Good day, and thank you for joining us. Welcome to the First Quarter 2022 Earnings Conference Call for ExlService Holdings, Inc. All participants are currently in a listen-only mode. After the presentations, we will have a question-and-answer session. I will now turn the call over to your speaker for today, Mr. Steven Barlow, Vice President of Investor Relations. Please proceed.

Thank you. Good morning, everyone. Thanks for joining us today for EXL’s First Quarter FY22 Financial Results Conference Call. I am Steve Barlow, Vice President of Investor Relations. On the call today are Rohit Kapoor, our Vice Chairman and Chief Executive Officer, and Maurizio Nicolelli, our Chief Financial Officer. We hope you had an opportunity to review our Q1 2022 Earnings Release we issued this morning. We have also updated our Investor Factsheet in the Investor Relations section of EXL’s website. As you know, some of the matters we'll discuss in this call 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, general economic conditions, those factors set forth in today's press release discussed in the company's periodic reports and other documents filed with the Securities and Exchange Commission from time to time. EXL assumes no obligation to update the information presented on this call. During our call today, 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, as well as on the Investor Factsheet. I'll now turn the call over to Rohit Kapoor, our Chief Executive Officer. Rohit.

Thank you, Steve. Good morning, everyone. Welcome to our Q1 2022 earnings call. I hope all of you and your families are safe and healthy. I'm delighted to report that EXL had a strong start to the year. In terms of revenue and adjusted EPS, we outperformed our expectations for the quarter. Our first quarter revenue was $329.2 million, up 11.4% from the previous quarter, and up 25.9% year-over-year. For the quarter, adjusted EPS was $1.42 per share, up 20.3% year-over-year. Our Analytics segment had another excellent quarter with revenue of $149 million, up 17.8% sequentially, and 45.7% year-over-year. Analytics now accounts for 45% of our total revenue. The maturity, scale, and expertise of our data Analytics business have differentiated us from competition and accelerated our overall growth. Our Digital Operations and Solutions business also saw strong growth this quarter, with revenue of $180.2 million, up 6.6% quarter-over-quarter, and up 13.2% year-over-year. This was driven primarily by double-digit revenue growth in our Insurance and Emerging segments. We've been able to drive consistent double-digit growth rates across our core industry verticals by number one, delivering larger enterprise-wide digital transformation engagements. And number two, deploying new scalable solutions that are being leveraged across multiple clients and industries. I would like to share a few examples that illustrate these two aspects of our revenue growth acceleration. In our data analytics business, we recently added a strategic account from the financial services industry, which turned to EXL for our industry-leading strength in customer analytics, data engineering, and data management. This client, one of the largest investment management funds in the U.S., initiated its relationship with us across the entire analytics value chain. We are leveraging our technology and industry expertise to extract insight from this client's structured and unstructured data sets. This is allowing the client to deliver better consumer experiences across digital and non-digital channels, driving both higher customer engagement and building larger customer lifetime value. This win is also significant in terms of the scope and scale of the project. While historically, we would typically start a new client relationship with annualized revenue of $250,000 to $500,000. We are now signing larger engagements with annualized revenue of $1 million or higher. In this particular client example, our annualized revenue for the first year is well above $5 million. It is a prime example of how clients are increasingly turning to EXL to drive bigger enterprise-wide initiatives. And our leadership in data analytics is now clearly well established. An example of a new engagement that allows us to scale our offerings is our recent work with a leading credit union in the U.S. This client wanted to improve customer experience across multiple lending products by reducing the time to underwrite and accelerate the pace of customer onboarding. This transformation included challenges such as legacy lending technologies, lack of personalization in the underwriting process, and complex and manual onboarding workflows that slowed the customer acquisition journey. As that strategic digital partner, EXL designed a next-generation digital lending platform that allows faster response time and much more personalized offers based on real-time customer data. By combining our AI-powered data extraction capabilities and our comprehensive customer analytics, we were able to automate underlying operations and decisions. This helped our client immediately offer the right lending products to the right customer at the right time. This new digital lending platform is fully scalable within our existing client by expanding across multiple product lines and can now be deployed in a plug-and-play fashion across our entire client base. This one EXL approach of leveraging data, analytics, digital, and cloud capabilities to create scalable solutions is also helping us secure more wins in our emerging business segment. Each quarter, we have been increasing the depth and breadth of our client offerings in this vertical while adding a number of new logos. Our Insurance business has become a prime example of our continued evolution, as we become the partner of choice for large-scale enterprise transformation projects. In fact, we have recently announced a trial of major industry recognitions that showcased this leadership capability. We were ranked second overall in the HFS 'Top 10 for Insurance Services and in this year's ISG Provider Lens for Insurance BPO. EXL is a leader in all categories in the U.S. and Australia, including property and casualty, life, and third-party administration. For the third straight year, EXL was on the top spot in Everest Group's PEAK Matrix Assessment for Property and Casualty Insurance, recognized as both a leader and a star performer. The Everest Analyst noted our strength as a digital approximation partner combined with our strong foundational understanding of the insurance domain and operations. In December of last year, we announced the acquisition of Clairvoyant, a global data, AI, and Cloud Services Company. The acquisition adds to our expertise and depth in data engineering, design capabilities, data management, Cloud enablement, managed services, and data security. The addition of Clairvoyant's capabilities and team have strengthened our value proposition for our clients. We have significantly added to our talent base and are enabling a more integrated set of services for our clients to truly unlock the potential of their data. Over the course of the last quarter, our combined team has introduced new capabilities to our existing customers and prospects. We are thrilled with the response and adoption of our expanded value proposition. We have successfully started joint engagements with several of our large strategic customers across all verticals. This has significantly added to the overall growth potential for our Analytics business. We are pleased that the Clairvoyant acquisition is meeting both our revenue and profitability expectations. The demand for skilled talent in our space, particularly around digital, Cloud, data, and analytics-oriented skill sets has significantly increased in the past few months. Balanced management and wage inflation is our top priority that we're managing at EXL. We have adopted a comprehensive and holistic strategy to ensure employee well-being from a 360-degree perspective. First, our culture is a key driver that helps us collaborate as a team and brings out the best in our people. Our employees cherish the strong growth, collegial environment, entrepreneurial work culture, and the caring manner in which we engage with them. This includes a continual focus on career-pathing and developing our talent organically. EXL has a long history of promoting from within, and our strong up-skilling programs have been embraced widely. In 2021, our employees completed almost 571,000 hours of training to help them advance in their careers. Second, we have benchmarked our compensation and benefits to be competitive in the marketplace. This allows us to retain and attract the best possible talent. Over the last two years, we have chosen to be flexible in terms of our business operating model. We have expanded hybrid work models to best align the needs of our employees with our clients' requirements, compliance with regulatory policies, and create an environment to collaborate and innovate together. We have significantly accelerated our focus on employee health and well-being with a focus on both physical and mental wellness. Recruiting from outside EXL is also important as we are growing at a fast pace. Our growth provides opportunities for advancement and new challenges for our employees. The kind of work we do for our clients is very stimulating for our employees. It helps our employees learn, grow, and get exposed to cutting-edge technologies and evolving business models. In Analytics, we continue to be a successful recruiter at the world's leading universities and technical schools. We have been the top recruiter for analytical talent for over 15 years. In summary, our people are our most important assets. We will continue to endeavor to make EXL a preferred destination for employees to build a rewarding career. This is an incredibly exciting time for EXL. While we are closely monitoring the volatile economic and geopolitical environment, we are enormously confident in our agility and ability to navigate changes in the marketplace. We are capitalizing on our data-driven solutions and strategic investments that have helped us create a great deal of momentum over the past several quarters. We are well prepared to seize the market opportunity and create meaningful value for our clients. I will now invite Maurizio to highlight our Q1 financial performance and 2022 guidance.

Thank you, Rohit. And thanks everyone for joining us this morning. I will provide insights into our financial performance for the first quarter, followed by our revised outlook for 2022. Our quarter was better than expected with revenue of $329.2 million, up 22.6% year-over-year and 8.6% sequentially on an organic constant currency basis. Adjusted EPS was $1.42. All revenue growth numbers mentioned hereafter are on an organic constant currency basis. Revenue from our Digital Operations and Solutions businesses, as defined by three reportable segments, excluding Analytics, was $180.2 million, up 14% year-over-year. Sequentially from the fourth quarter, revenue was up 6.8%. Insurance generated revenue of $103.3 million, up 13.9% year-over-year, driven by expansion in existing client relationships in life and annuities, higher volumes in audit and survey business lines, and new client wins in 2021. The insurance vertical, consisting of both our Digital Operations and Solutions and Analytics businesses, grew 15.1% year-over-year. Emerging reported revenue of $50.7 million, up 36.2% year-over-year. This growth was driven by new client wins in 2021 and higher volumes in our travel, transportation, and logistics businesses. The Emerging protocol, consisting of both our Digital Operations and Solutions and Analytics businesses, grew 42% year-over-year. Healthcare reported revenue of $26.2 million, down 13.5% year-over-year due to lower volumes in our clinical services business due to a transition in client. The Healthcare vertical, consisting of Digital Operations and Solutions and Analytics businesses, grew 11.7% year-over-year. Analytics had revenue of $149 million, up 36% year-over-year on an organic constant currency basis. Clairvoyant contributed $10.2 million of revenue, including Clairvoyant Analytics, which grew 45% year-over-year on a reported basis. This growth was driven by increased volumes in banking and financial services, payment integrity, direct marketing, and new client wins in 2021. Sequentially, from the fourth quarter of 2021, organic constant currency revenue was up 11.1%, indicating continued strong momentum and demand for Analytics services. Our SG&A expenses increased by 80 basis points year-over-year to 19.5% of revenue, driven by investment in front-end sales and digital capabilities. Our adjusted operating margin for the quarter was 18.2%, down 200 basis points year-over-year due to investments needed in ramping up new client wins in 2021 and investments in front-end sales and digital capabilities. Sequentially, our adjusted operating margin increased by 120 basis points, driven by lower marketing expenses and operating leverage. Our effective tax rate for the quarter was 23.9%, down 30 basis points year-over-year. This decrease was driven mainly by lower taxes in certain U.S. jurisdictions. Our adjusted EPS for the quarter was $1.42, up 20.3% year-over-year on a reported basis. Our balance sheet remains strong. Our cash and short-term investment at March 31st was $269 million, and our debt was $295 million, for a net debt position of $26 million. Subsequent to the close of the quarter, we entered into an amended five-year credit agreement totaling $400 million, with an accordion feature which allows EXL to borrow an additional $200 million. Our first-quarter cash flow from operations was an outflow of $26.9 million compared to an inflow of $15.2 million in the first quarter of 2021. This is due to the timing of client receivable collections, which were received in early April, and higher bonus payouts due to our strong financial performance in 2021. During the quarter, we repurchased $221,000 shares at an average price of $127, totaling $28 million. In addition, we spent $16 million on capital expenditures as we continued to invest in the business for long-term growth. Based on our first-quarter performance and current growth visibility for the rest of the year in all our verticals, we are increasing our guidance for 2022. First-quarter revenue includes 2% of one-time revenue that may not occur in the subsequent quarters. Our revised 2022 guidance is as follows. Revenue is expected to be in the range of $1.315 billion to $1.335 billion. This represents a year-over-year growth rate of 17% to 19% on a reported basis and 14% to 16% on an organic constant currency basis. This is an increase of $30 million at the midpoint from the previous guidance of $1.28 billion to $1.31 billion. Our guidance includes $40 to $45 million of revenue from Clairvoyant, which is in line with our previous guidance. Our guidance includes higher salary expenses in certain areas such as Analytics, AI, and Cloud compared to 2021. We have started our return to the office in March in a phased manner and expect the percentage of our employees working from the office to rise over the course of the year. We will have a hybrid model of working going forward. We expect approximately 2/3 of our employees to work either full-time or part-time from the office and 1/3 to work remotely. We expect a foreign exchange gain between $3 million and $4 million, net interest income of approximately $1 million and our effective tax rate to be in the range of 23% to 25%. In the Philippines, where we have approximately 8,000 employees, the government has issued regulations mandating the percentage of employees required to return to the office as of April 1st. There is significant uncertainty around the definition of the regulations and the implications on the local tax rate. While we are working to comply with these regulations and manage our workforce, any additional one-time tax expense in the Philippines has not been included in our guidance. Based on the above, we expect our adjusted EPS to be in the range of $5.40 to $5.65, up 12% to 17% from the $4.83 we reported in 2021. In terms of capital allocation, we continue to look at reasonably priced tuck-in acquisitions with revenue growth rates similar to our current business in the areas of analytics, digital capabilities, and solutions in insurance and healthcare. In addition, we will continue to spend on internally developed capabilities and expect capital expenditures to be in the range of $40 million to $45 million. We anticipate our buyback program will continue at a pace similar to 2021. Looking at the second quarter, we expect the revenue to be similar to the first quarter results due to one-time revenue in the first three months of 2022. Adjusted EPS in the second quarter will be lower than the first quarter due to annual wage increments starting April 1st, higher return-to-office expenses as we gradually return to the office, investments in digital transformations, and acquisition-related costs. In conclusion, we have started 2022 with very good momentum. Our pipeline of opportunities continues to grow with larger deal sizes, expansions of work with our long-term clients and new client wins. In addition, we remain vigilant on our cost structure as the business grows while addressing market volatility. Based on the visibility we have for the rest of the year, we are confident in our 2022 growth, which will enable us to drive shareholder value. Now, Rohit and I would be happy to take your questions.

We'll pause for just a moment to compile the Q&A roster. Your first question comes from Bryan Bergin from Cowen. Your line is open.

Good morning. Thank you. Start on the outlook here. So strong Q1 beat here across the board and you raised the FY22 revenue outlook on top of that Q1 outperformance, Maurizio, I know you mentioned the Q1 revenue includes, I think 2% that may not occur. So can you dig into that more? What is that? And then the EPS looks like it shifted around a little bit within the year. Can you talk about any notable changes in the margin expectations that would drop versus three months ago? Just curious if there's something undoubtedly changed or if it's more about this is Q1 going early in the year dynamic that drove your approach there.

We experienced unexpected higher volumes in the first quarter in both our Digital Operations and Solutions and Analytics businesses, which we did not anticipate. We do not expect these volumes to continue, so we have classified them as one-time. That's why we wanted to bring it to everyone's attention on this call. Regarding our EPS guidance, it's still early in the year, as we are only three months into 2022. There is a degree of uncertainty for the remainder of the year. We are facing some wage inflation that we are managing in critical areas of our business, and we want to ensure we forecast that properly. We are also seeing some attrition in parts of our workforce, particularly in the Philippines. As we start returning to the office, we anticipate an increase in our expenses throughout the year. Therefore, we have raised our EPS guidance, but since it is early in the year, you could consider it conservative. We will adjust our guidance as we gain more visibility moving forward.

That makes sense. And just a follow-up on the workforce, so you did have healthy additions to headcount in spite of that attrition spiking, can you just dig in a little bit more? Is it any more than just in the Philippines where you're seeing that occur? And then just your comfort levels as far as where in the workforce that's occurring. And just plans for remediation.

Sure. Bryan. We've added a significant amount of employees in the first quarter of 2022, and that's largely being driven by the growth that we're seeing from our existing clients and the new clients that we've had. We did have a higher attrition rate in the first quarter of FY22, and that was principally driven by attrition that went up in the Philippines. I think it went up pretty much for the entire industry in the Philippines. And there's a considerable amount of uncertainty out there that drove that attrition rate up there. We feel confident in our ability to recruit, onboard and manage service delivery for our clients and execute to the business that we have won. We've got a very strong brand positioning among our employee base and in the market for us to be able to attract and retain this talent. So this is something which is a core part of our business and we invest very significantly in this area, and we feel confident in our ability to continue to add and build and grow our business.

Your next question comes from the line of Maggie Nolan from William Blair. Your line is open.

Hi. Thank you. Can you talk a little bit about your top account dynamics? What you're seeing amongst kind of the top couple in those buckets that you break out?

Sure, Maggie. Our top accounts are actually continuing to diversify and our customer concentration continues to come down as we grow our business with existing clients and add new client relationships. We've got really strong client relationships that are reflected in the growth rate of our existing strategic accounts. I think our top 10 accounts continue to grow very, very nicely. They grew very sharply in 2021, and we think we will continue to grow that in FY22 as well. The number of new service offerings and the share of wallet that we can take with these clients continues to remain a huge opportunity for us. Our penetration with these clients is still relatively low. And therefore, our ability to continue to grow and expand with these clients is very high. As we engage with them in different buying centers, in different geographies, in different product lines, we believe that we can continue to grow with our existing clients and with our top clients in a meaningful way.

Okay. Thank you. And then can you provide a little more detail on the circumstances of the transitioning healthcare clients in ops business and what that transition timeline looks like, and when you expect the impact to annualize.

Sure. This is something which we had disclosed previously as well, and this is for a client that wanted to transition some of the work into our captive format. That's something which we are helping that client in terms of that transition. We've got a terrific relationship with that client, but we are helping them on the clinical side in terms of the conversion and building up our capabilities on the analytics side where we can assist them. This type of transition happens pretty much all the time. It’s something which is pretty normal in our business. The key thing to take a look at is the combined growth rate of the Analytics business and of the Healthcare business. And if you see the combined growth rate of the healthcare business, that's very healthy in double digits, despite the transition. So we're actually very happy with how the overall portfolio is performing.

Your next question comes from the line of Ashwin Shirvaikar from Citibank. Your line is open.

Thank you. Good results. I'd like to start asking about the top-line in your prepared remarks you've mentioned the trend towards larger contracts. The example given was specific for Analytics, but I just want to broaden out to say, are you seeing larger contracts across the board? Or is it still more sporadic? And then on the ramping of those contracts, is that also happening faster? Does that down the road just kind of lead to a sustainably higher growth rate?

Thanks, Ashwin. So yes, we are seeing very strong demand environment in the marketplace right now. We are seeing large contracts, not only in our data analytics business but also in our Digital Operations and Digital Solutions business. And that's because clients are engaging with us much more holistically. They're looking at enterprise-wide processes they want us to run and manage. So that's being very helpful. We're also seeing the speed of decision-making accelerate. And in the past, the sales cycle might have typically been a 12 to 18 month sales cycle for our Digital Operations deal. Today, it's about six months in terms of that speed. So frankly, larger contracts, faster decision making, and many more services that we can provide to our clients. And it's a very demand-rich target environment right now.

Got it. Regarding the Philippines and the regulatory uncertainty related to the return to office, how do you see that developing? I understand it's still early, but is there a way to categorize the types of employees who might be resistant to returning? Are there longer-term strategic options for potentially relocating work outside the country? Can we discuss this question further?

Sure. So look, I think in the Philippines, the regulatory authorities have asked for all employees to be brought back to the office 100% and that change was effective 1st of April. However, the way in which they are defining that is something which is getting clarified in terms of how many days in a month does an employee need to be in the office, what's categorizes a person who's working from the office versus working from home, versus working remotely. I think this will all get stabilized and it will get clarified over the next few months. There are also presidential elections that are taking place in the Philippines in the next quarter or so. So that's slightly that the alignment with the new administration will sort itself out. As far as the employees are concerned, we want to make sure that we remain flexible to meet the needs of our employees. But we also want to balance it out with the needs of our clients, with the regulatory requirements, and our ability for us to get together to collaborate and to innovate. So it's really balancing out the employee flexibility, customer requirement, regulatory regime in a particular jurisdiction, and our overall thesis around coming together and collaborating and innovating. We're going to work towards that with an optimal mix of that. And I'm sure over the next few months this will stabilize.

Thanks for the clarification. The other part of your question was whether there is a greater focus on work-related tasks as opposed to healthcare, especially from the Philippines, or if that's not accurate.

Yes, that's correct. We have clinical resources in the Philippines, including qualified nurses as well as U.S.-licensed and registered nurses. We do perform work there, but it's important to note that much of what we do is now fully integrated with our digital capabilities. This involves high-end, complex tasks that utilize extensive data analytics and digital technology in our operations.

Your next question comes from the line of Puneet Jain from JPMorgan. Your line is open.

Hey, thanks for taking my question and Rohit, it was nice to know that you are seeing larger-sized deals in analytics, but how defensive that business can be in an event of a macro slowdown? Like some of the work that's been committed, the new contracts, how defensive some of that work can be if there is a macro slowdown? And if you can also talk about the impact on Digital Operations in the event of a macro slowdown.

Certainly, Puneet. As we have consistently noted over the years, during periods of high economic growth, our services and solutions are highly valued by our clients because they rely on us to support that growth. Conversely, in times of economic slowdown or recession, companies need to optimize their cost structures and utilize data effectively to ensure that their investments yield the highest returns, which again highlights the necessity of our services. We believe we've demonstrated this across various economic cycles. The importance of our Analytics business might actually increase during a downturn, as every dollar spent must generate a return. Clients are increasingly focused on return on investment. As we help improve their business outcomes, the need for our services becomes even more essential. Therefore, regardless of whether the economy is growing or facing a downturn, we believe our business services will remain crucial to our clients.

Understood. And then on wage inflation, can you size the level of wage inflation you're seeing? I know you talked about you seeing high wage inflation in Analytics, digital, and cloud areas. Can you talk about how much wage inflation there is compared to last year? And also, is there any difference in wage inflation across different regions? This Philippines issue, is this mostly about taxes or inflation, or are you also seeing higher wage inflation there?

Right. The wage inflation Puneet, as you know, is a very complex topic because it varies by geography, it varies by level, it varies by skill set and because we had so many new employees, it also varies by tenure of the employees and it's a very complicated issue that's being put to work. What we can tell you is that we factored in a much higher salary increment this year in 2022 as compared to previous years. And that's very meaningful and very significant. It definitely is much more in the areas where there is a scarcity of talent, which is all around Analytics, digital, and Cloud and technology. Those scarce resources definitely are areas where we're seeing the market comp. Conclusion going up more significantly, and in order to remain competitive, we are matching those kinds of incremental there. The wage inflation in general that we've got. We now have a salary increment side which typically is on first of April and then we also have another increment cycle for our senior employees, which is typically on first of October. So that's how it kind of gets factored in for us throughout the year.

Understood. Thank you.

Your next question comes from the line of Mayank Tandon from Needham and Company. Your line is open.

Good morning. This is Kyle Peterson speaking on behalf of Mayank. Thank you for the opportunity to ask questions. I wanted to discuss demand, as the growth outlook appears very strong. The guidance for the year suggests that you are exceeding your updated medium-term growth targets. What do you believe is the primary factor contributing to this? Is it that the demand environment is better than what you would expect in a typical medium-term scenario, or are you observing market share gains? What do you think is driving the stronger organic growth?

Yeah. I think there are two fundamental factors. One, there is definitely a change in the marketplace which we've spoken about before. The consumer has adopted digital in a much more holistic fashion. And therefore, all companies are trying to embrace digital transformation and use data analytics in a much more meaningful way and that's driving the demand up. And the second is the positioning of our company, which has been strategically and thoughtfully and deliberately put together over the past several years, is meant to address the most strategic areas of our client's requirements. And we believe that our focus on data is resonating really, really strongly in the marketplace. Every single client is looking to create value out of data, and they find the partnership with EXL to be very, very strategic and very helpful in their endeavors, in terms of providing the right kind of an experience to their end consumers and being able to optimize on pricing, on underwriting, on customer acquisition, on settlement of claims across the multiple set of activities. So it seems to be resonating very broadly. I would say both the demand, the pull factor, which is driven by the consumer changing its behavior, and clients wanting to adopt this transformation much more aggressively and much more quickly. And our positioning and our capability set seems to resonate with the highest growth areas in the marketplace.

Makes sense and so helpful. And then just a quick follow-up on M&A. You guys mentioned that you are still on the lookout for reasonably priced tuck-in deals. Have you noticed with the recent market volatility that evaluations gotten a little more reasonable where it's probably a little easier to find attractive targets at good prices or has some of the recent market volatility not really trickled down to some of the private market and M&A valuations?

I would characterize the M&A market as still pretty frothy. I think valuations are still fairly high right now. We were active on a weekly basis looking at many different opportunities that come our way. And those areas that we have been looking at specifically, Analytics, within digital capabilities and solutions within insurance and healthcare. But we haven't really seen too much of a change in terms of valuations. But again, it's similar to the Clairvoyant transaction that we did. It needs to be very strategic and we need to be at a reasonable price for us to move forward on M&A, which will become a bigger portion of our growth story going forward.

I guess, good quarter.

Your next question comes from the line of Moshe Katri from Wedbush Securities. Your line is open.

Thanks. I have two questions, one specific and one broader. Did you discuss guidance for margins for this calendar year? I'm not certain if you've compared those levels to last year. On a bigger note, regarding visibility and the potential for an economic slowdown, I recall that in the past, budgets for BPO and some of the work you were doing weren't typically sourced from IT or operational budgets. These budgets tend to be more defensive. Has that shifted in recent years regarding the types of clients you are engaging with? Any insight on that would be appreciated. Thanks.

I want to address the first question regarding margins. We provided medium-term guidance indicating margins of 17% to 18% for the coming years. While we have not specified margin guidance for 2022, if you calculate from EPS to revenue, you will find margins in the low 18% range, which aligns with the guidance we gave in February. We feel reasonably confident about that for the year. However, there are several uncertainties regarding costs in 2022. Despite that, we remain comfortable with that margin range as a minimum for 2022.

And in response to the broader question and the visibility and the defensiveness of our business mix, Moshe, I think the primary buyer for us continues to remain the Chief Operating Officer and the business head. And frankly, IT budgets are being folded in alongside with the business. It's become part and parcel of running and managing the business. So we do think the Digital Operations and Digital Solutions business will remain very defensive even if there is a slowdown. And again, the data analytics part of our business is a defensive business because most of the work that we do there is all around helping clients do customer acquisition and customer management, do pricing and risk management, and do operational analytics and optimize their cost structure. So frankly, all of these are ongoing activities that are going to be needed even in the event of a slowdown.

And just the last one here. During the last cycle when we got into a slowdown, we did get an impact on sales cycles, right? These typically get much longer when we go through a slowdown. Is that the right way of looking at it?

Yes. I think that's correct. You might see the sales cycle increase in timeline, but I think in terms of existing clients wanting to do more business, that's probably going to continue and it's probably going to accelerate at the right time.

Your next question comes from the line of Vince Colicchio. Your line is open.

Hi Rohit, can you provide some insight on the new logos for the quarter? You mentioned that your new deals are experiencing a stronger startup process in terms of business rollout. Are you noticing this trend with most of the new logos?

Yes, Vince. So one of the things, which we are very happy about is not only the number of new logos that we've signed up, but the quality of the new logos. We are also happy that it's well balanced between Digital Operations and Solutions and our Data Analytics business. Some of these logos, we believe, have got tremendous opportunity for us to be able to build up and scale-up. The initial size of the engagement is much larger as compared to previous years. So frankly, we're very happy with the new logo sign-ups.

I'm not sure if you've already mentioned this, but I've heard from others that in the Philippines, despite the increase in attrition, there is a significant supply to manage through this. Would you agree that this is the case for you?

Yes. That is very true. Keep in mind one thing that as an operating business, we've got processes and systems in place to be able to manage through periods of high attrition because of the additional bench that we carry and the trained resources that we carry. Frankly, from a service delivery perspective, we're able to maintain that and manage that even if the attrition rate is high in a particular quarter. The availability of talent in the Philippines continues to be good, and we're not finding a challenge in terms of our recruiting abilities. And particularly when it comes to recruiting at the entry-level, the availability of talent is actually pretty strong.

And lastly, are there any other regulatory issues bubbling up in other offshore locations we should be aware of?

No. There's none that have bubbled up. But I think this entire piece around the future of work and the future operating business model, that's going to continue to evolve and it's likely going to settle down. And so every jurisdiction is going to come up with its own definition of how they'd like the workforce to operate between the facilities, between home and the hybrid model. And I think this will continue to evolve as we go along. And the good thing is, it's likely to evolve to a place that will provide for greater flexibility to our employees, allow for our clients to be able to take advantage of that. And it's going to be good for the overall growth of our industry. So we are very, very optimistic in terms of how this might settle down.

We have a follow-up question from the line of Ashwin Shirvaikar from Citibank. Your line is open.

Thank you. The question was on the amended credit agreement, the upsizing as well. How should we think of this is more offense or defense? Offense be looking at more M&A, defense being I would say recession fears rising and you're just being careful and bulking up your optionality and flexibility?

Hi, Ashwin. It's Maurizio. We've restructured our revolver, which was set to terminate in November, and now it's current. We decided to increase it for two main reasons. One is to enhance our operational flexibility in terms of available capital. The other reason is to ensure that if we need capital for future mergers and acquisitions, we have a larger facility to take advantage of those opportunities. As we mentioned regarding M&A, we aim to grow the company both organically and through acquisitions. This approach will enable us to enhance our capabilities and accelerate growth. So, I would say it serves both purposes: it provides operational capacity if needed and allows us to capitalize on potential M&A opportunities down the line.

Your next question comes from the line of David Grossman from Stifel. Your line is open.

Good morning. Thank you. I'm wondering if I could just follow-up a couple of the margin questions that have been asked. I think you mentioned that you typically have a wage cycle, one in the 1st of April, one in the 1st of October. When you think about the guidance that you've provided for the year, have you provided some incremental wage pressure in that guidance relative to what you're planning on today?

Yes, David. We have provided for a higher salary increment in FY22 as compared to previous years, and that is factored in our guidance.

Yeah, I think that the question, Rohit, was whether you've gone beyond what you're currently planning as a provision, if you will, for incremental wage inflation extending through the year?

So I think we've just gone through that increment cycle, David, in April. If there's a need for us to be relooking at that, we'll evaluate that a few months down the line. We do have an opportunity to assess that in the October cycle. So six months down the line, we do have an opportunity. At this point in time, we believe we've adequately planned for it and adjusted for it already.

And what do you expect the gross margins? How do you expect them to trend over the course of the year? Should we expect them to remain relatively flat or do you see some movements over the course of the year?

They'll trend similarly to where we are today, maybe a little bit of an uptake going forward. Keep in mind the second quarter, we do have a number of expenses coming onboard. The biggest piece of the increment is April 1st and then there's a smaller piece on October 1st. So that's usually an area that it affects the margin to a certain extent. And it's a little bit what I talked about in terms of second quarter guidance both on revenue and on EPS that's affecting it. But overall, we're going to manage to that adjusted operating margin that we gave guidance to, and also within the guidance for 2022. And it gets back to focusing on the overall margin for the year in the low 18% range because that's what you're going to back-calculate from EPS.

Right. And then one last question. I know, Rohit, you don't like to talk about specifics around backlog, pipeline, and bookings, and a question came up earlier about that, but can you give us any incremental color at all on the pace and cadence of bookings and how you're thinking about bookings on a year-over-year basis in calendar FY22?

Sure, David. So first of all, we did sign up a large number of new clients in 2021, and so that's something which results in revenue growth in FY22, and that feels very good. The pipeline strength we've spoken about in the past, that's gone up more than twice, the pipeline that used to exist previously. So that's been very strong. Our win rate is actually a very healthy win rate, so we feel very good about the opportunities that we have in the pipeline and our ability to convert. With the shortening of the sales cycle and larger deals coming into the pipeline, the quality of the pipeline, the backlog, and the business momentum looks pretty solid. So from a qualitative standpoint, it's all looking very healthy.

Last question comes from the line of Robbie Bamberger from Baird Capital. Your line is open.

Thanks for taking my question. Are you guys seeing more companies starting to outsource because they can't deal with employee attrition themselves? I guess Digital Solutions and Analytics are a big selling point too, but are you seeing that accelerating trend towards outsourcing given this tougher hiring environment?

Yes, Robbie. I think that's a reality which most of our clients face. Our clients, if you just think about their business model, they're seeing strong growth and they're seeing a talent scarcity. They're seeing a need for changing their business models, enabling digital transformation, leveraging data, and getting into new areas. Therefore partnering with providers like EXL becomes a necessity for them. So yes, we are seeing that take place. Many of our clients, particularly in the markets in which we operate, in the U.S., UK, Europe, and in Australia, are finding it difficult to recruit talent and leveraging a strategic partner like EXL becomes an imperative for them.

Yes. Thank you. And then one follow-up just on inflation. So how easily have you've been able to raise pricing for your existing and new clients just given this inflation environment?

So raising pricing is never easy. But look, in this kind of an environment, it's absolutely necessary and important. We've started dialogue with our clients in terms of making sure that the commercial arrangements are appropriate so that we can continue to be a strong sustainable partner for them and provide them with the right talent, the right skill sets, tenure, and the right experience. This is something which is obviously being done client by client. And we are working through this. It is a change from the way in which the entire industry operated previously. So it's a bit of change management. Our advantage is that the work that we do for our clients is higher on the complexity spectrum. And our ability to demonstrate the value that we are generating for them is very transparent. Therefore, asking for the price increase is something which we hope will be an easier conversation with our clients.

Thank you for all the questions. This concludes today's conference call. Thank you all for joining. You may now disconnect.