Exlservice ((EXLS)) has held its Q4 earnings call. Read on for the main highlights of the call.
ExlService Holdings’ recent earnings call showcased a strong financial performance, highlighted by significant revenue growth and a robust increase in adjusted EPS. The company’s success in digital operations and AI integration were key drivers of this positive outcome. Despite facing challenges such as foreign exchange headwinds and the need for increased investment, the overall sentiment from the call was optimistic, with positive aspects significantly outweighing the negatives.
Strong Revenue Growth
ExlService reported impressive revenue figures for the fourth quarter, reaching $481 million, which marks a 16% increase year over year. For the full year 2024, the company achieved a revenue of $1.838 billion, reflecting a 12.7% growth compared to the previous year.
Significant Growth in Digital Operations
The digital operations and solutions segment experienced substantial growth, with revenue increasing by 18% year over year to $274 million. This growth was consistent across all three industry verticals: insurance, healthcare, and emerging markets, showcasing the company’s strong position in these sectors.
Increase in Adjusted EPS
ExlService saw a notable increase in adjusted EPS, which rose by 26% in the fourth quarter to $0.44 per share. For the full year, adjusted EPS was $1.65, up 15.4% year over year, indicating strong profitability.
AI and Data Integration
AI and data played a crucial role in ExlService’s revenue, accounting for 53% in 2024. The company launched eaccelerate.ai, an agentic AI platform, and expanded partnerships with major tech companies like NVIDIA, Databricks, AWS, Microsoft, and Google, highlighting their commitment to innovation.
Strong Cash Flow and Share Repurchase
The company generated a robust cash flow from operations amounting to $269 million in 2024, a 27% increase year over year. Additionally, ExlService repurchased 6.3 million shares for $196.5 million, reflecting confidence in their financial health.
Foreign Exchange Headwind
ExlService anticipates a foreign exchange headwind of $10 million for 2025, which could pose a challenge to their financial performance. However, the company remains optimistic about overcoming this hurdle.
Investment Needs Impacting Margins
The need for increased investment in R&D and AI solutions development is expected to impact gross margins. Operating margin increases are projected to be only 10 to 20 basis points for 2025, indicating a cautious approach to balancing growth and investment.
Deceleration in Analytics Revenue Growth
Analytics revenue growth was reported at 9.1% year over year for 2024, which is slower compared to other segments. This deceleration highlights a potential area for improvement in the company’s growth strategy.
Forward-Looking Guidance
ExlService provided robust guidance for 2025, anticipating revenue to range between $2.025 billion and $2.06 billion, representing a 10% to 12% year-over-year growth. Adjusted EPS is expected to be between $1.83 and $1.89, reflecting an 11% to 14% increase. The company plans to transition their operating model to include industry market units and new financial reporting segments, aligning with their data and AI growth strategy.
In summary, ExlService Holdings’ earnings call painted a positive picture of the company’s financial health, with strong revenue growth and significant advancements in digital operations and AI integration. While challenges such as foreign exchange headwinds and investment needs exist, the overall sentiment remains optimistic, with strategic plans in place to drive future growth.