exl investor day 2010 -...

EXL Investor Day 2010

NASDAQ MarketSite

November 4, 2010

© ExlService Holdings, Inc. 2006-2010 Confidential 2

Safe Harbor Statement

These materials contain forward-looking statements. You should not place undue reliance on those statements

because they are subject to numerous uncertainties and factors relating to the Company's operations and business

environment, all of which are difficult to predict and many of which are beyond the Company's control. Forward-looking

statements include information concerning the Company's possible or assumed future results of operations, including

descriptions of its business strategy. These statements may include words such as "may," "will," "should," "believe,"

"expect," "anticipate," "intend," "plan," "estimate" or similar expressions. These statements are based on assumptions

that we have made in light of management's experience in the industry as well as its perceptions of historical trends,

current conditions, expected future developments and other factors we believe are appropriate under the

circumstances. You should understand that these statements are not guarantees of performance or results. They

involve known and unknown risks, uncertainties and assumptions. Although the Company believes that these forward-

looking statements are based on reasonable assumptions, you should be aware that many factors could affect the

Company's actual financial results or results of operations and could cause actual results to differ materially from those

in the forward-looking statements. These factors are discussed in more detail in the Company's filings with the

Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended

December 31, 2009. These risks could cause actual results to differ materially from those implied by forward-looking

statements in this release. You should keep in mind that any forward-looking statement made herein, or elsewhere,

speaks only as of the date on which it is made. New risks and uncertainties come up from time to time, and it is

impossible to predict these events or how they may affect the Company. The Company has no obligation to update any

forward-looking statements after the date hereof, except as required by federal securities laws.


Agenda

Welcome and Introduction

Vikram Talwar: Executive Chairman10:00 am – 10:15 am

Strategy Update

Rohit Kapoor: President & Chief Executive Officer10:15 am – 10:40 am

Business Growth

Bill Bloom: Executive Vice President, Global Client Services11:05 am – 11:30 am

Financial Overview

Vishal Chhibbar: Chief Financial Officer11:30 am – 11:55 am

Capability Showcase

Rembert de Villa: Global Head of Client Management & Chief Strategy Officer11:55 am – 12:30 pm

Delivery and Execution

Pavan Bagai: Chief Operating Officer10:40 am – 11:05 am

Lunch 12:30 pm – 1:00 pm


Agenda



Strategy Update


Business Growth


Financial Overview


Capability Showcase

Rembert de Villa: Global Head of Client Management & Chief Strategy Officer 11:55 am – 12:30 pm



Lunch 12:30 pm – 1:00 pm


The New Normal

Over the past year sentiment at EXL’s clients has become more balanced and

has returned to a level of relative stability

• Clients experienced

financial uncertainty

• Slowdown in outsourcing

decisions

• Cut back on discretionary

spending

BPO Environment in

2008-09

Favorable Developments

in EXL’s Focus Areas

Outsourcing

• Clients under pressure to reduce

costs

• Comfort with outsourcing high

end processes

• Increase in global travel

• Increase in freight volumes

• Stricter regulations

• Higher cost of compliance

Transformation

• Return of discretionary spending

• Increased use of transformation

to manage cost pressures

• Clients using transformation to

grow revenues and not just

manage costs

• Financial stability

• Business investment

• Board involvement in

outsourcing decisions

• Political rhetoric

• Pace of strategic decision

making

• Employment levels

2010: BPO Industry is

gradually recovering…

…however some challenges

still remain

Insurance/Utilities

Transportation/Travel

BFS / F&A


Accelerating Business Momentum

EXL has reaccelerated its growth and momentum by staying focused on its strategy while

remaining financially disciplined

$98.7

$152.0

$181.7$191.0

2006 2007 2008 2009 2010E

26%

($ in millions)• Financial Discipline

Acquisitions

Investments

Foreign exchange

hedging

• Contracting

Risk balancing

Pricing

Minimum volume

commitments

• Geographic

Expansion

• Succession Planning

Business Prudence and

Financial Conservatism

Positioned Strongly for Accelerated

Revenue Growth

New Clients

• 2 strategic client wins

• 16 new client wins

Existing Clients

• 7 clients over $10M



Strong Organic

Growth

Bolt-on

Acquisitions

GTSC

247.0*

* 2010 management revenue guidance

http://www.schneider.com/index.htm


Positioning for Success

Our goal is to achieve consistent year-on-year 25% - 30% over all revenue growth by strengthening

our position as a “Category Killer” focused in select industry verticals and horizontals

Customer Centric

Business Model

Sharp Industry Vertical Focus

Integrated Transformation

and Outsourcing

Services


Regulatory Changes

Emerging Players

Emerging Industry Trends

Cloud Computing

Emerging long-term trends will have an impact on our clients and will influence the evolution of

the vendor landscape

Innovation


Key Investment Priorities

Our focused investment in building the “Category Killer” verticals has been successful and

we plan to increase investments in the front-end to leverage our capabilities

Investment in

Front-end

Investment in Building

Domain Expertise

Capital Investment to

Support Growth

• Launched the Client Executive Model

• Strengthening the sales force

• Marketing and branding

• Vertical specific training academies

• Hiring of senior level subject matter experts

• Creating proprietary intellectual property

• Technology

Enhance the scalability of the organization’s operations

Business embedded technology levers

• Innovation lab and new product development

• Onshore capability

• Acquisitions

$9.2$11.3

$13.9

$19.2

2007 2008 2009 2010E

Investment in Sales & Marketing

28%

($ in millions)


Agenda



Strategy Update


Business Growth


Financial Overview


Capability Showcase

Rembert de Villa: Global Head of Client Management & Chief Strategy Officer11:55 am – 12:30 pm



Lunch 12:30 pm – 1:00 pm


Current BPO Industry Trends

BPO: Business Process Outsourcing to Business Process Orbit-shift?

Transactional BPO Transformational BPO

Engagement

Value Drivers

Execution

Tactical Strategic

Vendor supplier relationship Partnership / co-innovation

Risk control Risk sharing

Release capital in non-core functions Core business transformation

Input / efficiency Output / effectiveness

Cost benefit / headcount Competitive advantage

Legacy technology Platform solutions

Low cost location based offshoring Skill based right shoring

FTE based pricing Transaction / outcome based pricing

Focus on operational KPIs Focus on business value / impact

Six-Sigma led continuous improvement Transformation services led quantum shift


Differentiating on Domain Expertise

Domain expertise provides tangible quantitative benefits to clients that reduce costs and

enhance efficiency and effectiveness

Organizational

Design

People

Tools / Platforms

Acquisitions

Alignment of business by verticals / horizontals

Centers of Excellence as creators and custodians of IP

Learning & Development (vertical specific academies1)

Industry experts embedded in businesses

>700 employees LOMA, AICPCU/IIA & CII certified

>900 personnel HIPAA certified

3 full actuaries, 25 intermediate actuaries

73 doctors, 20 nurses, 9 pharmacists, 20 lawyers, 10 architects / engineers

EXL LifePRO® (platform-based servicing)

BPM capability

Partnerships (Datanomic, Firescope, Microsoft)

Knowledge management (Insurance Center of Excellence portal)

EXL LifePRO®

Schneider

American Express GTSC

1: EXL’s Insurance Academy was one of the two in-house learning centers showcased at NASSCOM HR Summit in July 2010


Case Studies

Integrated Solution Set

An integrated outsourcing and transformation capability is imperative to succeed in the new

BPO paradigm focused on business outcomes and value

Current Client Operation

TCO : $50 mm

C-SAT : 85%

Headcount : 2300 Domain Specific

Integrated

FrameworkIntegrated Methodology

Outsourcing Vendor Commitment

TCO : $30 mm

Customer Retention : 90%

Client Specific Road Map

Headcount Reduction

Labor Arbitrage

Tech Apps Analytics

UK Based Utilities Client

Shifting the paradigm from resolving

exceptions to correcting defects and avoiding

imbalance

Reduced incoming volumes,

recovery / avoidance of

imbalance

US Insurance ClientPredictive tool based on customer behavior

data to reduce discount on products while

retaining customersCost of retention reduced by 7%

BenchmarkingAnalytics

Global Delivery

Technology Reengineering

Best Practices


Quality of Delivery Independent of Scale

Quality of delivery is a key differentiator for EXL and we will maintain this focus as we scale

Business Scale

Qu

alit

y o

f D

eliv

ery

1

2

3

4

5 67

EXL Quality Capability Curve

Focus Dilution Risk Path

Key Quality Milestones / Interventions

Dedicated quality compliance function

Quality certifications (ISO 27000, ISO 9001,

COPC)

Dedicated Six Sigma function

Developed robust proprietary process

management methodologies and tools (EXLMS,

MOST, ProMPT)

Management attention realignment

- Domain focused structure

- Client manager led account structure

Launch of B-Prompt (control / transparency /

responsiveness)

NextGen proprietary framework (Delivery +

Transformation + Solutioning)

Risks Recognized as Scale Increases

- Management bandwidth stretch / focus dilution

- Lack of standardization (methodologies outdated)

- Rise in client expectations

- New offerings without underlying quality ecosystem

1

2

3

4

5

6

7


Succeeding in an Inflationary Cost Environment

As we continue to drive operational efficiency, our focus on integrated solutions aimed at

enhancing business value for clients will lead to margin expansion

Va

lue

Cre

atio

n fo

r E

XL

1

2

Phase 3 : Breaking Linearity

Phase 1 : Operational Efficiency

- Manpower efficiency

- Shift utilization

- Infrastructure optimization

Phase 2 : Operations Redesign

- Restructuring

- Knowledge initiatives

- New logistics model

- Benchmarking & business intelligence

Phase 3 : Breaking Linearity

- Revenue α (Cost)n

- Led by greater value capture

- Transaction / outcome based pricing

- Transformation integrated solutions

- Technology embedded solutions

- Compensation restructuring

- Leveraging partnerships

2008-09 2009-10 2011->

3

Phase 2 : Operations Redesign

Phase 1 : Operational Efficiency


Talent Management as a Lever for Growth

Identifying, attracting and retaining the “right” skills is critical to success as the BPO paradigm

evolves

• “A” method of hiring

• Culture induction

• Management development

• Succession planning

• Common goals

• Bonding exercises

• Robust recruitment engine

• Brand building

• Active engagement

• Training academies

• Leadership development

• Career pathing

• Alignment of compensation with outcomes

• Management of impact of attrition

• Strong market demand for talent

• Skill set availability

• Domain knowledge


• Maturity and motivation levels

• Domain knowledge

• Resistance to change


• Cultural and mindset fit

• Ability to bridge functional divides

• Strategic thinking

• Campus hiring programs

• Mentoring and engagement

• Leadership development

• Growth opportunities

• Domain training

• Environment for innovation

Se

nio

r

Ma

na

ge

me

nt

Mid

dle

Ma

na

ge

me

nt

Asso

cia

tes /

Fro

nt L

ine

Le

ad

ers

hip

Challenges Responses


Agenda



Strategy Update


Business Growth


Financial Overview


Capability Showcase




Lunch 12:30 pm – 1:00 pm


A “Former” Clients Perspective on BPO

ITO BPO

Important decision to IT

Enterprise selects a handful of

vendors - buying decision made

by IT manager

Strategic decision to company (the

BPO partner is “making the

donuts”)

Emotional and analytical decision,

focused on risk management

Technical expertise

Account management approach

Standard business arrangements

Domain expertise

Tailored solutions

Flexible business arrangements

ITO vendors are important to

company, but not viewed as core

to business

C-suite involved in developing a

trusting relationship

Want a BPO partner to make you

feel like their “most important

client”

Selection

Fit

Partnering

The selection criteria companies use to select their BPO partners is different than how they

choose ITO vendors


2004 2005 2006 2007 2008 2009 2020

Scenario 2

Implied 2009 – 2020

CAGR:20%

Scenario 1

Implied 2009 – 2020

CAGR:14%

Indian BPO Exports ($ in billions)

$3.1$4.6

$6.3$8.4

$10.9$11.7

Size: ~$85

2004 – 2007

CAGR: 39%

Our Opportunity – An Attractive Growth Market

Source: Research & Intelligence: BPO 3.0 – Charging Ahead 2010, NASSCOM Analysis for Indian IT-BPO Industry 2009 and 2008.

Notes:1 Scenario 1 assumes following: Slow pace of reforms in education; limited development of Tier II, III cities; continued Indian government; support; continued trust as a sourcing hub;

limited lash back from protectionism2 Scenario 2 assumes following: Expedited reforms in tertiary education; 10-15 Tier II cities with world class infrastructure; adoption of new business models by the industry; India

among the top 3 innovation hubs in the world; and talent pool of 13.5 million

2007 – 2009

CAGR: 18%

Actual Scenario 1 Scenario 2

Size: ~$50

The Indian BPO market is expected to grow at 14% annually

EXL’s goal is to achieve organic growth of 15% to 20% over the next few years


Growing

existing client

relationships is

faster and more

profitable

Expanding Existing Client Relationships

EXL has over 120 clients

Establish capability and trust with

the client

Introduce new products and

services to existing clients

Expand into new areas of the

client’s business

In BPO typically more than 85% of revenue growth comes from existing clients


Opportunity to Grow Our Existing Clients

CLIENT CLIENT

Business Unit A

Business Unit B

International Subsidiaries

Supporting Functions

Business Unit A

Business Unit B

International Subsidiaries

Supporting Functions

On average, we estimate that even our most mature clients have outsourced

less than 10% of their workforce

EXL’s Transformation Services EXL’s Outsourcing Services

Example of Current Breadth of

Relationship

Introduce Our Services Across the

Client Organization

We believe we

can double our

revenue just by

growing our

existing client

base

We believe we

can more than

double our

revenue just by

growing our

existing client

relationships


Winning New Clients

Exceptional Delivery Capability

Trusted Relationships

Experienced Sales Team

New

Client

Wins

Marketplace reputation, a client-focused culture, and top-notch sales executives leads to

new client relationships


Creating a World-Class Front-End

More Experienced

Sales and Client

Management Team

Empowerment of

Local Decision

Makers

Investments in

Support Functions

• Introduce more seasoned local Client Executives with deeper industry knowledge to

oversee relationship

• Hire experienced sales executives and advisors to drive flow and close new business

• Maintain high-touch with EXL senior management for strategic matters

• Faster and improved decision making by local Client Executives

• Local Client Executives and offshore Delivery Leads have shared goals for growth,

profitability, staff retention, and client satisfaction

• Develop closer relationships with advisors and industry experts

• Industry vertical specific events and initiatives

• Improve branding and market awareness

EXL’s success has come as a result of best-in-class delivery of BPO and Transformation

Services - we’re now focused on developing an equally strong front-end


Agenda



Strategy Update


Business Growth


Financial Overview


Capability Showcase



Pavan Bagai: Chief Operating Officer10:40 am – 11.05 am

Lunch 12:30 pm – 1:00 pm


$33.4 $34.5 $37.7 $42.0 $41.6 $46.6 $50.5

$7.6 $7.9 $10.5

$12.4 $12.9

$14.1 $17.1

$41.0 $42.4

$48.2

$54.4 $54.5

$60.6

$67.6

40.6% 39.1% 40.2% 44.1% 42.2% 38.2% 40.0%

- 50. 0%

0. 0%

50. 0%

100. 0%

150. 0%

$0. 0

$10. 0

$20. 0

$30. 0

$40. 0

$50. 0

$60. 0

$70. 0

$80. 0

Q1'09 Q2'09 Q3'09 Q4'09* Q1'10 Q2'10 Q3'10

($ in millions)

Outsourcing Transformation Gross Margin %

Accelerated Growth Over Last 6 Quarters

EXL’s revenues grew at 39.6% over the past 6 quarters

through balanced organic and inorganic growth

* Excludes a one-time client payment of $5.1 million

Consistently delivering sequential growth across all segments while maintaining stable margin across quarters

Organic revenue growth rate of 25.1%

Number of clients with annual revenue >$10 million currently 7 vs. 2 in 2007

EXL

CAGR 39.6%Outsourcing

CAGR 31.7%

Transformation

CAGR 71.9%

Sequential Revenue Growth


$11.3 $12.4

Q1'09 Q3'10

($ in thousands)

$25.0

$28.4

Q1'09 Q3'10

($ in thousands)

Gross Margin/FTE (Ex FX)

Outsourcing: Grew Revenue with Stable Margins

All large strategic clients are contractually protected for inflation

Operating efficiencies driving margin improvement:

a. Transport cost - 190 basis points

b. Technology and Telecom - 130 basis points`

Revenue/FTE (ex FX) Gross Margin/FTE (ex FX)

Despite wage and general inflation, EXL has been able to expand constant currency gross

margin through a combination of contractual provisions, efficiency gains and cost savings

$27.0

$11.8

* Excludes EXL LifePRO

*

*


$25.4

$38.0

Q3'09 Q3'10

($ in thousands)

$2.8

$5.7 $1.8

$3.0 $3.0

$8.4

Q1'09 Q3'10

($ in millions)

Risk and Financial Management

Operations and Process Excellence

Decision Analytics

Transformation: Accelerated Revenue Growth

One-third of transformation business is annuity-based

Added 21 new clients since Q1 2009

Improved margins through better utilization and onshore/offshore mix

Growth Across Service Lines Gross Margin / Headcount (Ex Fx))

Balanced growth across transformation service lines

driving a CAGR of 71.9% over the last 6 quarters

$7.6

$17.1

TTM TTM


17.1% 16.7%16.0%

6.2%

7.3% 7.7%

FY 08 FY 09 YTD 10G&A as % of Revenue S&M as % of Revenue

Gaining Operating Leverage

EXL has achieved meaningful operating leverage over the last 2 years, while continuing to make

investments in Sales & Marketing capabilities

Generated 110 bps of operating leverage

over the last 2 years

Our goal is to achieve between 50 to 100

bps of operating leverage each year

Investment in Sales & Marketing has

increased by $7.4MM in 2010 over 2008

We expect to maintain Sales and Marketing

expense at similar levels as a percentage of

revenue

Operating Leverage


Adjusted EBITDA : Continued Value Creation

Adjusted EBITDA has grown at a CAGR of 35% since IPO and has multiplied by 3.3x

EBITDA growth of 35% is higher than revenue growth of 26%

Continued cost optimization and improved operating leverage

Increasing business volumes driving EBITDA growth

Adjusted EBITDA

* Excludes a one-time client payment of $5.1 million

$14.6 $18.3

$32.1

$37.8

$48.3

2006 2007 2008 2009* YTD 2010(Annualized)

($ in millions)

($ in thousands) 2006 2007 2008 2009* 2010

EBIT $5,525 $4,814 $15,665 $19,301 $24,975

add: Depreciation 5,919 7,582 10,622 11,238 $13,013

add: Amortization of Intangibles 1,180 1,630 534 167 $1,851

add: Stock compensation expense 1,974 4,307 5,278 7,093 $8,471

Adjusted EBITDA $14,598 $18,332 $32,099 $37,799 $48,309


Diluted EPS YTD Q3'09

Business Growth

OperationalEfficiencies

Operating Leverage

Investment in Front-End

Tax Impact FX/Hedging Impact

Diluted EPS YTD Q3'10

Amortization of Intangibles

& Stock Compensation Expense (net

of tax)

Adjusted Diluted EPS YTD Q3'10

28 Cents

47 Cents

60 Cents

79 Cents

15 Cents

6 Cents

4 Cent

-1 Cent

-5 Cents

13 Cents

19 Cents

EXL has added 32 cents to YTD Q3 Diluted EPS driven mainly by business growth and enhanced

efficiencies coupled with an effective hedging program

114% Y-o-Y Increase in YTD Diluted EPS

Growth of business operations including acquisitions increased EPS by 24 cents

Increase in effective tax rate from -2.1% to 17.5% reduced EPS by 5 cents

Effective hedging program protecting against adverse currency movement


Cash and cash equivalents Jan 1, 2009

Cash generated f rom operations

Investments Cash and cash equivalents Sep 30, 2010

$112.2$102.6 $102.6

$10.0$45.7

$52.4

$26.2

Effective Capital Deployment

Free cash generated from operations deployed in growth-oriented investments such as delivery

infrastructure and technology applications

Reduction in DSO

Cash generated

from operations

Acquisitions

Capital

Investments

DSO reduction from 69 to 56 days over 7 quarters: Freeing up $5 million of excess cash

Strong cash flows from operations: YTD’2010 inflows $23.7 million

Continually deploying funds to expand our infrastructure for future growth and acquisitions

($ in millions)

$57.4

$5.0


Effective Risk Management And Compliance

Our systematic approach to FX risk cushions currency risk and puts us at a competitive

advantage in a weak dollar environment

• Focus on mitigating overall profit volatility

• Three year rolling cash flow hedging program

layered to average into forward rates

• FX collars in long-term contracts

• Minimum volume commitments

• Termination penalties

• Transitioning to SEZs

• Geographic expansion

• Corporate structure for effective tax planning

Foreign Exchange Hedging Tax

• 3 seamless integrations in the last 18 months

• Set up integration team with senior executive

oversight

Acquisition Integration


Agenda



Strategy Update


Business Growth


Financial Overview


Capability Showcase




Lunch 12:30 pm – 1:00 pm


Innovation and Capability Development

OutsourcingOperations & Process

ExcellenceDecision Analytics

Risk & Financial

Management

Insurance Academy

Sustainable Claims Cost Reduction

Reconciliation Solution – E Track Tool

Fraud Analytics

Sanctions Compliance

Compliance Testing

Optimization

Maximizing Customer

Life Time Value

Marketing Analytics

Solution Suite

Rapid Integration

Transformation Execution

Information Security

Compliance

Next Generation

Analytics CoE

Service Offering Partnership Domain Knowledge

Reconciliation Solution –

E Track Tool

Solvency II Program Execution Support

Transformation


Capability Showcase

A. Claims Process Optimization

Arnab Dey: Vice President

Client Executive

B. Rapid Integrated Transformation Execution (RITE)

Alex Kloubek: Vice President

Operations and Process Excellence

C. Compliance Testing Optimization

Narasimha Kini: Senior Vice President & Head

Risk and Financial Management

D. Creation of Center of Excellence

Vivek Jetley: Senior Vice President & Head

Decision Analytics

E. Value Recovery Solution

Pavan Bagai: Chief Operating Officer

F. Insurance Academy

Dennis Thomas: Vice President

Client Executive

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