What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-29 · 152 added, 185 removed, 328 unchanged (51% of the section changed)

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

• use of AI technology presents competitive, reputational and legal risks, and our use of AI technology may not be successful;

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

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

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

• reliance on third parties to deliver services and infrastructure for client critical services, and on third party data use rights for certain of our offerings;

• employee wage increases;

• failure to protect our intellectual property;

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

• our ability to grow our business or effectively manage growth and international operations;

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

• our ability to manage rapid infrastructure and personnel growth across countries;

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

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• increasing competition in our industry;

• telecommunications or technology disruptions or breaches, natural or other disasters, medical epidemics or pandemics, such as COVID-19, or acts of violence or war;

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

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

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

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

• restrictions on immigration;

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

• challenges by applicable tax authorities to transfer pricing determinations or the introduction of new or unfavorable tax legislation, including legal restrictions on repatriation of funds held abroad;

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

• restrictions on immigration and work permits;

• difficulty of enforcing judgments against our foreign subsidiaries or officers;

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

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

Inception of interest rate swaps to hedge interest rate risk;

• our ability to service debt or obtain additional financing on competitive terms, or exposure to interest rate fluctuations that are not fully hedged through interest rate swaps.

• negative public reaction in the U.S.

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

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

• our ability to meet our sustainability-related initiatives.

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

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Executive Overview

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

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

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

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

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

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

Our reportable segments are as follows:

• Healthcare,

• Analytics, and

• Emerging Business

We are a global data and artificial intelligence (“AI”) company that offers services and solutions to reinvent our client business models, drive better outcomes and unlock growth with speed.

We harness the power of data, AI, and deep industry knowledge to transform businesses, including the world’s leading corporations in industries including insurance, healthcare, banking and capital markets, retail, communications and media, and energy and infrastructure, among others.

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

Through the end of 2024, we managed and reported financial information through our four strategic business units:

Insurance, Healthcare, Analytics and Emerging Business, which reflected how management reviewed financial information and made operating decisions.

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

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

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

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

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

Although we continue to develop relationships with new clients to diversify our client base, we believe that the loss of any of our top ten clients could have a material adverse effect on our financial performance.

Acquisition during the year 2024

On August 1, 2024, we completed the acquisition of Incandescent Technologies, Inc.

(“ITI Data”), a data management solutions firm that works with the global banks, financial services and healthcare companies.

It delivers enterprise business solutions for clients processing significant data volumes with complex data management requirements.

The acquisition strengthens our ability to deliver reliable, data-driven insights to our clients and ultimately drive greater value and innovation across their operations.

2025 Operating Model

In the first quarter of 2025, we began to implement operational and structural changes to accelerate the execution of our data and AI strategy, capture a greater share of the growing AI market and drive our long-term growth.

The new operating model is comprised of Industry Market Units (“IMUs”) to focus on delivering higher value to clients leveraging our full suite of capabilities;

and Strategic Growth Units to focus on rapidly advancing our capabilities specific to various industries and client needs.

This will enable us to further embed analytics throughout each of our IMUs, enhance our client relationships, deepen investments in data and AI capabilities, develop industry-specific AI solutions, form partnerships, access new client buying centers, enable expansion of our addressable markets across industries and geographies, and provide more professional development opportunities for our employees.

Our IMUs, Insurance, Healthcare and Life Sciences, Banking, Capital Markets and Diversified Industries, and International Growth Markets, reflect how management will review financial information and make operating decisions beginning in the first quarter of 2025.

These IMUs will focus on managing customer relationships and delivering the “One EXL” value proposition to clients, maintain a unified go-to-market approach and be integrally responsible for growth, profitability and client satisfaction.

Our new reportable segments, aligned to our IMUs, effective for the first quarter of 2025 will be as follows:

• Healthcare and Life Sciences,

• Banking, Capital Markets and Diversified Industries,

• International Growth Markets

The primary changes in our new reportable segments reflect 1) the integration of our former Analytics reportable segment as a core capability within each of our IMUs, ensuring alignment with the specialized needs of our clients across IMUs, 2) the reorganization of our former Emerging Business reportable segment into a Banking, Capital Markets and Diversified Industries reportable segment, excluding Life Sciences, which is now a part of former Healthcare reportable segment, and including data and analytics services, and 3) the formation of International Growth Markets as a separate business unit to represent all our service and solutions offerings to clients in the United Kingdom, Europe, Middle East and Asia-Pacific geographies across all industry verticals.

The International Growth Markets business unit will help strategically expand our footprint in markets outside of Americas and drive focus on offerings and expansion in those markets in new and existing clients.

This change in segment presentation will not have any effect on our consolidated statements of income, balance sheets or statements of cash flows.

The revised presentation will be reflected in our periodic and annual reports beginning in the first quarter of 2025.

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

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

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

We market and sell our services to existing and prospective clients through our sales and client management teams, which are aligned by our clients’ industry verticals and our capabilities such as digital operations and solutions and analytics.

Our sales and client management teams operate primarily from the United States, India, the United Kingdom, Ireland and Australia.

Digital Operations and Solutions:

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

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

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

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

We provide our clients with a range of data and AI-driven digital operations and solutions include:

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

We have transformed various client operations using the above solutions such as underwriting operations, claims processing, accounts payables processing, utilization management, member and provider contact center services and collections and accounts receivable.

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

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

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

We have also observed that prospective larger clients are entering into multi-vendor relationships with regard to their digital operations and solutions needs to seek more favorable contract terms and diversification of the risk of concentration on a few vendors.

We have also observed that prospective larger clients are entering into multi-vendor relationships with regard to their digital operations and solutions needs, in order to achieve more favorable contract terms and diversification of the risk of concentration on a few vendors.

We believe that the trend toward multi-vendor relationships will continue.

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

To the extent our large clients expand their use of multi-vendor relationships and are able to extract more favorable contract terms from other vendors, our gross margins and revenues

may be reduced with regard to such clients if we are required to modify the terms of our relationships with such clients to meet competition.

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

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

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

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

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

We also offer integrated solutions to help our clients in cost containment by leveraging technology platforms, customizable and configurable analytics and expertise in healthcare reimbursements to help clients enhance their claim payment accuracy.

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The short-term nature and specificity of these projects could lead to fluctuations and uncertainties in the revenues generated from providing analytics services.

We anticipate that revenues from our analytics services will grow as we expand our service offerings and client base, both organically and through acquisitions.

We anticipate that revenues from our analytics services will grow as we expand our offerings, client base and go-to-market strategy, both organically and through acquisitions.

For fiscal 2024, we generated revenues of $1,838.4 million compared to revenues of $1,630.7 million for fiscal 2023, an increase of $207.7 million, or 12.7%.

We serve clients mainly in the United States and the United Kingdom, with these two regions generating 82.6% and 11.7%, respectively, of our total revenues for fiscal 2024 and 84.1% and 10.9%, respectively, of our total revenues for fiscal 2023.

For fiscal 2024 and 2023, our total revenues from our top ten clients accounted for 33.2% and 34.0% of our total revenues, respectively.

Cost of Revenues

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and non-cash stock-based compensation expense;

outsourced/subcontractors costs;

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

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operational expenses for our operations centers;

• Outsourced/subcontractors and professional services costs;

• travel and other billable costs to our clients;

• costs relating to our direct mail operations and other digital operations and solutions.

• other costs which primarily include travel and costs relating to our direct mail operations.

The most significant components of our cost of revenues are salaries and benefits (including stock-based compensation), retirement benefits, recruitment, training, transport, meals, rewards and recognition and employee health and life insurance.

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We expect our cost of revenues to continue to increase as we continue to add professionals in our operations centers globally to service additional business and as wages continue to increase globally.

In particular, we expect recruitment and training costs to continue to increase as we hire additional staff to service new clients and train existing staff to provide them with evolving skill sets.

In particular, we expect recruitment and

training costs to continue to increase as we hire additional staff to service new clients and train existing staff to provide them with evolving skill sets.

There is significant competition for professionals with skills necessary to perform the services we offer to our clients.

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

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

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

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

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

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

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

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

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Depreciation and Amortization Expense

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

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

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

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pound sterling representing 10.7% and 10.1% of our total revenues in fiscal 2024 and 2023, respectively.

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

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

pound sterling, representing 29.7%, 8.2%, 3.5% and 2.8%, respectively, of our total expenses in fiscal 2024, compared to 28.5%, 8.2%, 2.0% and 3.1%, respectively, of our total expenses in fiscal 2023.

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

pound sterling and the U.S.

dollar have changed substantially in recent years and may fluctuate substantially in the future as well.

The results of our operations could be substantially impacted as the Indian rupee, the Philippine peso and the U.K.

pound sterling appreciate or depreciate against the U.S.

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

The exchange rates among these currencies and the U.S.

dollar have changed over the years and may fluctuate substantially in the future as well.

The results of our operations could be substantially impacted as these currencies appreciate or depreciate against the U.S.

See Part I, Item 1A, “Risk Factors” under “Risks Related to the International Nature of Our Business––Currency exchange rate fluctuations in the various

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

Interest Expense

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

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

Other Income/(Expense), Net

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Forward Stock Split

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

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

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

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

Subsequent Event

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

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

Repurchases may be discontinued

at any time by the management.

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

In October 2021, the Organization for Economic Co-operation and Development (“OECD”) introduced Pillar Two Framework imposing a global minimum tax rate of 15%.

We have determined that the impact of the Pillar Two Framework did not have material impact on our consolidated financial statements.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon the financial statements included in this Annual Report on Form 10-K, which have been prepared in accordance with U.S.

The discussion and analysis of our financial condition and results of operations are based upon the consolidated financial statements included in this Annual Report on Form 10-K, which have been prepared in accordance with U.S.

generally accepted accounting principles (“U.S.

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

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

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

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

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

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Variable Consideration

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

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

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

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Type of Contracts Requiring Judgment

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

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

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

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

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.

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

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

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

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

Unbilled Receivables

Unbilled receivables represent revenues recognized for services rendered between the last billing date and the balance sheet date.

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

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

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

The estimated amount of revenue to be collected from our customers are presented as contract assets within “Other Current Assets”.

Allowance for Expected Credit Losses

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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.

Business Combinations

Business Combinations and Goodwill

We account for all business combinations using the acquisition method of accounting as prescribed by ASC Topic 805, Business Combinations .

The guidance requires the use of significant estimates and assumptions in determining the fair value of identifiable assets acquired and liabilities assumed, including intangible assets and contingent consideration, and allocation of purchase price over such assets and liabilities on the acquisition date.

purchase price over such assets and liabilities on the acquisition date.

The significant estimates and assumptions include, but are not limited to, the timing and amount of future revenue and cash flows based on, among other things, discount rate reflecting the risk inherent in future cash flows, customer attrition rates and the long-term growth rate applied within the discounted cash flow model.

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

Goodwill 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.

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

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

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

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

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

We also perform a quantitative assessment of goodwill impairment, if based on the qualitative factors, we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The significant estimates and assumptions include, the timing and amount of future revenue and cash flows, discount rate reflecting the risk inherent in future cash flows and the long-term growth rate applied within the discounted cash flow model.

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

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

Stock-Based Compensation

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

Financial Accounting Standards Board Interpretation No.

48, Accounting for Uncertainty in Income Taxes , requires companies to recognize, measure, present and disclose uncertain tax positions.

ASC Topic 740, Income Taxes , requires companies to recognize, measure, present and disclose uncertain tax positions.

We employ a two-step process for recognizing and measuring uncertain tax positions.

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

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

Our assessment is based on whether:

(1) the contract involves the use of a distinct identified asset, (2) we obtain the right to substantially all the economic benefits from the use of the asset throughout the term of the contract, and (3) we have the right to direct the use of the asset.

A lease is classified as a finance lease if any one of the following criteria are met:

(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.

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

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

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

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

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

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

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

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

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

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

Contingencies

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When a material loss contingency is reasonably possible but not probable, we do not record a liability, but instead disclose the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made.

Significant judgment is required in the determination of probability and whether an exposure is reasonably estimable, both.

Significant judgment is required in the determination of both probability and whether an exposure is reasonably estimable.

Our judgments are subjective and based on the information available from the status of the legal or regulatory proceedings, the merits of our defenses and consultation with in-house and outside legal counsel.

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2024 Percentage of Revenues, net Fiscal

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

2023 Percentage of Revenues, net Dollar Change Percentage Change

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

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Income before earnings from equity affiliates 198.4 10.8 % 184.4 11.3 % 14.0 7.6 %

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

Net income attributable to ExlService Holdings, Inc.

stockholders $ 184.6 11.3 % $ 143.0 10.1 % 1.2 % $ 41.6

Gain/(loss) from equity-method investment (0.1) — % 0.2 — % (0.3) (150.0) %

Net income $ 198.3 10.8 % $ 184.6 11.3 % $ 13.7 7.4 %

(1) Exclusive of depreciation and amortization expense.

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Revenues for fiscal 2024 were up by $207.7 million, or 12.7%, compared to fiscal 2023, driven primarily by revenue growth from our new and existing clients in all of our reportable segments.

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

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

dollar during fiscal 2023, compared to fiscal 2022.

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

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

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

dollar during fiscal 2023, compared to fiscal 2022.

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

Revenue growth in Insurance of $84.1 million from fiscal 2023, was primarily driven by expansion of business from our new and existing clients during fiscal 2024.

Revenue growth in Healthcare of $10.4 million from fiscal 2023, was primarily driven by expansion of business from our existing clients during fiscal 2024.

Revenue growth in Emerging Business of $46.0 million from fiscal 2023 was primarily driven by expansion of business from our new and existing clients of $45.4 million and an increase in revenues of $0.6 million that was mainly attributable to the appreciation of the U.K.

pound sterling against the U.S.

dollar during fiscal 2023, compared to fiscal 2022.

dollar during fiscal 2024.

Revenue growth in Analytics of $67.2 million from fiscal 2023 was primarily driven by higher volumes in our annuity and project-based engagements from our new and existing clients of $66.5 million, including incremental revenue from our August 2024 acquisition of ITI Data and an increase in revenues of $0.7 million that was mainly attributable to the appreciation of the U.K.

pound sterling against the U.S.

dollar during fiscal 2024.

Cost of Revenues and Gross Margin:

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Cost of revenues for fiscal 2024 increased by $124.5 million, or 12.2% compared to fiscal 2023.

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

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

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

of $2.0 million.

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

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

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

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

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

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

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

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

See Note 26 – Restructuring Costs to our consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data.” Our gross margin for fiscal 2024 was 37.6% compared to 37.3% for fiscal 2023, an increase of 30 basis points ("bps").

The increase in cost of revenues in Insurance of $48.6 million from fiscal 2023 was primarily due to increases in employee-related costs of $42.3 million on account of higher headcount, restructuring costs and wage inflation, higher technology costs of $4.8 million on account of increased subscription to cloud-based software licenses and our continued investments in our hybrid working model, higher facilities costs of $3.9 million and higher other operating costs of

$3.1 million, partially offset by foreign exchange gain, net of hedging of $5.5 million.

Gross margin in Insurance increased by 90 bps from fiscal 2023, primarily due to operational efficiencies during fiscal 2024.

The increase in cost of revenues in Healthcare of $8.6 million from fiscal 2023 was primarily due to increases in employee-related costs of $9.0 million on account of higher headcount and wage inflation, and higher technology costs of $1.3 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model, partially offset by foreign exchange gain, net of hedging of $1.7 million.

Gross margin in Healthcare decreased by 160 bps from fiscal 2023, primarily due to ramp-ups for certain existing clients during fiscal 2024.

The increase in cost of revenues in Emerging Business of $30.5 million from fiscal 2023 was primarily due to increases in employee-related costs of $28.6 million on account of higher headcount, restructuring costs and wage inflation, higher technology costs of $3.0 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs $2.0 million, partially offset by foreign exchange gain, net of hedging of $3.1 million.

Gross margin in Emerging Business decreased by 140 bps from fiscal 2023, primarily due to ramp-ups for certain existing clients during fiscal 2024.

The increase in cost of revenues in Analytics of $36.8 million from fiscal 2023 was primarily due to increases in employee-related costs of $34.8 million on account of higher headcount, restructuring costs and wage inflation, including incremental cost related to our August 2024 acquisition of ITI Data and higher technology costs of $8.6 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model, partially offset by lower other operating costs $4.2 million and foreign exchange gain, net of hedging of $2.4 million.

Gross margin in Analytics increased by 70 bps from fiscal 2023, primarily due to higher revenues and operational efficiencies, partially offset by impact of restructuring costs of 40 bps during fiscal 2024.

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

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Selling, general and administrative expenses $ 372.2 $ 318.5 $ 53.7 16.8 %

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

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

The increase in SG&A expenses of $53.7 million from fiscal 2023 was primarily due to higher employee-related costs of $34.2 million on account of higher headcount and wage inflation, including incremental costs related to our August 2024 acquisition of ITI Data, higher investments in digital and generative AI capabilities of $13.2 million, higher sales and marketing spend of $1.9 million, restructuring costs, litigation settlement costs and associated legal fees of $3.1 million and higher other operating costs of $2.7 million.

This increase in SG&A expenses was partially offset by foreign exchange gain, net of hedging of $1.4 million during fiscal 2024, compared to fiscal 2023.

Depreciation and Amortization.

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Depreciation and amortization expense $ 55.2 $ 50.5 $ 4.7 9.4 %

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

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

The increase in depreciation expense of $5.8 million from fiscal 2023 was primarily due to investments in digital capabilities, computers and networking equipment during fiscal 2024.

The decrease in intangibles amortization expense of $1.1 million was primarily due to end of useful lives for certain intangible assets, partially offset by amortization of intangibles associated with our acquisition of ITI Data in August 2024 during fiscal 2024, compared to fiscal 2023.

Income from Operations.

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The average exchange rate of the U.S.

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

dollar against the South African rand decreased from 18.51 during fiscal 2023 to 18.35 during fiscal 2024.

We recorded a foreign exchange gain, net of $1.5 million for fiscal 2023 compared to a foreign exchange gain, net of $0.9 million for fiscal 2024.

Interest expense .

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

Interest expense increased from $13.2 million for fiscal 2023 to $19.3 million for fiscal 2024, primarily due to higher average borrowings during fiscal 2024, compared to fiscal 2023.

Other Income, net.

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(dollars in millions)

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

Gain on sale and mark-to-market on investments $ 5.7 $ 5.0 $ 0.7 12.9 %

Interest and dividend income 9.9 8.0 1.9 23.6 %

2 unchanged sentences

Other income, net $ 16.1 $ 10.8 $ 5.3 (100.0) %

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

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

Other income, net increased by $5.3 million, from $10.8 million for fiscal 2023 to $16.1 million for fiscal 2024.

The increase is primarily due to higher yield on our investments of $2.6 million and net impact of $2.5 million from changes in fair value of contingent consideration related to our June 2022 acquisition of Inbound Media Group, LLC and December 2021 acquisition of Clairvoyant during fiscal 2024, compared to fiscal 2023.

Income Tax Expense .

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

The effective tax rate increased from 22.5% for fiscal 2023 to 24.1% for fiscal 2024.

We recorded income tax expense of $62.9 million and $53.5 million for fiscal 2024 and 2023, respectively.

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

The increase in income tax expense was primarily as a result of higher profit, increase in non-deductible expenses and lower excess tax benefits related to stock-based compensation, partially offset by decrease in foreign tax rate differential during fiscal 2024, compared to fiscal 2023.

Net income increased from $184.6 million for fiscal 2023 to $198.3 million for fiscal 2024, primarily due to increase in income from operations of $24.8 million and higher other income, net of $5.3 million, partially offset by higher interest expense of $6.1 million, lower foreign exchange gain, net of $0.6 million and higher income tax expense of $9.4 million.

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

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

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

During 2024, some of our foreign subsidiaries repatriated $38.2 million (net of $2.6 million withholding taxes) to the United States.

Operating Activities:

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Collections in accounts receivable, including advance billings was driven by revenue growth for fiscal 2024.

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

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

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

Our days sales outstanding were 62 days as of December 31, 2024, compared to 64 days as of December 31, 2023.

• Payment of contingent consideration related to our December 2021 acquisition of Clairvoyant contributed to a higher cash payout of $11.0 million for fiscal 2024, compared to fiscal 2023.

• Changes in other assets, accounts payables including other liabilities contributed higher cash payout of $11.5 million for fiscal 2024, compared to fiscal 2023.

Investing Activities:

Cash used for investing activities were $119.1 million for fiscal 2024, compared to $12.0 million for fiscal 2023.

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

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

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

The increase in cash used for investing activities of $107.1 million year-over-year is primarily due to higher net purchase of investments of $88.8 million and net cash used for business acquisition of $24.3 million for fiscal 2024, compared to fiscal 2023.

This was partially offset by lower capital expenditures in infrastructure, technology assets, software and product developments of $6.5 million for fiscal 2024, compared to fiscal 2023.

Financing Activities:

Cash used for financing activities were $119.1 million for fiscal 2024, compared to $181.4 million for fiscal 2023.

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

The decrease in cash used for financing activities of $62.3 million year-over-year was primarily due to net proceeds from borrowings under our revolving credit facility and new term loan facility of $88.8 million for fiscal 2024, compared to net repayment of our borrowings of $50.0 million for fiscal 2023.

The increase was also due to higher purchases of treasury stock of $76.1 million under our share repurchase program for fiscal 2024, compared to fiscal 2023.

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

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

We incurred $46.3 million of capital expenditures during fiscal 2024.

We expect to incur total capital expenditures of between $50 million to $55 million in fiscal 2024, primarily to meet our growth requirements, including additions to our facilities as well as investments in technology applications, product development, digital technology, advanced automation, robotics and infrastructure.

We expect to incur total capital expenditures of between $50 million to $55 million in fiscal 2025, primarily to meet our growth requirements, including additions to our facilities and infrastructure, as well as investments in technology applications, product development and other, digital technologies.

In connection with any tax assessment orders that have been issued, or may be issued against us or our subsidiaries, we may be required to deposit additional amounts with the relevant authorities with respect to such assessment orders.

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

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

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

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

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

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

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

As of December 31, 2023 and 2022, we had outstanding letters of credit of $0.5 million, each, that were not recognized in our consolidated balance sheets.

As of December 31, 2024 and 2023, we had outstanding letters of credit of $0.8 million and $0.5 million, respectively, that were not recognized in our consolidated balance sheets.

These are unlikely to have, a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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The following table summarizes our debt position:

As of December 31

(dollars in millions)

Revolving credit facility

December 31, 2024 December 31, 2023

Revolving credit facility Term loan facility Total Revolving credit facility Term loan facility Total

Current portion of long-term borrowings $ — $ 5.0 $ 5.0 $ 65.0 $ — $ 65.0

Unamortized debt issuance costs — (0.1) (0.1) — — —

Total current portion of long-term borrowings

— 4.9 4.9 65.0 — 65.0

Long-term borrowings

190.0 93.8 283.8 135.0 — 135.0

Unamortized debt issuance costs — (0.2) (0.2) — — —

Total long-term borrowings

190.0 93.6 283.6 135.0 — 135.0

Total borrowings $ 190.0 $ 98.5 $ 288.5 $ 200.0 $ — $ 200.0

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We held a $300.0 million revolving credit facility pursuant to our credit agreement (the “Credit Agreement”), dated as of November 21, 2017, with certain lenders and Citibank N.A.

as Administrative Agent.

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

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

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

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

November 21, 2022 to April 18, 2027;

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

dollar borrowings.

The 2022 Credit Agreement provides an option to increase the commitments by up to $200.0 million, subject to certain approvals and conditions.

as Administrative Agent, which was amended and restated on April 18, 2022 (the “2022 Credit Agreement”).

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

On August 9, 2024, we and each of our wholly owned material domestic subsidiaries entered into a First Amendment to Amended and Restated Credit Agreement with Citibank, N.A., as Administrative Agent, and certain lenders (the “2024 Credit Agreement”), pursuant to which the parties thereto amended and restated the 2022 Credit Agreement.

Among other things, the 2024 Credit Agreement (a) provides for a $100.0 million increase to the revolving credit commitments such that the aggregate amount of revolving credit commitments available as of August 9, 2024 is equal to $500.0 million;

and (b) provides for the issuance of a new term loan facility in the aggregate amount of $100.0 million with an annual prepayment amount of 5%.

The increased revolving credit facility and the new term loan facility both mature on April 18, 2027.

The 2024 Credit Agreement includes a letter of credit sub facility and is voluntarily pre-payable from time to time without premium or penalty.

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

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

In addition, the 2022 Credit Agreement contains a covenant to not permit the interest coverage ratio or the total net leverage ratio, both, as defined, for the four consecutive quarter period ending on the last day of each fiscal quarter, to be less than 3.0 to 1.0 or more than 3.5 to 1.0, respectively.

Borrowings under the revolving credit facility can be used for working capital and general corporate purposes, including permitted acquisitions.

Borrowings of $100.0 million under the term loan facility (which was drawn based on adjusted SOFR) were used to repay the borrowings outstanding under the revolving credit facility on August 9, 2024.

Obligations under the 2024 Credit Agreement are guaranteed by our wholly-owned material domestic subsidiaries and are secured by all or substantially all of our and our material domestic subsidiaries’ assets.

The 2024 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 distributions, enter into, or undertake, certain liquidations, mergers, consolidations or acquisitions and dispose of certain assets or subsidiaries.

In addition, the 2024 Credit Agreement contains a covenant to not permit the interest coverage ratio or the total net leverage ratio for the four consecutive quarter period ending on the last day of each fiscal quarter, to be less than 3.0 to 1.0 or more than 3.5 to 1.0, respectively.

The 2024 Credit Agreement bears interest at a rate equal to specified prime rate (alternate base rate) or adjusted SOFR, plus, in each case, an applicable margin.

The applicable margin is tied to our total net leverage ratio and ranges from 0% to 0.75% per annum on loans pegged to the specified prime rate, and 0.88% to 1.75% per annum on loans pegged to the adjusted SOFR.

The applicable margin on the revolving credit facility is tied to our total net leverage ratio and ranges from 0% to 0.75% per annum on loans pegged to the specified prime rate, and 0.875% to 1.75% per annum on loans pegged to the adjusted SOFR.

The applicable margin on the term loan facility is also tied to our total net leverage ratio and ranges from 0.125% to 1.00% per annum on loans pegged to the specified prime rate, and 1.125% to 2.00% per annum on loans pegged to the adjusted SOFR.

The revolving credit commitments under the 2024 Credit Agreement are subject to a commitment fee which is also tied to our total net leverage ratio, and ranges from 0.125% to 0.275% per annum on the average daily amount by which the aggregate revolving commitments exceed the sum of outstanding revolving loans and letter of credit obligations.

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

Effective interest rate 6.3 % 2.9 %

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

The effective interest rates of the revolving credit facility and the term loan facility are as follows:

Year ended December 31,

Revolving credit facility 6.3 % 6.3 %

Term loan facility 6.5 % —

As of December 31, 2024 and 2023, we were in compliance with the financial covenants under the 2024 Credit Agreement.

Recent Accounting Pronouncements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis