ExlService Holdings, Inc. (EXLS) Earnings Call Transcript & Summary

Hello, and welcome to the ExlService Holdings, Inc. Annual Meeting of Stockholders. At this time, I would like to turn the conference over to Garen Staglin, Chairman of the Board of Directors.

Good morning, ladies and gentlemen. I am Garen Staglin, Chairman of the Board of Directors of ExlServices (sic) [ ExlService ] Holdings, Inc. On behalf of the Board and the officers of the company, I am pleased to welcome all of you to the virtual Annual Meeting of Stockholders. The COVID-19 pandemic has created unique challenges to all of us, personally and to EXL as a whole. The company has been ably guided by our CEO and Vice Chairman, Rohit Kapoor, and the senior leadership team to ensure the health and safety of our 32,000 employees. In addition, I am pleased to report that our clients have appreciated our agile response to the pandemic, and we thank them for their patience and understanding and flexibility in these troubled times. Our ability to quickly enable the vast majority of our employees to work from home is creating a lasting goodwill. I also wish to thank our Board for their additional oversight and contributions and extra meetings over this period. Thank you all for joining us today via our web portal. It's 8:35 a.m. Eastern Daylight time and in accordance with the bylaws of the company, I call to order the Annual Meeting of Stockholders. Before proceeding to the business of the meeting, I would like to introduce you to my fellow directors who are all here live via audio webcast today: David Kelso; Deborah Kerr; Anne Minto; Som Mittal; Clyde Ostler; Nitin Sahney; Jaynie Studenmund; Vikram Pandit; and our CEO and Vice Chairman, Rohit Kapoor. In addition, present today via live audio webcast are our auditors from Deloitte & Touche, our external counsel from McGuireWoods, and our executive officers: Pavan Bagai, Maurizio Nicolelli, Nalin Miglani, Vikas Bhalla, Samuel Meckey, Anita Mahone, Vivek Jetley and Ajay Ayyappan. And now I would like to ask Ajay to go over the rules of conduct and agenda for this meeting. Ajay?

Thank you, Garen. In order to provide a fair and informative meeting, your cooperation in observing the following rules of conduct, which provide general procedures and specified time limits, will be greatly appreciated. For your convenience, the rules are also available for viewing on the web platform. As this year's annual meeting is in a virtual-only format, you will be able to submit questions that we will answer at the appropriate time later in the meeting. I will conduct the question-and-answer session. One, only validated stockholders or their proxies may ask questions in the designated field on the web portal. Please provide your name and affiliation in the question box. Two, questions or remarks must be relevant to the meeting, pertinent to matters properly before the meeting and briefly stated within a time limit of 3 minutes. The meeting is not to be used as a forum to present general economic, political or other views that are not directly related to the business of ExlService. And three, if any person has any special questions, not relating to the meeting or not a concern to the stockholders generally, one of the officers present will discuss the matter with such person after the meeting at some other mutually convenient time. To arrange for a discussion, please contact Steven Barlow, Vice President of Investor Relations, by e-mail at [email protected]. Thank you for your cooperation. The agenda for today's meeting is posted on the web portal. It is our intention to conduct this meeting in accordance with the agenda. You will note that under Item 9 in the agenda, an opportunity is provided for questions and discussion. Prior to commencing with the formal balloting and vote tabulation, our Vice Chairman and CEO, Rohit Kapoor, would like to say a few words.

Thank you, Ajay. Welcome, and thank you for attending the ExlService Holdings 2020 Annual Meeting of Stockholders. I would first want to reiterate what Garen said, that we hope you are safe and healthy as we navigate the challenges we face personally and professionally. At EXL, our people are our primary assets, and we have taken extensive efforts to make sure they are safe. As a global company, we have always felt that it is our obligation to our stockholders, employees and the communities in which we operate to emphasize corporate social responsibility in our business. We believe that corporate social responsibility is even more acutely important in these unprecedented times. During this pandemic, we have stepped up our contributions in all of the communities in which we operate to assist in response efforts. The health of the communities we live and work in is vital. We have funded meals for needy children and health care workers and contributed to organizations that supply PPP -- PPE to health care workers. I want to take just a few minutes to share some of EXL's accomplishments during the last annual meeting. We improved our annual revenues from $883.1 million in fiscal year 2018 to $991.1 million in fiscal year 2019, which is an increase of 12%. Operations management, which is the sum of 5 reportable segments other than Analytics, had a revenue increase of 6.1% with the Insurance and Finance & Accounting segments showing the highest growth. Analytics revenues grew 25.3% year-over-year. In 2019, we won 28 new clients and received numerous awards and industry recognition. Our focus on looking deeper and adapting to technology changes has enabled us to deliver superior returns and create tremendous value for our stockholders since our IPO in 2006. Today, we are a trusted strategic digital transformation partner for our clients. We employ our industry domain expertise and technology to help our clients generate value by enabling them to apply digital technologies and analytics to transform their business models, better understand and use their data assets and efficiently run their operations. Our emphasis on analytics has been key to our growth, comprising 36% of revenue, up from 19% in 2015. The success of our strategy has been recognized by the market and demonstrated by our strong increase in stockholder value in the last 5 years. We outperformed or matched our market benchmarks and our industry peers. EXL's shares had a 1-year TSR gain of 32% compared to a 26% gain by NASDAQ. EXL had positive 3- and 5-year stockholder returns of 38% and 148 -- 142%, respectively. As we move into the second half of 2020, the COVID-19 pandemic has introduced many challenges, but it has also created opportunities to develop solutions to help our clients address issues that have emerged from this crisis. The digital agenda will become more critical to our clients' business strategy as end customers migrate to a more touchless and online experience. We are seeing this today across financial services, insurance and health care as remote technologies replace human touch points, reducing virus exposure in the short-term but creating efficiency gains over the long term. Enterprise-wide data and analytics capabilities will no longer be a nice to have. The crisis brought on by the COVID-19 pandemic has made it clear, real-time insights at the point of execution are central to resilient and smart operations. Whether through cloud-based infrastructure to support large-scale work-from-home operations, diversified global operations delivery models or flexible supply chains, the ability to deliver business continuity under challenging circumstances is the new litmus test for operational resiliency. We have been investing in these capabilities for the last several years and feel confident that we are very well positioned to support our clients as the adoption of these trends accelerate in the future. Over the past 2 decades, EXL has successfully navigated formidable challenges. Through each such experience, we have evolved and emerged stronger. We expect this time to be no different, all with a view to enhancing stockholder value. I want to thank our stockholders, Board members, employees and clients for helping to make 2019 an outstanding year. I am very proud of where EXL is today and of our employees who work hard supporting our vision and values to help our clients succeed.

Thank you, Rohit. The Corporate Secretary will now report on the mailing of the notice of this meeting and the presence of a quorum.

Thank you, Garen. This meeting is held pursuant to a printed notice mailed or sent on the Internet on or about April 24, 2020, to each stockholder of record on April 17, 2020, who is entitled to vote. As our corporate headquarters have been closed for the 10 days prior to this meeting due to COVID-19, a list of stockholders entitled to vote at this meeting has been available for the past 10 days via written request to the Corporate Secretary and is available during this meeting on the virtual meeting web portal. All of our stockholders were furnished via the Internet, or upon request, mailed copies of our proxy statement and our annual report containing information about the company and its business. All documents concerning the call and notice of this meeting will be filed with the records of the company. At this meeting, the stockholders will be asked: one, to elect 6 directors of the company who are a former Class I and Class II directors; two, to ratify the Board's selection of Deloitte & Touche LLP as the company's independent registered public accounting firm for the current fiscal year, which ends on December 31; and three, to approve, on a nonbinding basis, the compensation of the named executive officers of the company. There are 34,343,507 shares of common stock entitled to vote. I certify that as the company's -- by the company's bylaws, the holders of a sufficient number of shares of the stock issued and outstanding and entitled to vote at this meeting are present in person or by proxy and that a quorum, therefore, is present.

Thank you, Ajay. I hereby declare that a quorum is present at this meeting in accordance with the company's bylaws. On behalf of the Board of Directors of the company, I would like to express my appreciation to all stockholders who are attending this meeting and those who are unable to attend but returned their proxies. The company has appointed Tracy Oats as the inspector of election in accordance with the bylaws. We have 3 proposals before us today as presented in the proxy statement. We will hear the motion for each proposal, and then we will turn to the voting of the shares. We will now entertain nominations for the 6 directors to be elected by the stockholders of the company as directors. If Proposal 1 is approved by the company's stockholders, each of the directors, if elected, will hold a term of one year until our 2021 annual meeting. To nominate the persons listed in the proxy statement, I recognize, Mr. David Kelso.

Thank you, Garen. I hereby nominate the following persons for election as directors of the company to be elected by the holders of common stock. The reelection of Ms. Anne Minto; Ms. Jaynie Studenmund; Mr. Som Mittal; Mr. Clyde Ostler; Mr. Rohit Kapoor; and myself, David Kelso. These nominees are named and described on pages 15, 16 and 87 of the company's proxy statement.

Thank you, David. You have heard the motion. Is there a second?

Second.

Thank you. Since no other nominations have been made in accordance with the bylaws, I hereby declare the nominations closed. The election of directors is now in order. The next matter being submitted to stockholders for action is the ratification of the appointment by the Board of Directors of Deloitte & Touche LLP as independent registered public accounting firm of the company for the current fiscal year, which ends on December 31. I'd like to call upon Clyde W. Ostler, Chairman of the Audit Committee, for the recommendation of the Board of Directors in this regard.

Mr. Chairman, the Audit Committee has the responsibility recommending auditors to be appointed by the Board of Directors. Many have decided to recommend Deloitte & Touche LLP as the company's independent registered public accounting firm. I move for the ratification of the appointment of Deloitte & Touche LLP to audit the financial statements of the company for the fiscal year 2020. Discussion of the proposed ratification of the appointment, Deloitte & Touche LLP, vote appears on Page 89 and 90 of the proxy statement.

Thank you, Clyde. You've heard the motion. Is there a second?

Mr. Chairman, I second.

Thank you. The next matter being submitted to stockholders for action is the approval on an advisory basis of the compensation of the named executive officers of the company. I would like to call upon Ms. Anne Minto, Chairman of the Compensation Committee, for the recommendation of the Board of Directors in this regard.

Thank you, Mr. Chairman. As required by applicable law, our stockholders are being provided with an advisory, nonbinding, vote on the compensation of our executive officers. Although the vote is advisory and is not binding on the Board of Directors, our compensation committee will take into account the outcome of the vote when considering future executive compensation decisions. The discussion of the proposed say on pay vote appears on Page 92 of the proxy statement. I move for the approval on an advisory basis of the compensation of the named executive officers of the company.

You've heard the motion. Is there a second?

Second.

Thank you. The polls are now open. I would like to point out that most of you who returned proxies, authorized the persons named in the proxy to vote on all proposals coming before the meeting. Any stockholder who hasn't yet voted or wishes to change his or her vote, may do so by clicking on the Vote Here button on the web portal and following the instructions there. You will need the control number provided on your proxy in order to vote online. Stockholders who have sent in proxies or voted via telephone or Internet and do not wish to change their vote, do not need to take any further action. We'll now pause to permit voting -- stockholders to vote, excuse me. [Voting]

All right. Now that everyone has had the opportunity to vote, I now declare the polls for ExlService Holdings 2020 Stockholder Meeting closed. We've now come to that part of the meeting on the agenda providing for general questions and answers. This will be led by our General Counsel, Ajay Ayyappan. Please note that we will attempt to answer as many questions as time allows, pursuant to the guidelines described at the beginning of the meeting. As a reminder, please include your name and affiliation in the text of your questions. Ajay, I'll turn it over to you.

Thank you, Garen. Garen, we have received one question. How does the company think about the issue of diversity at the Board level, particularly racial and ethnic diversity? Diversity has been shown to enhance decision-making and provides protection against groupthink. This question comes from Mr. John White, New York State Common Retirement Fund.

Dave Kelso, the Head of our Nominating Committee, would you like to answer that question?

Sure. Yes. We -- as shareholders know, we have 3 female directors on the Board. And we are actively searching for backgrounds with various skill sets and experiences including racial and continued gender diversity. And this is an area that we've spent a lot of time on in terms of canvassing the available marketplace with personal contacts as well as executive search firms. So this is a topic that is top of our mind.

Thank you, David. Ajay, back to you.

Thank you, Garen and David. Garen, there are no further questions in the queue. If at any time, you have a question about ExlService Holdings, Inc. that you wish to have answered, please contact Steven Barlow, Vice President of Investor Relations, by e-mail at [email protected]. Again, that is [email protected].

All right. Thank you. We'll now turn to the results of the balloting. The inspector has certified that the tally is complete. Can the Corporate Secretary, please result -- report the results of the balloting?

The holders of a majority of the shares of common stock present in-person or by proxy at this meeting have voted in favor of the election of Anne Minto, Jaynie Studenmund, Som Mittal, Clyde Ostler, David Kelso and Rohit Kapoor as directors. The holders of a majority of the shares of common stock have voted to ratify the selection of Deloitte & Touche LLP as the company's independent auditors for the fiscal year ended December 31, 2020. The holders of a majority of the shares of common stock present in person or by proxy at this meeting have voted in favor of the approval on an advisory basis of the compensation of the named executive officers of the company.

Thank you. I hereby declare: one, all of the nominees for director have been duly elected; two, that the appointment of Deloitte & Touche LLP to audit the financial statements of the company and its subsidiaries for fiscal year 2020 has been duly ratified; and three, that the advisory vote to approve the compensation of the named executive officers of the company has been duly approved. Our Director Secretary filed a certified tally with the minutes of the meeting. We will be reporting the final vote results in Form 8-K to be filed within 4 business days. I have the initial results of the inspector of elections. Can the Corporate Secretary please report the initial results of the balloting?

Again, we just reported those with all measures being passed.

Okay. Thank you very much.

I think we can move to Section 11, Garen.

Yes, I see that. There being no other business, our meeting is concluded. I would like to again express my sincere appreciation to the stockholders who attended this virtual meeting as well as those who submitted their proxies who were not able to be present. I hope we can host next year's meeting at our corporate headquarters in New York in person. In the interim, please stay safe and follow all COVID-19 recommended precautions. The meeting is adjourned.

Thank you.

Thank you.

The meeting has now concluded as mentioned. Thank you for attending today's presentation. You may now disconnect your lines.