ExlService Holdings Inc

Previous wording

For the three months ended June 30, 2024, we generated revenues of $448.4 million compared to revenues of $405.0 million for the three months ended June 30, 2023, an increase of $43.4 million, or 10.7%. For the six months ended June 30, 2024, we generated revenues of $884.9 million compared to revenues of $805.6 million for the six months ended June 30, 2023, an increase of $79.3 million, or 9.8%.

Current wording

For the three months ended September 30, 2024, we generated revenues of $472.1 million compared to revenues of $411.0 million for the three months ended September 30, 2023, an increase of $61.1 million, or 14.9%. For the nine months ended September 30, 2024, we generated revenues of $1,356.9 million compared to revenues of $1,216.6 million for the nine months ended September 30, 2023, an increase of $140.3 million, or 11.5%.

Previous wording

We serve clients mainly in the United States and the United Kingdom, with these two regions generating 82.7% and 11.8%, respectively, of our total revenues for the three months ended June 30, 2024, and 84.1% and 10.8%, respectively, of our total revenues for the three months ended June 30, 2023. For the six months ended June 30, 2024, these two regions generated 82.8% and 11.7%, respectively, of our total revenues and 84.4% and 10.6%, respectively, of our total revenues for the six months ended June 30, 2023.

Current wording

We serve clients mainly in the United States and the United Kingdom, with these two regions generating 82.2% and 12.0%, respectively, of our total revenues for the three months ended September 30, 2024, and 83.5% and 11.3%, respectively, of our total revenues for the three months ended September 30, 2023. For the nine months ended September 30, 2024, these two regions generated 82.6% and 11.8%, respectively, of our total revenues and 84.1% and 10.8%, respectively, of our total revenues for the nine months ended September 30, 2023.

Previous wording

For the three months ended June 30, 2024 and 2023, our total revenues from our top ten clients accounted for 33.0% and 33.8% of our total revenues, respectively. For the six months ended June 30, 2024 and 2023, our total revenues from our top ten clients accounted for 32.9% and 34.3% of our total revenues, respectively. Although we continue to develop relationships with new clients to diversify our client base, we believe that the loss of any of our top ten clients could have a material adverse effect on our financial performance.

Current wording

For the three months ended September 30, 2024 and 2023, our total revenues from our top ten clients accounted for 34.2% and 34.6% of our total revenues, respectively. For the nine months ended September 30, 2024 and 2023, our total revenues from our top ten clients accounted for 33.2% and 34.2% of our total revenues, respectively. Although we continue to develop relationships with new clients to diversify our client base, we believe that the loss of any of our top ten clients could have a material adverse effect on our financial performance.

Previous wording

There have been no significant changes in our critical accounting policies and estimates during the three and six months ended June 30, 2024, as compared to the critical accounting policies and estimates referred in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Critical Accounting Policies and Estimates” and Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

There have been no significant changes in our critical accounting policies and estimates during the three and nine months ended September 30, 2024, as compared to the critical accounting policies and estimates referred in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under “Critical Accounting Policies and Estimates” and Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Previous wording

Revenues for the three months ended June 30, 2024 were up by $43.4 million, or 10.7%, compared to the three months ended June 30, 2023, driven primarily by revenue growth from our new and existing clients in the Insurance, Emerging Business and Analytics reportable segments.

Current wording

Revenues for the three months ended September 30, 2024 were up by $61.1 million, or 14.9%, compared to the three months ended September 30, 2023, driven primarily by revenue growth from our new and existing clients in all of our reportable segments.

Previous wording

Revenue growth in Insurance of $40.0 million was primarily driven by expansion of business from our new and existing clients of $40.5 million. This was partially offset by a loss of $0.5 million, mainly attributable to the depreciation of the Indian rupee and the Australian dollar against the U.S. dollar during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

Revenue growth in Insurance of $21.2 million was primarily driven by expansion of business from our new and existing clients of $20.6 million and an increase in revenues of $0.6 million, mainly attributable to the appreciation of the U.K. pound sterling and the Australian dollar against the U.S. dollar during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Previous wording

Revenue growth in Healthcare of $0.9 million was primarily driven by expansion of business from our existing clients of $1.6 million, partially offset by lower revenues associated with the ramp-down of certain existing clients of $0.7 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Current wording

Revenue growth in Healthcare of $4.3 million was primarily driven by expansion of business from our existing clients of $4.3 million during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Previous wording

Revenue growth in Analytics of $20.5 million was primarily driven by higher volumes in our annuity and project-based engagements from our new and existing clients of $20.1 million and an increase in revenues of $0.4 million that was mainly attributable to the appreciation of the U.K. pound sterling against the U.S. dollar during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

Revenue growth in Analytics of $20.9 million was primarily driven by higher volumes in our annuity and project-based engagements from our new and existing clients of $20.5 million, including incremental revenue from our August 2024 acquisition of ITI Data and an increase in revenues of $0.4 million, mainly attributable to the appreciation of the U.K. pound sterling against the U.S. dollar during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Previous wording

Cost of revenues for the three months ended June 30, 2024 increased by $28.9 million, or 11.4% compared to the three months ended June 30, 2023. The increase in cost of revenues was primarily due to increases in employee-related costs including restructuring costs and technology costs, partially offset by foreign exchange gain, net of hedging. Our gross margin for the three months ended June 30, 2024 was 37.1%, compared to 37.5% for the three months ended June 30, 2023, a decrease of 40 basis points (“bps”) primarily driven by the impact of restructuring costs of 70 bps, partially offset by higher revenues during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Current wording

Cost of revenues for the three months ended September 30, 2024 increased by $37.8 million, or 14.8% compared to the three months ended September 30, 2023. The increase in cost of revenues was primarily due to increases in employee-related costs and technology costs, partially offset by foreign exchange gain, net of hedging. Our gross margin for the three months ended September 30, 2024 was 37.8%, compared to 37.7% for the three months ended September 30, 2023, an increase of 10 basis points (“bps”).

Previous wording

The increase in cost of revenues in Healthcare of $1.2 million for the three months ended June 30, 2024 was primarily due to increases in employee-related costs of $1.8 million on account of higher headcount and wage inflation, partially offset by foreign exchange gain, net of hedging of $0.6 million. Gross margin in Healthcare decreased by 230 bps during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to lower revenues associated with the ramp-down of certain existing clients and higher operating expenses during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Current wording

The increase in cost of revenues in Healthcare of $3.8 million for the three months ended September 30, 2024 was primarily due to increases in employee-related costs of $3.1 million on account of higher headcount and wage inflation, higher technology costs of $0.8 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs of $0.3 million, partially offset by foreign exchange gain, net of hedging of $0.4 million. Gross margin in Healthcare decreased by 320 bps during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to investment in ramp-ups in certain existing clients during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Previous wording

The increase in cost of revenues in Emerging Business of $7.3 million for the three months ended June 30, 2024 was primarily due to increases in employee-related costs of $7.6 million on account of higher headcount, restructuring costs and wage inflation and higher technology costs of $0.8 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model, partially offset by foreign exchange gain, net of hedging of $1.1 million. Gross margin in Emerging Business decreased by 210 bps during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to investment in ramp-ups in certain new and existing clients during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Current wording

The increase in cost of revenues in Emerging Business of $10.2 million for the three months ended September 30, 2024 was primarily due to increases in employee-related costs of $9.0 million on account of higher headcount and wage inflation, higher technology costs of $1.0 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs of $0.7 million, partially offset by foreign exchange gain, net of hedging of $0.5 million. Gross margin in Emerging Business decreased by 220 bps during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to investment in ramp-ups for certain new and existing clients during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Previous wording

The increase in SG&A expenses of $18.1 million was primarily due to increases in employee-related costs of $8.5 million on account of higher headcount and wage inflation, higher investments in digital and generative AI capabilities of $4.4 million, higher sales and marketing spend of $1.4 million, restructuring costs, litigation settlement costs and associated legal fees of $3.1 million and higher other operating costs of $1.2 million. This was partially offset by foreign exchange gain, net of hedging of $0.5 million, during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Current wording

The increase in SG&A expenses of $11.9 million was primarily due to increases in employee-related costs of $9.8 million on account of higher headcount and wage inflation, including incremental cost related to our August 2024 acquisition of ITI Data, higher investments in digital and generative AI capabilities of $2.6 million, and higher other operating costs of $0.2 million. This was partially offset by lower sales and marketing spend of $0.7 million during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Previous wording

The increase in depreciation expense of $0.9 million was primarily due to investments in digital capabilities, computers and networking equipment during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The decrease in intangibles amortization expense of $1.1 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023 was primarily due to end of useful lives for certain intangible assets.

Current wording

The increase in depreciation expense of $2.0 million was primarily due to investments in digital capabilities, computers and networking equipment during the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase in intangibles amortization expense of $0.2 million was primarily due to amortization of intangibles associated with our August 2024 acquisition of ITI Data, partially offset by decrease in intangibles amortization expense due to end of useful lives for certain intangible assets during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Previous wording

Income from Operations. Income from operations decreased by $3.4 million, or 5.2%, from $64.9 million for the three months ended June 30, 2023 to $61.5 million for the three months ended June 30, 2024, primarily due to higher SG&A expenses, partially offset by higher revenues during the three months ended June 30, 2024.

Current wording

Income from Operations. Income from operations increased by $9.2 million, or 15.2%, from $60.2 million for the three months ended September 30, 2023 to $69.4 million for the three months ended September 30, 2024, primarily due to higher revenues and higher gross margins, partially offset by higher SG&A expenses during the three months ended September 30, 2024.

Previous wording

Foreign Exchange Gain, net. Foreign exchange gains and losses are primarily attributable to the movement of the U.S. dollar against the Indian rupee, the Philippine peso, the U.K. pound sterling and the South African rand during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The average exchange rate of the U.S. dollar against the Indian rupee increased from 82.20 during the three months ended June 30, 2023 to 83.42 during the three months ended June 30, 2024. The average exchange rate of the U.S. dollar against the Philippine peso increased from 55.58 during the three months ended June 30, 2023 to 58.29 during the three months ended June 30, 2024. The average exchange rate of the U.K. pound sterling against the U.S. dollar increased from 1.25 during the three months ended June 30, 2023 to 1.26 during the three months ended June 30, 2024. The average exchange rate of the U.S. dollar against the South African rand decreased from 19.02 during the three months ended June 30, 2023 to 18.53 during the three months ended June 30, 2024.

Current wording

Foreign Exchange Gain, net. Foreign exchange gains and losses are primarily attributable to the movement of the U.S. dollar against the Indian rupee, the Philippine peso, the U.K. pound sterling and the South African rand during the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The average exchange rate of the U.S. dollar against the Indian rupee increased from 82.69 during the three months ended September 30, 2023 to 83.79 during the three months ended September 30, 2024. The average exchange rate of the U.S. dollar against the Philippine peso increased from 56.02 during the three months ended September 30, 2023 to 56.84 during the three months ended September 30, 2024. The average exchange rate of the U.K. pound sterling against the U.S. dollar increased from 1.26 during the three months ended September 30, 2023 to 1.31 during the three months ended September 30, 2024. The average exchange rate of the U.S. dollar against the South African rand decreased from 18.49 during the three months ended September 30, 2023 to 17.74 during the three months ended September 30, 2024.

Previous wording

We recorded a foreign exchange gain, net of $0.3 million for the three months ended June 30, 2023 compared to a foreign exchange gain, net of $nil for the three months ended June 30, 2024.

Current wording

We recorded a foreign exchange gain, net of $0.4 million for the three months ended September 30, 2023 compared to a foreign exchange gain, net of $0.3 million for the three months ended September 30, 2024.

Previous wording

Interest expense. Interest expense increased from $3.2 million for the three months ended June 30, 2023 to $5.3 million for the three months ended June 30, 2024, primarily due to a higher average outstanding balance under our revolving credit facility and a higher effective interest rate of 6.5% during the three months ended June 30, 2024, compared to 6.2% during the three months ended June 30, 2023.

Current wording

Interest expense. Interest expense increased from $3.4 million for the three months ended September 30, 2023 to $5.5 million for the three months ended September 30, 2024, primarily due to higher average borrowings during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Previous wording

Other income, net increased by $0.9 million, from $2.6 million for the three months ended June 30, 2023 to $3.5 million for the three months ended June 30, 2024. The increase is primarily due to higher yield on our investments of $0.8 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Current wording

Other income, net increased by $3.5 million, from $0.8 million for the three months ended September 30, 2023 to $4.3 million for the three months ended September 30, 2024. The increase is primarily due to higher yield on our investments of $0.9 million during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and recognition of contingent consideration liability of $2.5 million related to our December 2021 acquisition of Clairvoyant AI, Inc. (“Clairvoyant”) during the three months ended September 30, 2023.

Previous wording

Income Tax Expense. The effective tax rate decreased from 24.1% during the three months ended June 30, 2023 to 23.2% during the three months ended June 30, 2024. We recorded income tax expense of $13.9 million and $15.6 million for the three months ended June 30, 2024 and 2023, respectively. The decrease in income tax expense was primarily as a result of lower profit during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, partially offset by higher credits during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Current wording

Income Tax Expense. The effective tax rate decreased from 24.4% during the three months ended September 30, 2023 to 22.6% during the three months ended September 30, 2024. We recorded income tax expense of $15.5 million and $14.2 million for the three months ended September 30, 2024 and 2023, respectively. The increase in income tax expense was primarily as a result of higher profit during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, partially offset by higher excess tax benefits related to stock-based compensation during the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Previous wording

Net Income. Net income decreased from $49.1 million for the three months ended June 30, 2023 to $45.8 million for the three months ended June 30, 2024, primarily due to a decrease in income from operations of $3.4 million, higher interest expense of $2.1 million and lower foreign exchange gain, net of $0.3 million, partially offset by a lower income tax expense of $1.6 million and higher other income, net of $0.9 million.

Current wording

Net Income. Net income increased from $43.9 million for the three months ended September 30, 2023 to $53.0 million for the three months ended September 30, 2024, primarily due to an increase in income from operations of $9.2 million and higher other income, net of $3.5 million, partially offset by higher interest expense of $2.1 million, higher income tax expense of $1.3 million and lower foreign exchange gain, net of $0.1 million.

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023:

Previous wording

Revenues for the six months ended June 30, 2024 were up by $79.3 million, or 9.8%, compared to the six months ended June 30, 2023, driven primarily by revenue growth from our new and existing clients in the Insurance, Emerging Business and Analytics reportable segments.

Current wording

Revenues for the nine months ended September 30, 2024 were up by $140.3 million, or 11.5%, compared to the nine months ended September 30, 2023, driven primarily by revenue growth from our new and existing clients in all of our reportable segments.

Previous wording

Revenue growth in Healthcare of $0.5 million was primarily driven by expansion of business from our existing clients of $2.5 million, partially offset by lower revenues associated with the ramp-down of certain existing clients of $2.0 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

Revenue growth in Healthcare of $4.8 million was primarily driven by expansion of business from our existing clients of $4.8 million during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

Revenue growth in Emerging Business of $18.3 million was primarily driven by expansion of business from our new and existing clients of $18.0 million and an increase in revenues of $0.3 million that was mainly attributable to the appreciation of the U.K. pound sterling against the U.S. dollar during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

Revenue growth in Emerging Business of $32.9 million was primarily driven by expansion of business from our new and existing clients of $32.1 million and an increase in revenues of $0.8 million that was mainly attributable to the appreciation of the U.K. pound sterling against the U.S. dollar during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

Revenue growth in Analytics of $11.6 million was primarily driven by higher volumes in our annuity and project-based engagements from our new and existing clients of $11.6 million during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Current wording

Revenue growth in Analytics of $41.4 million was primarily driven by higher volumes in our annuity and project-based engagements from our new and existing clients of $40.6 million, including incremental revenue from our August 2024 acquisition of ITI Data and an increase in revenues of $0.8 million that was mainly attributable to the appreciation of the U.K. pound sterling against the U.S. dollar during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

Cost of revenues for the six months ended June 30, 2024 increased by $50.8 million, or 10.1%, compared to the six months ended June 30, 2023. The increase in cost of revenues was primarily due to increases in employee-related costs including restructuring costs and technology costs, partially offset by foreign exchange gain, net of hedging. Our gross margin for the six months ended June 30, 2024 was 37.2% compared to 37.4% for the six months ended June 30, 2023, a decrease of 20 bps primarily driven by the impact of restructuring costs of 30 bps, partially offset by higher revenues and operational efficiencies during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

Cost of revenues for the nine months ended September 30, 2024 increased by $88.6 million, or 11.7%, compared to the nine months ended September 30, 2023. The increase in cost of revenues was primarily due to increases in employee-related costs including restructuring costs and technology costs, partially offset by foreign exchange gain, net of hedging. Our gross margin for the nine months ended September 30, 2024 was 37.4% compared to 37.5% for the nine months ended September 30, 2023, a decrease of 10 bps.

Previous wording

The increase in cost of revenues in Insurance of $11.2 million for the three months ended June 30, 2024 was primarily due to increases in employee-related costs of $10.7 million on account of higher headcount, restructuring costs and wage inflation, higher technology costs of $1.2 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs of $1.1 million, partially offset by foreign exchange gain, net of hedging of $1.8 million. Gross margin in Insurance increased by 160 bps during the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to higher revenues and operational efficiencies during the three months ended June 30, 2024, compared to the three months ended June 30, 2023.

Current wording

The increase in cost of revenues in Insurance of $35.0 million for the nine months ended September 30, 2024 was primarily due to increases in employee-related costs of $30.9 million on account of higher headcount, restructuring costs and wage inflation, higher technology costs of $3.9 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model, higher facilities costs of $3.0 million and higher other operating costs of $1.6 million, partially offset by foreign exchange gain, net of hedging of $4.4 million. Gross margin in Insurance increased by 110 bps during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to higher revenues and operational efficiencies during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

The decrease in cost of revenues in Healthcare of $0.3 million for the six months ended June 30, 2024 was primarily due to foreign exchange gain, net of hedging of $0.8 million, lower facilities costs of $0.6 million resulting from optimization of office space and lower other operating costs of $0.3 million, partially offset by increases in employee-related costs of $1.4 million on account of higher headcount and wage inflation. Gross margin in Healthcare increased by 100 bps during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to higher revenues and operational efficiencies during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

The increase in cost of revenues in Healthcare of $3.5 million for the nine months ended September 30, 2024 was primarily due to increases in employee-related costs of $4.4 million on account of higher headcount and wage inflation and higher technology costs of $0.6 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model, partially offset by lower other operating costs of $0.3 million and foreign exchange gain, net of hedging of $1.2 million. Gross margin in Healthcare decreased by 30 bps during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to increases in employee-related costs, partially offset by higher revenues during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

The increase in cost of revenues in Emerging Business of $12.3 million for the six months ended June 30, 2024 was primarily due to increases in employee-related costs of $12.7 million on account of higher headcount, restructuring costs and wage inflation, higher technology costs of $1.1 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs of $0.5 million, partially offset by foreign exchange gain, net of hedging of $2.0 million. Gross margin in Emerging Business decreased by 140 bps during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to investment in ramp-ups in certain new and existing clients during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

The increase in cost of revenues in Emerging Business of $22.5 million for the nine months ended September 30, 2024 was primarily due to increases in employee-related costs of $21.7 million on account of higher headcount, restructuring costs and wage inflation, higher technology costs of $2.0 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model and higher other operating costs of $1.3 million, partially offset by foreign exchange gain, net of hedging of $2.5 million. Gross margin in Emerging Business decreased by 170 bps during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to investment in ramp-ups for certain new and existing clients during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

The increase in cost of revenues in Analytics of $17.6 million for the six months ended June 30, 2024 was primarily due to increases in employee-related costs of $16.2 million on account of higher headcount, restructuring costs and wage inflation and higher technology costs of $3.7 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model, partially offset by lower other operating costs of $1.6 million and foreign exchange gain, net of hedging of $0.7 million. Gross margin in Analytics decreased by 130 bps during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to the impact of restructuring costs of 60 bps and increases in employee-related costs, partially offset by higher revenues and operational efficiencies during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

The increase in cost of revenues in Analytics of $27.6 million for the nine months ended September 30, 2024 was primarily due to increases in employee-related costs of $23.5 million on account of higher headcount, restructuring costs and wage inflation, including incremental cost related to our August 2024 acquisition of ITI Data, and higher technology costs of $6.5 million on account of increased subscription to cloud-based software licenses and use of the hybrid working model, partially offset by lower other operating costs of $1.0 million and foreign exchange gain, net of hedging of $1.4 million. Gross margin in Analytics decreased by 30 bps during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to the impact of restructuring costs of 40 bps and increases in employee-related costs, partially offset by higher revenues during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

The increase in SG&A expenses of $31.1 million was primarily due to higher employee-related costs of $16.6 million on account of higher headcount and wage inflation, higher investments in digital and generative AI capabilities of $8.3 million, higher sales and marketing spend of $1.9 million, restructuring costs, litigation settlement costs and associated legal fees of $3.1 million and higher other operating costs of $2.1 million. This was partially offset by foreign exchange gain, net of hedging of $0.9 million, during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

The increase in SG&A expenses of $43.0 million was primarily due to higher employee-related costs of $26.4 million on account of higher headcount and wage inflation, including incremental cost related to our August 2024 acquisition of ITI Data, higher investments in digital and generative AI capabilities of $10.9 million, higher sales and marketing spend of $1.2 million, restructuring costs, litigation settlement costs and associated legal fees of $3.1 million and higher other operating costs of $2.3 million. This was partially offset by foreign exchange gain, net of hedging of $0.9 million, during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

The increase in depreciation expense of $0.8 million was primarily due to investments in digital capabilities, computers and networking equipment during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The decrease in intangibles amortization expense of $2.1 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023 was primarily due to end of useful lives for certain intangible assets.

Current wording

The increase in depreciation expense of $2.7 million was primarily due to investments in digital capabilities, computers and networking equipment during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The decrease in intangibles amortization expense of $1.9 million was primarily due to end of useful lives for certain intangible assets, partially offset by amortization of intangibles associated with our acquisition of ITI Data in August 2024, during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

Income from Operations. Income from operations decreased by $1.3 million, or 1.0%, from $124.3 million for the six months ended June 30, 2023 to $123.0 million for the six months ended June 30, 2024, primarily due to higher SG&A expenses, partially offset by higher revenues during the six months ended June 30, 2024.

Current wording

Income from Operations. Income from operations increased by $7.9 million, or 4.3%, from $184.5 million for the nine months ended September 30, 2023 to $192.4 million for the nine months ended September 30, 2024, primarily due to higher revenues, partially offset by higher SG&A expenses during the nine months ended September 30, 2024.

Previous wording

Foreign Exchange Gain, net. Foreign exchange gains and losses are primarily attributable to the movement of the U.S. dollar against the Indian rupee, the Philippine peso, the U.K. pound sterling and the South African rand during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The average exchange rate of the U.S. dollar against the Indian rupee increased from 82.22 during the six months ended June 30, 2023 to 83.27 during the six months ended June 30, 2024. The average exchange rate of the U.S. dollar against the Philippine peso increased from 55.18 during the six months ended June 30, 2023 to 57.27 during the six months ended June 30, 2024. The average exchange rate of the U.K. pound sterling against the U.S. dollar increased from 1.24 during the six months ended June 30, 2023 to 1.26 during the six months ended June 30, 2024. The average exchange rate of the U.S. dollar against the South African rand increased from 18.46 during the six months ended June 30, 2023 to 18.74 during the six months ended June 30, 2024.

Current wording

Foreign Exchange Gain, net. Foreign exchange gains and losses are primarily attributable to the movement of the U.S. dollar against the Indian rupee, the Philippine peso, the U.K. pound sterling and the South African rand during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The average exchange rate of the U.S. dollar against the Indian rupee increased from 82.38 during the nine months ended September 30, 2023 to 83.44 during the nine months ended September 30, 2024. The average exchange rate of the U.S. dollar against the Philippine peso increased from 55.46 during the nine months ended September 30, 2023 to 57.12 during the nine months ended September 30, 2024. The average exchange rate of the U.K. pound sterling against the U.S. dollar increased from 1.25 during the nine months ended September 30, 2023 to 1.28 during the nine months ended September 30, 2024. The average exchange rate of the U.S. dollar against the South African rand decreased from 18.47 during the nine months ended September 30, 2023 to 18.41 during the nine months ended September 30, 2024.

Previous wording

Interest expense. Interest expense increased from $6.6 million for the six months ended June 30, 2023 to $8.6 million for the six months ended June 30, 2024, primarily due to a higher average outstanding balance under our revolving credit facility and a higher effective interest rate of 6.6% during the six months ended June 30, 2024, compared to 6.1% during the six months ended June 30, 2023.

Current wording

Interest expense. Interest expense increased from $10.0 million for the nine months ended September 30, 2023 to $14.1 million for the nine months ended September 30, 2024, primarily due to higher average borrowings during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

Other income, net increased by $1.6 million, from $5.8 million for the six months ended June 30, 2023 to $7.4 million for the six months ended June 30, 2024. The increase is primarily due to higher yield on our investments of $0.8 million, a decrease of $0.6 million in contingent consideration liability related to our June 2022 acquisition of Inbound Media Group, LLC as a result of fair value adjustment and lower other expenses of $0.2 million during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

Other income, net increased by $5.2 million, from $6.6 million for the nine months ended September 30, 2023 to $11.8 million for the nine months ended September 30, 2024. The increase is primarily due to higher yield on our investments of $1.5 million, lower other expenses of $0.6 million, a decrease of $0.6 million in contingent consideration liability related to our June 2022 acquisition of Inbound Media Group, LLC as a result of fair value adjustment during the nine months ended September 30, 2024, and recognition of contingent consideration liability of $2.5 million related to our December 2021 acquisition of Clairvoyant during the nine months ended September 30, 2023.

Previous wording

Income Tax Expense. The effective tax rate increased from 19.1% during the six months ended June 30, 2023 to 22.6% during the six months ended June 30, 2024. We recorded income tax expense of $27.6 million and $23.6 million for the six months ended June 30, 2024 and 2023, respectively. The increase in income tax expense was primarily as a result of lower excess tax benefits related to stock-based compensation during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, and an increase in non-deductible expenses, partially offset by lower profit during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Current wording

Income Tax Expense. The effective tax rate increased from 20.8% during the nine months ended September 30, 2023 to 22.6% during the nine months ended September 30, 2024. We recorded income tax expense of $43.1 million and $37.8 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in income tax expense was primarily as a result of higher profit during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 and lower excess tax benefits related to stock-based compensation during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Previous wording

Net Income. Net income decreased from $100.4 million for the six months ended June 30, 2023 to $94.6 million for the six months ended June 30, 2024, primarily due to higher income tax expense of $4.0 million, higher interest expense of $2.0 million and a decrease in income from operations of $1.3 million, partially offset by higher other income, net of $1.6 million.

Current wording

Net Income. Net income increased from $144.3 million for the nine months ended September 30, 2023 to $147.6 million for the nine months ended September 30, 2024, primarily due to an increase in income from operations of $7.9 million and higher other income, net of $5.2 million, partially offset by higher income tax expense of $5.3 million, higher interest expense of $4.1 million, loss from equity-method investment of $0.3 million and lower foreign exchange gain, net of $0.1 million.

Previous wording

As of June 30, 2024 and 2023, we had $276.1 million and $250.0 million, respectively, in cash, cash equivalents and short-term investments, of which $241.3 million and $224.0 million, respectively, is located in foreign jurisdictions that upon distribution may be subject to withholding and other taxes. We periodically evaluate opportunities to distribute cash among our group entities to fund our operations, expand our business and make strategic acquisitions in the United States and other geographies, and as and when we decide to distribute, we may have to accrue additional taxes in accordance with local tax laws, rules and regulations in the relevant foreign jurisdictions. During the six months ended June 30, 2024, one of our subsidiaries in India repatriated $18.3 million (net of $1.0 million withholding taxes) to the United States.

Current wording

As of September 30, 2024 and 2023, we had $325.8 million and $274.2 million, respectively, in cash, cash equivalents and short-term investments, of which $288.5 million and $256.5 million, respectively, is located in foreign jurisdictions that upon distribution may be subject to withholding and other taxes. We periodically evaluate opportunities to distribute cash among our group entities to fund our operations, expand our business and make strategic acquisitions in the United States and other geographies, and as and when we decide to distribute, we may have to accrue in the year of distribution any additional taxes required in accordance with local tax laws, rules and regulations in the relevant foreign jurisdictions. During the nine months ended September 30, 2024, one of our subsidiaries in India repatriated $18.3 million (net of $1.0 million withholding taxes) to the United States.

Previous wording

Operating Activities: Cash provided by operating activities were $53.0 million during the six months ended June 30, 2024, compared to $63.6 million during six months ended June 30, 2023, reflecting lower cash earnings and higher working capital needs. The major drivers contributing to the decrease of $10.6 million year-over-year included the following:

Current wording

Operating Activities: Cash provided by operating activities were $163.2 million during the nine months ended September 30, 2024, compared to $132.2 million during nine months ended September 30, 2023, reflecting higher cash earnings and lower working capital needs. The major drivers contributing to the increase of $31.0 million year-over-year included the following: