ExlService Holdings, Inc. 2026 Q3 Earnings Call

Thanks, Ronnie. Hello, and thank you for joining EXL's third quarter 2026 financial results conference call. On the call with me today are Rohit Kapoor, Chairman and Chief Executive Officer, and Maurizio Nicolelli, Chief Financial Officer. We hope you've had an opportunity to review the third quarter earnings press release we issued yesterday afternoon. We've also posted a slide deck and investor fact sheet on our investor relations website. As a reminder, some of the matters we'll discuss this morning are forward-looking. Please keep in mind that these forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to, those factors set forth in yesterday's press release and in EXL's filings with the Securities and Exchange Commission from time to time.

EXL assumes no obligation to update the information presented on this conference call today. During our call, we may reference certain non-GAAP financial measures, which we believe provide useful information for investors. Reconciliation of these measures to GAAP can be found in our press release, slide deck, and investor fact sheet. With that, I'll turn the call over to Rohit.

Rohit? Thank you, Andrew, and good morning, everyone.

EXL delivered another strong quarter, with revenue of $634 million, up 20% year-over-year, and adjusted earnings per share of $0.62, an increase of 29%. Organic growth accelerated to 17%, with every segment growing more than 15%, reflecting broad-based momentum in our business that has strengthened throughout the year. As enterprises navigate the complexities of AI implementation, their investment areas naturally lend themselves to EXL's expertise, solutions, and services. Our deep understanding of client workflows and domain context, combined with our competencies in data and AI engineering, is creating a tailwind as we help clients solve the acute challenge of making AI work effectively in the enterprise. This dynamic is translating directly into our financial performance. Data and AI-led revenue grew 36% on a reported basis and 31% organically in the third quarter, now representing almost two-thirds of EXL's total revenue.

We saw strength across data management, AI services and solutions, payment integrity, Data and AI-led operations, and with our recent acquisition of iMerit, our model training solutions are also gaining traction. Importantly, the strength in Data and AI-led revenue is being accompanied by healthy growth in our underlying operations business. Digital Operations revenue declined 1.7% year over year. We addressed this last quarter, but it bears emphasizing. This decline is by design, and it reflects the evolution of our business mix as we continue to embed AI into operations work, which migrates it into our Data and AI-led category. Total Operations, which includes both Digital Operations and Data and AI-led operations, grew 12% year over year. We believe that Total Operations remains the best way to evaluate the underlying health of our operations business.

As we embed more AI into the workflows we manage, those engagements become more intelligent, more IP-led, and higher value. Our operations relationships give us the domain context, data access, and workflow knowledge to identify new AI use cases and deploy them even faster. That deepens client relationships and drives recurring growth for EXL. We saw strong performance across each of our four operating segments. Insurance grew 16% year over year, accelerating for the third straight quarter, led by our continued strong performance in data management and analytics. Our win rates have improved meaningfully this year as we go to market with an AI-forward value proposition. As insurers move forward on AI adoption, they first need a strong data foundation and then a partner to implement AI at scale. We've been successful in capturing that demand on both fronts, and that's what's been driving our results.

Healthcare and Life Sciences grew 19% year over year, led by continued strength in payment integrity. Additionally, our mid-market and regional health plan strategy is emerging as a meaningful growth engine. We are gaining traction across multiple service offerings, including both payment integrity and domain solutions focused on cost containment and AI integration into workflows. We believe this growing demand for our solutions and services in the mid-market reflects a secular trend. International Growth Markets grew 21% year over year, accelerating from approximately 13% growth in the first half of the year. Momentum was driven by clients deepening their engagement with EXL. We saw particular strength in banking, as well as in energy and utilities, where we launched a large deployment embedding our AI workflows across back office and collections. We are pleased with the progress we are making in this important growth segment for our company.

Banking, Capital Markets, and Diversified Industries grew 27% year over year, which includes the initial contribution from our recent acquisition of iMerit. Banking growth was led by particularly strong momentum across mid-tier banks and fintechs. We have also added 30 new logos this year as our AI-first data-led value proposition continues to gain traction. Taken together, these results demonstrate that our growth is not dependent on a single vertical offering or client cohort. Demand for our capabilities is broad-based as enterprises increasingly seek partners that can combine data, AI, and deep operational expertise to transform complex workflows. In the third quarter, pipeline creation grew double digits as clients expanded their relationships with us and committed to larger integrated deals. Over the past several quarters, we have spoken about the evolution of AI in the enterprise as projects have moved from experimentation and proof of concept to scaled implementation.

Now we are seeing the next chapter of that evolution roll out with agentic AI starting to go mainstream. Let me share some proof points from the quarter. Working closely with Google, we won an engagement with a leading U.K. bank to rebuild its analytics environment on Google Cloud, migrating it from SAS to a cloud-native architecture. We are using our agentic EXLdata.ai solution to deliver the work. Our differentiation from established engineering-led providers was the strength of our domain depth, our agentic approach to accelerating the migration, and our partnership with Google. This win was also aided directly by the investments we have been making in our partnership channel. Also, during the quarter, EXL strengthened its agentic AI leadership with enhanced solutions across finance, life and annuities, and payment integrity in areas where we control the full AI stack.

Our growing portfolio of agentic AI offerings helps clients accelerate decision-making, improve operational efficiency, and unlock greater business value. Notable launches included our Agentic Suite for finance, along with enhancements to LifePRO Agentic Suite for life and annuities, and Payment Integrity with AI for healthcare payers. These offerings extend the capabilities of our industry platforms, giving our clients a path to agentic AI adoption with increased business value. We closed on the iMerit acquisition at the end of July and have since been actively integrating the business. In the two months since closing, iMerit contributed $15.3 million of revenue to the quarter, with notable growth across high tech and healthcare, combined with continued momentum with frontier AI labs. The launch of the iMerit Scholars platform, which we announced earlier this week, is also a significant development.

Scholars bring together more than 30,000 vetted domain experts across 118 countries to fine-tune, evaluate, and validate AI models. The platform integrates recruiting, matching, management, and global payments into one system. For EXL enterprise clients, together with iMerit, we extend our reach across the AI life cycle. We have begun bringing iMerit's capabilities to our enterprise clients, and we are encouraged by the initial commercial activity. Let me briefly touch on some recent leadership changes at the company. As announced in September, Vivek Jetley, President and Head of Insurance, Healthcare and Life Sciences, accepted an opportunity to become a CEO elsewhere, and his last day with EXL was earlier this week. Vivek has been a close partner and friend for nearly 20 years, and on behalf of everyone at EXL, I want to thank him for his many contributions and wish him every success in his new endeavor.

Bhupender Singh, President and Head of International Growth Markets, has expanded his responsibilities to include leadership of our insurance segment. Raghav Jaggi, an Executive Vice President who has spent more than 23 years helping to grow EXL's insurance practice, will lead U.S. Insurance and report to Bhupender. Nikhil Dhingra, also an Executive Vice President, has been with EXL for more than 18 years and will now lead Healthcare and Life Sciences, reporting directly to me. EXL has a deep and experienced leadership bench, and these executives have played integral roles in building the businesses they will now lead. That depth provides continuity for our clients, employees, and shareholders. The strength of our third quarter performance gives us the confidence to raise our full-year outlook.

We now expect 2026 revenue to be in the range of $2.43 billion-$2.44 billion, representing 16%-17% growth on a reported basis, and 15% on an organic constant currency basis, up from our prior guidance of $2.39 billion-$2.415 billion. We are also raising our adjusted diluted EPS guidance to a range of $2.34-$2.36, representing approximately 20%-21% year-over-year growth, up from our prior guidance of $2.25-$2.29. We believe we are well-positioned as agentic AI becomes mainstream in the enterprise. With iMerit, EXL now operates across the full AI stack, building the data foundation, training and fine-tuning models, and embedding AI into the workflows that we run for our clients. Our Data and AI-led business is expanding, Total Operations continues to grow, and our performance is broad-based across segments.