over a period of five and fifteen years for the U.S.

and foreign research, respectively.

However, this change has no net impact on the consolidated statements of income for the years ended December 31, 2023 and 2022, due to an offset between current and deferred taxes.

The components of the deferred tax balances were as follows:

1 unchanged sentence

Deferred tax assets:

Tax credit carry forward $ 5,716 $ 16,236

Tax credit carry forwards $ 12,762 $ 5,716

Depreciation and amortization expense 14,569 14,734

2 unchanged sentences

Accrued employee costs and other expenses 21,611 15,504

Net operating loss carryforwards 412 2,057

Net operating loss carry forwards 212 412

Net unrealized foreign exchange loss 21,449 23,572

7 unchanged sentences

Net unrealized gain on investments 3,704 6,006

Capitalized costs 5,999 332

Foreign branch accounting 8,810 7,618

Others 2,132 2,182

3 unchanged sentences

The Company performed an analysis of the realizability deferred tax assets as of December 31, 2023 and 2022, and recorded a valuation allowance of $ 482 and $ 309 , respectively.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

The Company’s income tax expense also includes provisions established for uncertain income tax positions determined in accordance with Financial Accounting Standards Board Interpretation No.

10 unchanged sentences

The unrecognized tax benefits as of December 31, 2023 of $ 1,262 , if recognized, would impact the effective tax rate.

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

As of December 31, 2023 and 2022, the Company has no t accrued interest and penalties relating to unrecognized tax benefits.

Stock-Based Compensation

Prior period information has been adjusted to reflect the 5 -for-1 forward stock split of the Company’s common stock effected in August 2023.

Refer to Note 19 – Capital Structure to the consolidated financial statements for further details.

On June 15, 2018, at the Company’s 2018 Annual Meeting of Stockholders, the Company's stockholders approved the 2018 Omnibus Incentive Plan, which among other things, reserves 15,875,000 shares of the Company’s common stock for grants of awards under the 2018 Omnibus Incentive Plan.

As of December 31, 2022, the Company had 1,324,755 shares available for grant under the 2018 Omnibus Incentive Plan (includes 164,195 shares against vested performance-based restricted stock units for which the underlying common stock was issued subsequent to December 31, 2022).

As of December 31, 2023, the Company had 3,249,875 shares available for grant under the 2018 Omnibus Incentive Plan.

Under the 2018 Omnibus Incentive Plan, the Compensation and Talent Management Committee (the “Committee”) may grant awards of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards, performance-based compensation awards (including cash bonus awards and market condition based awards) or any combination of the foregoing.

1 unchanged sentence

The vesting period for the equity award issued is determined on the date of the grant and is non-transferable during the life of the equity award.

The majority of options expire within ten years from the date of grant.

Stock options have a contractual period of ten years from the date of grant and vest ratably over four years .

Restricted stock units generally vest proportionally over a period of four years from the date of grant, unless specified otherwise.

6 unchanged sentences

Total $ 58,437 $ 49,366 $ 38,621

Income tax benefit related to share-based compensation, including excess tax benefits $ 9,785 $ 9,424 $ 8,330

Stock Options

The fair value of each stock option granted to employees is estimated on the date of grant using the Black-Scholes option-pricing model.

The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation model.

All stock-based payment awards are amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period.

The Company accounts for the forfeitures as and when the actual forfeitures occur.

Income tax benefit related to stock-based compensation (1)

$ 17,333 $ 9,785 $ 9,424

EXLSERVICE HOLDINGS, INC.

2 unchanged sentences

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

(1) Includes $ 15,055 , $ 5,881 and $ 3,651 during the years ended December 31, 2023, 2022 and 2021, respectively, related to discrete benefits recognized in income tax expense in accordance with ASU No.

2016-09, Compensation - Stock Compensation.

Stock Options

Stock option activity under the Company’s stock-based compensation plans is shown below:

6 unchanged sentences

Vested and exercisable as of December 31, 2023 — $ — $ — —

The unrecognized compensation cost for unvested options as of December 31, 2022 was $ nil .

The Company did not grant any options during the years ended December 31, 2022, 2021 and 2020.

The aggregate intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020 was $nil, $ 2,475 and $ 3,488 , respectively.

The following table summarizes the status of the Company’s stock options outstanding, vested and exercisable as of December 31, 2022:

Options Outstanding, Vested and Exercisable

Range of Exercise Prices Shares Weighted-Average

Exercise Price

$ 25.01 to $ 28.00

3,093 $ 27.62

Weighted average grant date fair value of per unit of stock option granted during the period $ 12.03

Stock options granted under the 2018 Omnibus Incentive Plan during the year ended December 31, 2023, have a contractual period of ten years and vest ratably over four years .

The fair value of each stock option granted to employees is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Year ended December 31, 2023

Dividend yield —

Expected life (years) 6.25

Risk free interest rate for expected life 3.8 %

Volatility for expected life 32.4 %

The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation model.

As of December 31, 2023, unrecognized compensation cost of $ 18,717 is expected to be expensed over a weighted average period of 3.5 years.

The grant date fair value of stock options exercised and cash received from stock options exercised was as follows:

Year ended December 31,

2023 2022 2021

Cash received from options exercised during the year $ — $ 710 $ 1,501

Grant date fair value

$ 30 $ — $ 257

Cash received $ 85 $ — $ 710

Share Matching Program

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Under the SMP, the Company agreed to issue a number of restricted stock units equal to the number of newly acquired shares of the Company's common stock.

For purposes of the match, “newly acquired shares” includes the employee’s first quarter 2022 open market purchase of the common stock, and crediting of equity awards vesting under any existing stock award plan of the Company as having been purchased by such employees, in an amount between $ 100 to $ 500 per such employee.

For purposes of the match, “newly acquired shares” includes the employee’s first quarter 2022 open market purchase of the common stock, and

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

crediting of equity awards vesting under any existing stock award plan of the Company as having been purchased by such employees, in an amount between $ 100 to $ 500 per such employee.

The matching restricted stock units granted under the SMP will vest in two installments, with one-third to vest on the second anniversary of the grant date and the remaining two-thirds to vest on the third anniversary of the grant date;

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Restricted stock unit activity under the SMP is shown below:

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2022

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

Restricted Stock Units (SMP)

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Outstanding as of December 31, 2022 238,115 $ 24.95

Granted 52,636 124.76

Forfeited ( 20,885 ) 24.95

Outstanding as of December 31, 2023 217,230 $ 24.95

The fair value of common stock to be issued under the SMP was determined by estimating the discount for illiquidity using the Cost of Carry model, the Chaffe model and the Finnerty model with the following assumptions:

Year ended December 31, 2022

Dividend yield —

Expected life (years) 2.0

Risk free interest rate for expected life 2.3 %

Volatility for expected life 32.3 %

Discount for illiquidity 12.9 %

As of December 31, 2023, unrecognized compensation cost of $ 2,255 is expected to be expensed over a weighted average period of 1.3 years.

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Restricted Stock Units

Number Weighted-

Number Weighted Average

Outstanding as of December 31, 2022 *

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3,731,512 $ 24.96

* Includes 12,009 and 18,904 restricted stock units vested during the years ended December 31, 2022 and 2021, respectively, for which the underlying common stock is yet to be issued.

* As of December 31, 2023 and 2022, restricted stock units vested for which the underlying common stock is yet to be issued are 324,125 and 872,450 , respectively.

EXLSERVICE HOLDINGS, INC.

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

** As of December 31, 2022 and 2021, restricted stock units vested for which the underlying common stock is yet to be issued are 174,490 and 162,481 , respectively.

The fair value of restricted stock units is generally the market price of the Company’s shares on the date of grant.

As of December 31, 2023, unrecognized compensation cost of $ 59,067 is expected to be expensed over a weighted average period of 2.4 years.

The weighted-average fair value of restricted stock units granted was as follows:

The weighted average fair value of restricted stock units granted and the grant date fair value of restricted stock units vested was as follows:

Year ended December 31,

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Weighted average fair value $ 33.99 $ 24.28 $ 18.25

The total grant date fair value of restricted stock units vested was as follows:

Year ended December 31,

2022 2021 2020

Total grant date fair value $ 24,002 $ 23,845 $ 20,072

Grant date fair value $ 33,058 $ 24,002 $ 23,845

Performance-Based Stock Awards

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The dollar amount of shares of common stock that can be purchased under the 2022 ESPP must not exceed 15 % of the participating employee’s compensation during the offering period, subject to a cap of $ 25 per employee per calendar year.

The first offering period under the 2022 ESPP commenced on October 1, 2022 with a term of three months.

The Company has registered 800,000 shares of common stock to be reserved for issuance over the term of the 2022 ESPP.

As of December 31, 2022, 800,000 shares remain available for future issuance under the 2022 ESPP, of which 7,636 shares of common stock were eligible for purchase by employees for total proceeds of $ 1,060 for which the underlying common stock was issued subsequent to December 31, 2022.

The ESPP is compensatory and results in compensation expense.

The fair value of common stock to be issued under the ESPP was determined using the Black-Scholes option pricing model with the following assumptions:

The Company has reserved 4,000,000 shares of common stock for issuance under the 2022 ESPP.

The third offering period under the 2022 ESPP commenced on July 1, 2023 with a term of six months .

EXLSERVICE HOLDINGS, INC.

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

Year ended December 31, 2022

Activity under the Company’s 2022 ESPP is shown below:

Number Total Proceeds Received

Shares available for issuance as of December 31, 2022 4,000,000

Issuance of common stock related to the:

First offering period ( 38,180 ) $ 1,013

Second offering period ( 130,495 ) $ 3,548

Shares available for issuance as of December 31, 2023 3,831,325

Issuance of common stock related to the third offering

period made subsequent to December 31, 2023 71,645 $ 1,948

The ESPP is compensatory and results in compensation expense.

The fair value of common stock to be issued under the ESPP was determined using the Black-Scholes option pricing model with the following assumptions:

Third offering period of

July 1, 2023 to December 31, 2023 Second offering period of

January 1, 2023 to June 30, 2023 First offering period of

October 1, 2022 to December 31, 2022

Dividend yield — — —

3 unchanged sentences

Discount for illiquidity 8.9 % 10.3 % 9.9 %

The weighted-average fair value of employee stock purchase rights granted pursuant to the ESPP during the year ended December 31, 2022 was $ 20.53 .

Related Party Disclosures

In April 2022, the Company entered into a service contract for providing analytics services to The Vanguard Group Inc., which beneficially owns more than 10% of the Company’s common stock as of December 31, 2023.

During the year ended December 31, 2022, the Company recognized revenues, net of $ 2,258 related to this service contract.

The Company had outstanding accounts receivable of $ 856 related to this service contract as of December 31, 2022.

During the year ended December 31, 2023 and 2022, the Company recognized revenues, net of $ 1,975 and $ 2,258 , respectively, related to this service contract.

The Company had outstanding accounts receivable, net of $ 209 and $ 856 related to this service contract as of December 31, 2023 and 2022, respectively.

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

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Refer to Note 18 - Borrowings to the consolidated financial statements for further details.

The following transactions with the Purchaser were recognized by the Company in connection with the Notes:

Year ended December 31

The following transactions with the Purchaser were recognized by the Company in connection with the Notes during the year ended December 31, 2021:

Repayment of the Notes in cash $ 200,000

1 unchanged sentence

Interest expense on the Notes $ 3,442

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

Commitments and Contingencies

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As of December 31, 2023 and 2022, the Company had committed to spend approximately $ 7,100 and $ 9,700 , respectively, under agreements to purchase property and equipment.

This amount is net of capital advances paid which are recognized in consolidated balance sheets as “Capital work in progress” under “Property and equipment, net.”

This amount is net of capital advances paid which are recognized in consolidated balance sheets as “Capital work in progress” under “Property and equipment.”

On June 15, 2023, the Company, along with other limited partners, entered into a limited partnership agreement with the general partner, PNP Financial Services Fund GP I, LLC and initial limited partner and outgoing partner, to form a partnership with the name Plug and Play Financial Services Fund I, L.P.

(the “Partnership”) for the primary purpose of making investments in growth-stage technology companies.

During the year ended December 31, 2023, the Company invested $ 600 in the Partnership and is committed under the Partnership to make further investments up to an amount of $ 3,400 .

Other Commitments

5 unchanged sentences

The Company is required to meet certain requirements to retain the incentives.

The Company has, and will continue to, comply with the requirements to avail itself of the incentives.

The Company has complied, and intends to continue compliance with the requirements to avail itself of the incentives.

Contingencies

The transfer pricing regulations in the countries the Company operates in require that controlled intercompany transactions be at arm’s-length.

The transfer pricing regulations in the countries where the Company operates require that controlled intercompany transactions be at arm’s-length.

Accordingly, the Company determines and documents pricing for controlled intercompany transactions based on an economic analysis as prescribed in the respective regulations.

6 unchanged sentences

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

Pursuant to reviewing the Company’s annual VAT filings, the Indian tax authorities raised aggregate VAT tax demands for tax years 2015 and 2017, in the amounts of $ 5,526 and $ 6,387 , as of December 31, 2022 and 2021, respectively.

The GST authorities rejected the Company’s refunds claims in the amounts of $ 3,866 and $ 3,322 as of December 31, 2022 and 2021, respectively.

Pursuant to reviewing the Company’s annual VAT filings, the Indian tax authorities raised aggregate VAT demands for tax years 2015 and 2017, in the amounts of $ 5,493 and $ 5,526 , as of December 31, 2023 and 2022, respectively.

The Company has provided bank guarantees against these demands in the amounts of $ 4,570 and $ nil , as of December 31, 2023 and 2022, respectively.

The GST authorities rejected the Company’s refund claims in the amounts of $ 4,748 and $ 3,866 as of December 31, 2023 and 2022, respectively.

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

Accordingly, no provision was recognized as of December 31, 2023 and 2022, respectively.

One of the Company’s subsidiaries in India has undergone an assessment with the statutory authority with respect to defined social security contribution plan.

One of the Company’s subsidiary in India has undergone an assessment with the statutory authority with respect to defined social security contribution plan.

Except for some components of the assessment for which the Company has recognized a provision in the financial statements, the Company believes that the amount demanded by such authority is not a meaningful indicator of the potential liabilities of the Company, and that the matter is without merit.

The Company is defending against the assessment order and has accordingly instituted an appeal against the order before the relevant tribunal while also making a payment under protest of the amount demanded, being a prerequisite for the appeal to be admitted.

The Company is defending

EXLSERVICE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

December 31, 2023

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

against the assessment order and has accordingly instituted an appeal against the order before the relevant tribunal while also making a payment under protest of the amount demanded.

As of the reporting date, the Company’s management does not believe that the ultimate assessment will have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

The Company will continue to monitor and evaluate its position based on future events and developments in this matter.

In August 2019 and September 2020, the Indian Parliament passed various consolidating labor codes, including the Code on Social Security, 2020 (the “Indian Social Security Code”) which aims to rationalize labor laws.

The Indian Social Security Code has implications on defined social security contribution plans, provision of certain benefits or facilities to employees at employer’s costs and post-retirement benefits.

Most specifically, it broadens the definition of an employee and wages and liberalizes the definition of “continuous period” for the purpose of determining employee benefits, among others.

However, the rules for the Indian Social Security Code are yet to be published and the effective date from which these changes are applicable is yet to be notified.

The Company will complete its evaluation once the subject rules are notified and will give appropriate impact in the financial statements in the period in which, the Indian Social Security Code becomes effective and the related rules to determine the financial impact are published.

From time to time, the Company, its subsidiaries, and/or their present officers or directors, may be or have been, named as a defendant in litigation matters, including employment-related claims.

3 unchanged sentences

The outcomes of legal actions are unpredictable and subject to significant uncertainties, and thus it is inherently difficult to determine the likelihood of the Company incurring a material loss or quantification of any such loss.

With respect to pending litigation matters as of the reporting date, based on information currently available, including the Company’s assessment of the facts underlying each matter and advice of counsel, the amount or range of reasonably possible losses, if any, cannot be

reasonably estimated.

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

The Company will continuously monitor these matters to assess potential impacts to the financial statements.

Subsequent Events

On February 26, 2024, the Company’s board of directors authorized a $ 500,000 common stock repurchase program (the “2024 Repurchase Program”), effective March 1, 2024, for a two-year period, in line with its capital allocation strategy.

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

Repurchases may be discontinued at any time by the management.

The 2024 Repurchase Program replaces the 2022 Repurchase Program, which was terminated effective February 29, 2024.

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 9A. Controls and Procedures