And we’re persevering with to leverage AI in options that we handle, which is each driving better efficiencies and creating new worth for shoppers by growing precision and enabling improved outcomes. We’re embedding AI each in our knowledge and AI-led options in addition to the operations that we handle for our shoppers. This final level is vital and price stressing. After we efficiently embed AI into an present consumer workflow, the character of that engagement adjustments. It turns into extra clever, extra IP-led, and extra worth added. The income related to it strikes from our digital operations class into our knowledge and AI-led class.
As I communicated to you final quarter, with a purpose to present better transparency we share in our investor reality sheet a complete operations view that mixes digital operations and knowledge and AI-led operations which have migrated into our knowledge and AI-led class. In Q1, complete operations grew 10% 12 months over 12 months and stays a development driver for our firm’s income. The reported digital operations income after that migration was down 2% 12 months over 12 months. That is by design. We anticipate this deliberate and deliberate shift to proceed going ahead. We noticed sturdy efficiency throughout every of our 4 working segments to begin the 12 months. Insurance coverage grew 13% 12 months over 12 months, representing over a 3rd of our revenues.
I’m significantly happy to see it return to double-digit development. Insurers are accelerating adoption of AI to enhance underwriting, claims, and buyer expertise. We’re seeing sturdy deal exercise throughout all market segments. Healthcare and Life Sciences grew 21% 12 months over 12 months, representing over 1 / 4 of our revenues. Payers and suppliers are dealing with rising price pressures, regulatory complexity, and margin pressure. They’re turning to ExlService Holdings, Inc. to use AI at scale to enhance productiveness and outcomes. Fee integrity continues to be a major driver of development together with broad-based power in analytics, AI providers and options, and operations. Banking, capital markets and diversified industries grew 8% 12 months over 12 months and represented 1 / 4 of income.
The quarter noticed very excessive deal exercise and we stay assured in continued progress because the 12 months unfolds. Worldwide development markets grew 13% 12 months over 12 months, reflecting profitable AI-led expansions in new and present shoppers. Worldwide markets are an vital driver of our long-term development and international growth technique, and we proceed to put money into expertise and partnerships to develop our footprint. In the course of the quarter, we hosted our annual AI in Motion flagship occasion bringing collectively senior enterprise and know-how leaders from throughout our consumer and companion ecosystem. The main focus this 12 months was on what it takes to make agentic AI actual inside enterprise operations, from constructing the best knowledge foundations to orchestrating AI throughout complicated workflows.
The extent of engagement and the participation bolstered what we’re seeing in our pipeline. Enterprises are shifting from AI curiosity to AI in manufacturing. And we’re the companion that may assist them execute. We’re additionally seeing co-innovation with our know-how companions persevering with to resonate and earn us trade recognition. ExlService Holdings, Inc. was lately named Superior Know-how Accomplice of the Yr by NVIDIA, Finest New Accomplice of the Yr by Genesys, and AI and Machine Studying Market Disruptor of the Yr by AWS. These partnerships are usually not solely enabling our differentiated options, they’re changing into significant go-to-market and pipeline contributors.
In abstract, ExlService Holdings, Inc. entered 2026 with sturdy momentum, and we’ve glorious visibility for the rest of the 12 months. Demand for our knowledge and AI-led providers and options stays strong, persevering with the momentum we noticed on the finish of 2025. We proceed to strengthen our place by means of investments in capabilities, partnerships, and expertise. Our portfolio is properly balanced. Our pipeline is robust. And we’ve excessive renewal charges. Greater than 75% of our income is recurring or annuity-like, offering income stability and a terrific line of sight for the 12 months. For full 12 months 2026, we’re growing our income steerage to a variety of $2.3 billion to $2.33 billion, representing 10% to 12% fixed foreign money natural development.
We’re additionally growing our adjusted diluted EPS to $2.18 to $2.23, representing 12% to 14% year-over-year development. As all the time, I wish to thank our shoppers, companions, and workers for his or her belief and dedication and to our shareholders for his or her continued assist. Earlier than I hand it over to Maurizio, I wish to remind you that we’ll be internet hosting our Investor and Analyst Day on Could 13 in New York. We’ll share our multiyear development framework, AI monetization mannequin, and consumer case research that convey our AI technique to life. For these of you trying to perceive the ExlService Holdings, Inc. development story, that is the occasion to attend. Please attain out to Andrew for particulars.
I sit up for seeing you there. I’ll now flip the decision over to Maurizio to supply extra particulars on our monetary efficiency.
Maurizio Nicolelli: Thanks, Rohit, and thanks, everybody, for becoming a member of us this morning. I’ll present insights into our monetary efficiency for the primary quarter and our revised outlook for 2026. We delivered a powerful first quarter with income of $570.4 million, up 13.8% 12 months over 12 months on a reported foundation and 13.4% on a relentless foreign money foundation. Sequentially, we grew 5.1% on a relentless foreign money foundation. Adjusted EPS was $0.58, a year-over-year enhance of 20.2%. All income development percentages talked about hereafter are on a relentless foreign money foundation until in any other case acknowledged. Now, turning to section income for the primary quarter. The Insurance coverage section grew 12.6% 12 months over 12 months with income of $193.9 million.
This development was pushed by growth and better volumes in present consumer relationships and new wins. Sequentially, Insurance coverage grew 4.4%. The Insurance coverage vertical, together with income from Worldwide Progress Markets, grew 12.2% 12 months over 12 months with income of $226.1 million. The Healthcare and Life Sciences section reported income of $151.9 million, representing development of 21% 12 months over 12 months and 6.8% sequentially. The year-over-year development was pushed by larger volumes in our cost providers enterprise and growth in present consumer relationships with different healthcare providers we offer. The Healthcare and Life Sciences vertical, together with income from Worldwide Progress Markets, grew 20.9% 12 months over 12 months with income of $152.1 million.
Within the Banking, Capital Markets and Diversified Industries section, we reported income of $127.4 million, representing development of 8.1% 12 months over 12 months and 4% sequentially. This development was pushed by new consumer wins and growth of present consumer relationships. The Banking, Capital Markets and Diversified Industries vertical, together with income from Worldwide Progress Markets, grew 9.4% 12 months over 12 months with income of $192.2 million. Within the Worldwide Progress Markets section, we generated income of $97.1 million, up 10.9% 12 months over 12 months and 5.4% sequentially. This development was pushed by ramp-ups and better volumes with present shoppers and new wins throughout Banking, Capital Markets and Diversified Industries and Insurance coverage.
SG&A bills as a share of income elevated 20 foundation factors 12 months over 12 months to twenty.4%, pushed by investments in knowledge and AI-led options. Our adjusted working margin for the quarter was 20.5%, up 40 foundation factors 12 months over 12 months, pushed primarily by improved gross margins. Our efficient tax fee for the quarter was 21.9%, down 40 foundation factors 12 months over 12 months, pushed by larger income in lower-tax jurisdictions. Our adjusted EPS for the quarter was $0.58, up 20.2% 12 months over 12 months on a reported foundation. Our stability sheet stays sturdy. Our money, together with short- and long-term investments, as of March 31 was $266 million, and our revolver debt was $417 million, for a internet debt place of $151 million.
In the course of the quarter, we spent $13 million on capital expenditures and repurchased 4.4 million shares at a mean value of $31 per share, totaling $136 million. This contains 3.35 million shares acquired upfront as a part of the settlement of our beforehand introduced $125 million accelerated share repurchase. We anticipate to obtain the remaining shares within the second quarter. Now shifting on to our outlook for 2026. Whereas we stay cautious concerning the present macroeconomic local weather and geopolitical uncertainties, we’re growing our steerage for the 12 months primarily based on our present development momentum and our sturdy pipeline. We now anticipate 2026 income to be within the vary of $2.3 billion to $2.33 billion.
This represents year-over-year development of 10% to 12% on a reported and fixed foreign money foundation. This additionally represents a rise of $20 million on the midpoint, which features a $2 million overseas alternate headwind from our earlier steerage. We anticipate elevated investments in knowledge and AI capabilities and options for the remainder of the 12 months to develop our aggressive benefit and proceed to drive top-line income development. We anticipate a overseas alternate achieve of roughly $2 million to $3 million, internet curiosity expense of roughly $6 million to $8 million, and our full-year efficient tax fee to be within the vary of 21% to 22%. We anticipate capital expenditures to be within the vary of $50 million to $55 million.
We anticipate our adjusted EPS to be within the vary of $2.18 to $2.23, representing year-over-year development of 12% to 14%, up from our earlier steerage of $2.14 to $2.19. To conclude, we had a powerful begin to the 12 months, demonstrating distinctive aggressive place and participation in high-growth market segments. Regardless of the present geopolitical uncertainty, our main indicators stay optimistic, and we’ve a extremely adaptable and resilient enterprise mannequin, setting us up properly for a stable 2026. With that, Rohit and I’d be completely happy to take your questions.
Operator: Thanks. At the moment, if you want to ask a query, please click on on the Increase Hand button, which could be discovered on the black bar on the backside of your display screen. When it’s your flip, you’ll obtain a message in your display screen from the host permitting you to speak, after which you’ll hear your identify known as. Please settle for, unmute your audio, and ask your query. As a reminder, we’re permitting analysts one query and one associated follow-up right this moment. We’ll pause a second to permit the queue to type. We’ll now open the decision for questions. Our first query comes from an Analyst with TD Cowen.
Please unmute your line and ask your query.
Analyst: Hello. Good morning. Thanks. I wished to ask right here on the expansion information. So good to see the increase. Are you able to simply dig in on the important thing assumptions for knowledge and AI-led versus digital ops development and possibly how your views on the industries might form up? After which, Maurizio, simply regardless of the sturdy commentary right here, it doesn’t recommend any demand influence to you. However would you continue to say this appears like a prudent outlook for the stability of the 12 months?
Rohit Kapoor: Hello. So, our development outlook—you understand, we’ve elevated our steerage for the complete 12 months. As you all know, our first quarter is usually a powerful quarter, and we had a terrific first quarter this time. What we’ve seen is that we’ve been in a position to outperform our personal expectations within the first quarter. We proceed to see good pipeline and good demand for our providers, and due to this fact we’ve elevated our steerage for the stability of the 12 months. The info and AI-led a part of our enterprise is definitely resonating very properly within the market. It now represents 60% of our complete portfolio and it’s rising very properly.
Even for digital operations, as we’ve shared with you, our complete operations is definitely rising fairly properly as properly, and we proceed to see demand on the market. If you happen to speak about industries, we proceed to see good momentum in insurance coverage, in banking, and in healthcare. Among the industries the place we see a bit little bit of softness are retail and communications. However a majority of our enterprise is basically made up of banking, monetary providers, insurance coverage, and healthcare, and people are all very sturdy pipelines and demand for us.
We don’t actually present a break-up, as you understand, between knowledge and AI-led and digital operations, however it could be truthful to say that our digital operations will develop barely under the corporate common and our knowledge and AI-led piece will likely be powering the expansion of the general firm. I’ll cross it on to Maurizio to speak concerning the prudent steerage that we’ve given.
Maurizio Nicolelli: Thanks, Rohit. And, we’re seeing superb momentum coming into the calendar 12 months. Q1 is often a powerful quarter for us to essentially begin out the 12 months, and we noticed that once more this 12 months. We proceed to see that momentum going into the remainder of the 12 months. One factor to spotlight is we did increase our steerage on the midpoint by $20 million, greater than our beat within the first quarter, and that does embody a $2 million FX headwind from the final time we gave steerage.
After which lastly, our steerage goes to be a bit prudent and take into consideration what is going on within the present macro setting and likewise the geopolitical uncertainties which are on the market. We’ve got three extra quarters remaining for the remainder of the 12 months. We’ve got superb momentum going into the second quarter and the remainder of the 12 months, and we’ve elevated our information. We’re nonetheless early within the 12 months, and we’ll proceed to revisit our information as we go ahead. However the massive optimistic right here is that we’ve very optimistic momentum going into the remainder of the 12 months from Q1.
Analyst: Okay. That’s useful. That’s clear. Perhaps on margin. So it seems to be such as you outperformed there as properly. Are you able to simply touch upon any change within the expectation on adjusted working margin for the 12 months? And is it funding timing—any cadence expectations—simply to assist?
Maurizio Nicolelli: Positive. You noticed our adjusted working margin are available at 20.5% in Q1, and that’s up 40 foundation factors from Q1 of final 12 months. We all the time see Q1 being a really sturdy quarter each on income and profitability, and that units us up very properly for the remainder of the 12 months by way of investing to proceed to drive double-digit development for the remainder of the 12 months and likewise going into 2027. So you will note us, as you noticed final 12 months, begin to make further investments, significantly into our knowledge and AI capabilities throughout the remainder of the 12 months.
And our adjusted working margin forecast for the remainder of the 12 months will likely be just like what we’ve talked about—in that 19% vary.
Analyst: Alright. Nice. Thanks.
Operator: Our subsequent query comes from David Koning with Baird. Please unmute your line and ask your query.
David Koning: Yeah. Hey, guys. Thanks, and nice job once more. I assume one query: we hear your shoppers—simply all the businesses within the setting proper now—are actually on the lookout for AI financial savings. Do you get a few of them pushing you on value a bit bit, simply saying, “Hey, we have to discover methods to avoid wasting to point out our CEO, our board, and so forth., that we’re saving cash”? Do you see that as a value headwind in any respect or extra of a requirement tailwind?
Rohit Kapoor: Hello, Dave. Let me present a bit little bit of context round what we’re seeing across the adoption of AI. Primary, we’re seeing shoppers switching over from AI pilots and AI POCs to AI in manufacturing. That may be a massive change, and that started off early this 12 months. Frankly, that’s enjoying to our strengths and the worth that we are able to add to those relationships. The second factor we’re seeing is, as shoppers take into consideration AI in manufacturing, they’re fairly keen to open up entry to their know-how programs, to their databases, and permit us to make adjustments to the end-to-end workflow.
As you understand, the applying of AI must be pushed along with the transformation of the workflow, and we’re in the most effective place to drive that. The third piece is the business mannequin can be altering. What we’re seeing is, as shoppers come to us with the adoption of AI to be carried out and enabled, the business mannequin is altering far more in the direction of a fixed-fee and milestone-based cost and an outcome-based mannequin. That enables us to handle pricing and margins and add worth to the client relationship.
The negotiations and conversations are far more about offering our shoppers with deterministic advantages related to AI adoption and for us to do it in a means that permits us to earn a good margin. We’re not actually seeing shoppers come to us simply asking for value reductions. The worth discount is alongside the transformation and alongside the worth creation.
David Koning: Thanks for that. And only one follow-up. Within the Worldwide section, I do know you known as out a bit uncertainty with the battle. At 17% of income, it truly accelerated fairly properly within the quarter. Would you anticipate to see a bit deceleration there? Perhaps describe what the impacts you assume would occur.
Rohit Kapoor: Dave, firstly, our Worldwide Progress Markets is extremely underpenetrated, so the chance set out there’s monumental. Second, we’ve little or no and really restricted publicity to the Center East. Most of our income from shoppers actually comes from the UK, Europe, Australia, and New Zealand, and we’re seeing wholesome adoption of AI in these geographies. Our objective will likely be to proceed to drive better and sooner adoption of our providers within the Worldwide Progress Markets. We’re not actually seeing any direct influence because of the battle as such. There could also be some downstream second-degree or third-degree impacts related to that with our shoppers. However frankly, it is extremely fertile floor for us within the Worldwide Progress Markets.
We’re going to proceed to put money into that house by including extra expertise and bringing extra capabilities, and we expect we must always be capable of develop our Worldwide Progress Markets enterprise fairly properly, and it ought to develop on the similar stage as, if not larger than, the corporate common development fee.
David Koning: Nice. Thanks, guys. Good job.
Operator: Our subsequent query comes from Maggie Nolan with William Blair. Please unmute your line and ask your query.
Maggie Nolan: Hello. Thanks. I’m curious for those who can share any perspective on internet income retention at a few of your largest accounts to assist us get on the query of quantity versus a few of this work migration between sorts of choices?
Rohit Kapoor: Hello, Maggie. That may be a nice query and one thing that we’ve been paying shut consideration to. As I stated earlier, one of many issues occurring with our extra mature shoppers is, as they ask us to assist them undertake AI into their enterprise workflows, we’re in a position to work on a lot bigger items of operations for them as in comparison with the previous, and likewise work on a whole lot of work related to constructing the proper of knowledge basis and new service strains which we’d not have engaged with them on beforehand. The panorama at which we’re working—our TAM—is increasing. It’s changing into a a lot larger enjoying area for us.
On the similar time, we’re in a position to deploy AI and get rid of and cut back the quantity of guide effort required to do a few of these processes and cross on this productiveness profit to our shoppers. So for those who speak about internet income retention, it nonetheless is a development story for us as a result of, on a internet foundation, we’re seeing a a lot wider panorama to play in, and we’re seeing the income dimension and the scale of the operation truly enhance regardless of offering them with a profit related to the guide portion of the work that was being accomplished beforehand.
Maggie Nolan: Thanks. After which I observed within the ready remarks a bit little bit of an emphasis on partnerships. I’m questioning if there’s something you’ll be able to share with us to provide us a way of how that’s progressing—like what the partner-sourced pipeline seems to be like or co-selling metrics—after which any variance in issues just like the deal cycle when you’ve got partnership involvement.
Rohit Kapoor: We’ve got been very happy with the development of our companion relationships. As you noticed, our companions are recognizing our effort and our differentiated capabilities as in comparison with among the different gamers they is likely to be coping with. The distinctive factor about ExlService Holdings, Inc. is that we come on the transformation and the adoption of AI from a course of and workflow lens and with information of our shoppers’ enterprise and operations. Our companions are discovering that to be a singular worth proposition—the information of the area and the power to use contextual understanding of our shoppers’ enterprise alongside the applied sciences that our companions are offering. That’s creating an enormous quantity of worth uplift for our shoppers.
These partnerships are resonating. The movement is changing into lots simpler and smoother by way of our go-to-market methods, and our companions are recognizing us and giving us these awards as in comparison with different gamers. Go-to-market is the extra thrilling half as a result of now, after we work together with shoppers, we’re in a position to take our companions there, and our companions are additionally bringing us into offers during which they’re collaborating. The exercise and the deal circulate have elevated considerably, and we foresee that going into the long run as properly.
Maggie Nolan: Thanks. Congratulations.
Rohit Kapoor: Thanks.
Operator: Our subsequent query comes from Surinder Thind with Jefferies LLC. Please unmute your line and ask your query.
Surinder Thind: Rohit, are you able to assist me perceive the step-down within the digital ops section? Over the previous couple of years, that was a excessive single-digit grower. I believe the expectation is extra muted. Is the concept right here that correlates with the development in agentic mannequin capabilities? Ought to we anticipate to possibly a 12 months or two from now see an extra step-down in that section because the fashions additional advance? After which in the end, is all of that getting recaptured within the knowledge and AI-led section?
Rohit Kapoor: Sure, Surinder. Let me attempt to undergo this step-by-step. Firstly, for those who check out complete operations, that continues to develop and develop, and within the first quarter, complete operations grew 10% 12 months over 12 months. Inside complete operations, you possibly can break up it into two buckets: one is digital operations, and the opposite is knowledge and AI-led operations. Because the adoption of AI will increase, we’re going to see a much bigger shift in the direction of knowledge and AI-led operations, and albeit, that could be a superb factor from our perspective as a result of because the operations shift in the direction of knowledge and AI-led, we’re placing in additional IP, extra proprietary belongings of ExlService Holdings, Inc., and creating extra worth for our shoppers.
That enterprise turns into a lot stickier, a lot larger in dimension, and we management the result finish to finish. Going ahead for the rest of this 12 months, digital operations will seemingly proceed to have the identical type of deceleration of development that occurred within the first quarter, however the shift in the direction of knowledge and AI-led operations is the essential piece. That’s positioning the corporate to be a future-forward firm for our shoppers, and that’s what our shoppers and prospects are , participating with us in an much more decided method. That’s the reason we’re seeing our pipeline being extraordinarily full and the extent of exercise very excessive.
We really feel very assured about persevering with to develop our general enterprise on this double-digit vary going ahead.
Surinder Thind: After which turning to headcount. You proceed to see a powerful uptick there. Is that how we must always anticipate the mannequin to evolve over the following couple of years—the place there’s a unfold between revenues and headcount—or ought to that unfold develop within the coming years after we take into consideration attending to a extra revenue-per-headcount mannequin as you construct out your IP?
Rohit Kapoor: If you happen to check out Q1, our revenues elevated by 14% and our headcount elevated by about 11%. If you happen to have a look at earlier quarters and former years, usually that has been the pattern the place headcount enhance is decrease than the income enhance. We’d anticipate that to proceed. Going ahead, it relies upon upon the kind of service combine we’re offering to our shoppers and the actions we’re enterprise. As we transfer from digital operations to knowledge and AI-led operations, that’s positively going to lead to a decrease headcount addition and a a lot larger income uptick.
But when we get into newer service strains, it is going to rely on the dynamics of these new service strains, and the income per headcount will likely be decided by the traits of that exact service line. On a steady-state foundation as this transition takes place, you’d anticipate a delta between income development and headcount development to be about 3%, which is the case proper now. However as we go ahead, that may shift in some way.
Operator: Please use the Increase Hand button that may be discovered on the black bar on the backside of your display screen. Our subsequent query comes from an Analyst with JPMorgan. Please unmute your audio and ask your query.
Analyst: Hello. Thanks for taking my query. I used to be questioning for those who might speak concerning the particular drivers on such sturdy traction in AI and knowledge providers you present to operations administration shoppers. Was it in any means associated to AI mannequin evolution or simply shoppers embracing AI with new budgets?
Rohit Kapoor: Our knowledge and AI-led portion of our enterprise has a number of parts: our knowledge administration enterprise, our analytical mannequin and providers and options enterprise, our cost integrity enterprise, and our knowledge and AI-led operations. We’re seeing broad-based traction and development throughout all of those completely different service strains. The info administration half is foundational, and that’s the place we’re seeing large demand. The problem for us is hiring expertise rapidly sufficient to meet that demand. In different areas, we’re seeing a pivot—a few of our analytical providers are switching over to AI providers, and that could be a very sturdy pivot. We’re additionally seeing a really sharp enhance in knowledge and AI-led operations.
When these conversions transfer into manufacturing, that’s driving a sooner development fee of our knowledge and AI-led class. We’re very happy that we’ve a number of service strains in that class, every with super headroom and all rising very properly. It is rather broad-based. It’s not one specific service line driving that development; it’s a number of service strains. That provides us confidence within the sustainability and sturdiness of our enterprise development.
Analyst: Bought it. Appears very broad-based. And possibly as my follow-up, our checks are exhibiting that AI-driven automation of enterprise processes from 50% to 80% is 10 instances more durable than going from zero to 50. Might you contact on what you’re seeing in your shoppers in embracing this subsequent milestone? And is there any progress throughout the quarter?
Rohit Kapoor: The 50% to 80% refers to what metric?
Analyst: AI-driven automation of enterprise processes.
Rohit Kapoor: When shoppers wish to undertake AI into their operations, it isn’t merely taking an LLM and pasting it on prime of that operation. There’s a entire collection of labor that must be undertaken. Primary, the info basis must be appropriate, and the power to make use of structured and unstructured knowledge and make that readily usable is a key foundational step. Secondly, the applying of the LLM or the AI mannequin must be iterated upon and refined as we go ahead. Third, there’s a very massive piece related to information and understanding of context—bringing collectively insurance policies, guidelines, laws, and the way a selected transaction must be processed.
That information must be clearly outlined with the use and utility of the AI mannequin. Lastly, the semantic layer—which is vital for creating worth for any enterprise AI adoption—must be mixed utilizing each the probabilistic parts of an LLM and deterministic parts, significantly for regulated industries. Bringing collectively all of these items, after which placing collectively guardrails, safety, and plenty of parts related to token economics—that is all very complicated. We’re in a lucky place that we’ve accomplished this a number of instances over. We will ship the enterprise outcomes to our shoppers, and our shoppers belief our means to execute. That’s what is driving the expansion there.
Operator: Our subsequent query comes from David Grossman with Stifel. Please unmute your audio and ask your query.
David Grossman: Good morning. Thanks. I believe, Rohit, you had talked about in an earlier query that the NRR is above 100%. We will clearly see that within the numbers. Maybe you possibly can assist us perceive how that quantity has trended over the previous couple of years, in addition to examine and distinction that with what the IT providers corporations are seeing—who’re struggling—and what’s making you completely different there. In addition to possibly speak concerning the backlog and simply how far out you’ll be able to see that dynamic persevering with?
Rohit Kapoor: Sure, David. The NRR for us is kind of sturdy and optimistic. The massive motive is that with the adoption of AI, shoppers are getting extra snug outsourcing extra work and outsourcing extra end-to-end course of journeys. Prior to now, they have been snug outsourcing duties and items of it, however now they’re snug permitting a companion like ExlService Holdings, Inc. to handle that journey finish to finish. The reason being that’s the solely solution to rework the journey, take management of the info belongings, deploy AI throughout the workflow, and be held accountable for the result. Frankly, the enterprise mannequin change with AI is permitting a really favorable shift in comparison with beforehand.
Beforehand, with the adoption of different applied sciences—whether or not it was bots or different automation—it was all the time about whether or not extra work might be outsourced. Now it’s the full end-to-end life cycle that may be outsourced. It’s a lot higher on this AI adoption wave.
David Grossman: And the way lengthy, Rohit, does it take to go from the start to extra of a gentle state?
Rohit Kapoor: Some time, David. Organising the info basis itself takes a good period of time as a result of most of our shoppers shouldn’t have very mature knowledge estates, and placing that in place requires a whole lot of heavy lifting. Then iterating on the mannequin and ensuring that it’s working together with the contextual items of our shoppers’ enterprise additionally requires a good quantity of effort, complexity, and time. This isn’t a once-and-done piece. When you implement AI into the workflow, you must continually preserve and maintenance it, and there’s a managed service portion that must be in place as a result of these fashions will drift over time.
You’ll want to apply new context to those fashions on an ongoing foundation. It’s a pretty complicated piece of labor to ship the result after which to keep up it and stick with it.
David Grossman: So can the NRR keep above one if you go into the upkeep mode?
Rohit Kapoor: We should see how that progresses. One of many issues we’re seeing is, as we deploy AI into the workflow, our shoppers are beginning to supply newer function units to their clients of their choices. They’re additionally keen to supply newer service strains. There may be extra being added to the present piece of labor, and if that continues, sure, I believe the NRR will proceed to stay above one.
David Grossman: Nice. Thanks. So only one fast one on margins. I do know you’re guiding, Maurizio, to flattish margins 12 months over 12 months—or no less than that’s what it could seem within the 19 vary—and that’s regardless of what seems to be like favorable combine shift. Is there some dynamic if you migrate from a person-based billing mannequin to extra of an outcomes-based mannequin on a short-term foundation the place there are some transition prices? Or is there one thing else occurring that may lead to flattish margins on such sturdy income development?
Maurizio Nicolelli: We had an excellent quarter general on profitability, and also you proceed to see an uptick in gross margins. If you happen to have a look at the second quarter of final 12 months, we have been at 37.7%. This quarter, we’re at 38.9%. Every quarter since then has continued to rise. What you’re seeing is us driving profitability there. The offset is sustained funding. If you happen to have a look at our funding line and the extent of funding we’re making, it’s rising sooner than income general. We have to proceed to take a position, significantly in R&D, as we develop increasingly AI capabilities. That leads us again to a mid-19% vary general in margins.
And for those who have a look at our general steerage, we’re nonetheless driving EPS barely larger than general income, which is one among our acknowledged objectives.
David Grossman: Bought it. Alright, guys. Thanks very a lot.
Operator: Our final query comes from Vincent Colicchio with Barrington Analysis. Please unmute your audio and ask your query.
Vincent Colicchio: Yeah. Rohit, you had talked about the business mannequin has modified, and it typically incorporates outcome-based pricing on AI offers. I’m curious, what portion of latest AI offers contain outcome-based pricing?
Rohit Kapoor: We’re seeing some AI offers have outcome-based pricing fashions, significantly these the place shoppers are permitting us to rework their end-to-end processes. That’s the place they’re holding us accountable for the outcomes, and the pricing mannequin is switching over to that. Understand that the adoption of AI is gradual, and that shift is going on over time. There are parts of our enterprise which are already outcome-based—the cost integrity work that we do is totally outcome-based. As that enterprise continues to develop and use much more AI in its service line, that portion continues to extend. Anytime we’re adopting extra AI into the workflow, that’s one thing which is kicking in.
The largest barrier is shoppers shouldn’t have good metrics related to learn how to outline that final result and learn how to attribute duty for the result. A few of this tends to be a portion on a fixed-fee foundation and, over and above that, some sharing of the achieve and productiveness that we are able to present to our shoppers. That mannequin works properly for newer shoppers which are going into this and wanting to hunt the good thing about that final result.
Vincent Colicchio: And will you replace us on how strong your acquisition pipeline is and the place your priorities might lie?
Rohit Kapoor: On this setting, we’re seeing a reasonably sturdy pipeline of belongings. We wish to be very cautious by way of the selection of those belongings and ensure they additional our ambitions to be the AI strategic companion of selection for our enterprise shoppers. There are functionality units throughout the AI enablement workstream that we wish to add to. We’ve got consciously picked and chosen the areas the place we wish to add extra functionality, and we’re acquisitions on a reasonably common foundation. As you understand, solely if you consummate an acquisition can you actually ensure about doing an acquisition.
We hope that we will shut an acquisition quickly, however we can not touch upon the timing as of now.
Vincent Colicchio: Thanks, Rohit. Good quarter.
Rohit Kapoor: Thanks, Vincent.
Operator: We’ve got no additional questions at the moment. This concludes our name. Thanks, and have a very good day.
Do you have to purchase inventory in ExlService proper now?
Before you purchase inventory in ExlService, contemplate this:
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*Inventory Advisor returns as of April 29, 2026.
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The Motley Idiot has positions in and recommends ExlService. The Motley Idiot has a disclosure policy.
ExlService (EXLS) Q1 2026 Earnings Transcript was initially revealed by The Motley Idiot
