ExlService Holdings, Inc.

Previous wording

•our ability to successfully consummate or integrate strategic acquisitions including the impact from the impairment of goodwill and other intangible assets, if any;

Current wording

•our ability to successfully consummate or integrate announced or future strategic acquisitions, including the impact from the impairment of goodwill and other intangible assets, if any;

Previous wording

We serve clients mainly in North America, and the United Kingdom & Europe, with these two regions generating 83.0% and 14.5%, respectively, of our total revenues for the three months ended March 31, 2026 and 82.9% and 15.1%, respectively, of our total revenues for the three months ended March 31, 2025.

Current wording

We serve clients mainly in North America, and the United Kingdom & Europe, with these two regions generating 82.3% and 15.0%, respectively, of our total revenues for the three months ended June 30, 2026, and 82.2% and 15.1%, respectively, of our total revenues for the three months ended June 30, 2025. For the six months ended June 30, 2026, these two regions generated 82.6% and 14.8%, respectively, of our total revenues and 82.5% and 14.8%, respectively, of our total revenues for the six months ended June 30, 2025.

Previous wording

For the three months ended March 31, 2026 and 2025, our total revenues from our top ten clients accounted for 34.6% and 33.7% 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 June 30, 2026 and 2025, our total revenues from our top ten clients accounted for 34.1% and 33.5% of our total revenues, respectively. For the six months ended June 30, 2026 and 2025, our total revenues from our top ten clients accounted for 34.3% and 33.6% 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 months ended March 31, 2026, 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 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, 2025.

Current wording

There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2026, 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 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, 2025.

Previous wording

The following table summarizes our results of operations:

Current wording

The following table summarizes our results of operations for the three months ended June 30, 2026 and 2025:

Previous wording

Revenue growth in Insurance by 12.7% was driven by the expansion of business from our existing clients by 11.5% and new clients by 1.2% during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

Revenue growth in Insurance by 14.9% was driven by the expansion of business from our existing clients by 13.7% and new clients by 1.2% during the three months ended June 30, 2026, compared to the three months ended June 30, 2025.

Previous wording

Cost of revenues for the three months ended March 31, 2026 increased by $40.6 million, or 13.2%, compared to the three months ended March 31, 2025. The increase in cost of revenues was due to increases in employee-related costs of $35.5 million on account of higher headcount and wage inflation, and higher technology, facilities and other operating costs of $8.8 million, partially offset by a foreign exchange gain, net of hedging of $3.7 million. Our gross margin for the three months ended March 31, 2026 was 38.9%, compared to 38.6% for the three months ended March 31, 2025, an increase of 30 basis points (“bps”) primarily driven by higher revenues and operational efficiencies, partially offset by lower volumes in certain existing clients during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

Cost of revenues for the three months ended June 30, 2026 increased by $48.5 million, or 15.2% compared to the three months ended June 30, 2025. The increase in cost of revenues was due to increases in employee-related costs of $44.9 million on account of higher headcount and wage inflation, and higher technology costs of $8.4 million, facilities and other operating costs of $4.4 million, partially offset by a foreign exchange gain, net of hedging of $9.2 million. Our gross margin for the three months ended June 30, 2026 was 38.0%, compared to 37.7% for the three months ended June 30, 2025, an increase of 30 basis points (“bps”), primarily driven by higher revenues and operational efficiencies, partially offset by lower volumes from certain existing clients.

Previous wording

The increase in cost of revenues in Healthcare and Life Sciences by $12.6 million for the three months ended March 31, 2026 was due to increases in employee-related costs of $9.3 million on account of higher headcount and wage inflation, higher technology costs of $1.6 million, and higher facilities and other operating costs of $2.7 million, partially offset by foreign exchange gain, net of hedging of $1.0 million. Gross margin in Healthcare and Life Sciences increased by 140 bps, primarily due to higher volumes in certain existing clients during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

The increase in cost of revenues in Healthcare and Life Sciences by $10.8 million for the three months ended June 30, 2026 was due to increases in employee-related costs of $9.3 million on account of higher headcount and wage inflation, higher technology costs of $1.9 million, and higher facilities and other operating costs of $1.7 million, partially offset by foreign exchange gain, net of hedging of $2.1 million. Gross margin in Healthcare and Life Sciences increased by 340 bps, primarily due to higher volumes from certain existing clients during the three months ended June 30, 2026, compared to the three months ended June 30, 2025.

Previous wording

The increase in cost of revenues in Banking, Capital Markets and Diversified Industries by $6.7 million for the three months ended March 31, 2026 was due to increases in employee-related costs of $6.9 million on account of higher headcount and wage inflation, and higher technology costs of $1.1 million, partially offset by a foreign exchange gain, net of hedging of $1.0 million and lower other operating costs of $0.3 million. Gross margin in Banking, Capital Markets and Diversified Industries decreased by 40 bps, primarily due to lower volumes in certain existing clients during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

The increase in cost of revenues in Banking, Capital Markets and Diversified Industries by $11.9 million for the three months ended June 30, 2026 was due to increases in employee-related costs of $11.4 million on account of higher headcount and wage inflation, higher technology costs of $1.8 million, and higher facilities and other operating costs of $1.0 million, partially offset by foreign exchange gain, net of hedging of $2.3 million. Gross margin in Banking, Capital Markets and Diversified Industries decreased by 300 bps, primarily due to lower volumes from certain existing clients during the three months ended June 30, 2026, compared to the three months ended June 30, 2025.

Previous wording

Selling, General and Administrative (“SG&A”) Expenses. SG&A expenses as a percentage of net revenues increased from 20.2% during the three months ended March 31, 2025 to 20.4% during the three months ended March 31, 2026.

Current wording

Selling, General and Administrative (“SG&A”) Expenses. SG&A expenses as a percentage of net revenues increased from 19.2% during the three months ended June 30, 2025 to 20.9% during the three months ended June 30, 2026.

Previous wording

The increase in SG&A expenses by $15.0 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025 was primarily due to increases in employee-related costs of $11.8 million on account of higher headcount and wage inflation, increased investments in digital and generative AI capabilities of $1.9 million, and higher sales and marketing and other operating costs of $1.3 million.

Current wording

The increase in SG&A expenses by $25.1 million during the three months ended June 30, 2026, compared to the three months ended June 30, 2025 was primarily due to increases in employee-related costs of $19.7 million on account of higher headcount and wage inflation, iMerit acquisition related expenses of $1.9 million, increased investments in digital and generative AI capabilities of $1.8 million, and higher sales and marketing and other operating costs of $1.7 million.

Previous wording

The increase in depreciation and amortization expense by 3.3% during the three months ended March 31, 2026, compared to the three months ended March 31, 2025 was primarily due to investments in infrastructure, technology assets and digital capabilities.

Current wording

The increase in depreciation and amortization expense by 3.9% during the three months ended June 30, 2026, compared to the three months ended June 30, 2025 was primarily due to investments in infrastructure, technology assets and digital capabilities.

Previous wording

Income from Operations. The increase in income from operations by 17.1% during the three months ended March 31, 2026, compared to the three months ended March 31, 2025 was primarily due to higher revenues and gross margins, partially offset by higher SG&A expenses.

Current wording

Income from Operations. The increase in income from operations by 7.6% during the three months ended June 30, 2026, compared to the three months ended June 30, 2025 was primarily due to higher revenues and gross margins, partially offset by higher SG&A expenses.

Previous wording

Foreign Exchange Gain, net. We recorded a foreign exchange gain, net of $1.1 million for the three months ended March 31, 2026, compared to a foreign exchange gain, net of $1.2 million for the three months ended March 31, 2025. 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 March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

Foreign Exchange Gain, net. We recorded a foreign exchange gain, net of $1.6 million for the three months ended June 30, 2026, compared to a foreign exchange gain, net of $2.2 million for the three months ended June 30, 2025. 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, 2026, compared to the three months ended June 30, 2025.

Previous wording

Interest expense. The decrease in interest expense by $0.1 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025 was primarily due to a lower average effective interest rate.

Current wording

Interest expense. The increase in interest expense by $0.8 million during the three months ended June 30, 2026, compared to the three months ended June 30, 2025 was primarily due to a higher average borrowings.

Previous wording

Other income, net decreased by $2.2 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025 due to lower yield on our investments and higher other expenses.

Current wording

Other income, net decreased by $5.6 million during the three months ended June 30, 2026, compared to the three months ended June 30, 2025 primarily due to changes in the fair value consideration related to our August 2024 acquisition of Incandescent Technologies, Inc. (“ITI Data”), lower yield on our investments and higher other expenses, net.

Previous wording

Net Income. The increase in net income by 0.8% during the three months ended March 31, 2026, compared to the three months ended March 31, 2025 was attributable to the aforementioned factors.

Current wording

Net Income. The decrease in net income by 2.3% during the three months ended June 30, 2026, compared to the three months ended June 30, 2025 was attributable to the aforementioned factors.

Previous wording

Revenues for the three months ended March 31, 2026 were up by $69.4 million, or 13.8%, compared to the three months ended March 31, 2025, driven by the expansion of business from our existing clients across all reportable segments by 11.8% and revenue from new clients wins by 2.0% during the three months ended March 31, 2026.

Current wording

Revenues for the six months ended June 30, 2026 were up by $149.6 million, or 14.7%, compared to the six months ended June 30, 2025, driven by the expansion of business from our existing clients across all reportable segments by 12.4% and revenue from new clients wins by 2.3% during the six months ended June 30, 2026.

Previous wording

Revenue growth in International Growth Markets of 13.4% was driven by the expansion of business from our existing clients by 8.0%, new clients by 2.9% and a foreign exchange gain, net of hedging by 2.5% during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

Revenue growth in International Growth Markets of 14.0% was driven by the expansion of business from our existing clients by 10.1%, new clients by 3.6% and a foreign exchange gain, net of hedging by 0.3% during the six months ended June 30, 2026, compared to the six months ended June 30, 2025.

Previous wording

The increase in cost of revenues in Insurance by $11.6 million for the three months ended March 31, 2026 was due to increases in employee-related costs of $11.2 million on account of higher headcount and wage inflation, and higher technology costs of $1.8 million, partially offset by a foreign exchange gain, net of hedging of $1.1 million and lower other operating costs of $0.3 million. Gross margin in Insurance increased by 110 bps, primarily due to higher revenues and operational efficiencies during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

The increase in cost of revenues in Insurance by $28.7 million for the six months ended June 30, 2026 was due to increases in employee-related costs of $26.8 million on account of higher headcount and wage inflation, higher technology costs of $4.3 million, and higher other operating costs of $1.0 million, partially offset by foreign exchange gain, net of hedging of $3.4 million. Gross margin in Insurance increased by 40 bps, primarily due to higher revenues and operational efficiencies during the six months ended June 30, 2026, compared to the six months ended June 30, 2025.

Previous wording

The increase in cost of revenues in International Growth Markets by $9.7 million for the three months ended March 31, 2026 was due to increases in employee-related costs of $8.1 million on account of higher headcount and wage inflation, and higher technology, facilities and other operating costs of $2.2 million, partially offset by a foreign exchange gain, net of hedging of $0.6 million. Gross margin in International Growth Markets decreased by 250 bps, primarily due to lower volumes in certain existing clients during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

The increase in cost of revenues in International Growth Markets by $18.4 million for the six months ended June 30, 2026 was due to increases in employee-related costs of $16.7 million on account of higher headcount and wage inflation, higher technology costs of $3.9 million, and higher facilities and other operating costs of $0.9 million, partially offset by a foreign exchange gain, net of hedging of $3.1 million. Gross margin in International Growth Markets decreased by 130 bps, primarily due to lower volumes from certain existing clients during the six months ended June 30, 2026, compared to the six months ended June 30, 2025.

Previous wording

Income Tax Expense. The effective tax rate for the three months ended March 31, 2026 was 26.6%, an increase from 16.9% for the three months ended March 31, 2025. We recorded income tax expense of $24.3 million and $13.5 million for the three months ended March 31, 2026 and 2025, respectively. The increase in income tax expense was primarily as a result of lower excess tax benefits related to stock-based compensation of $13.2 million and higher profit, partially offset by a decrease in non-deductible compensation expenses, as compared to the three months ended March 31, 2025.

Current wording

Income Tax Expense. The effective tax rate for the six months ended June 30, 2026 was 24.9%, an increase from 19.5% for the six months ended June 30, 2025. We recorded income tax expense of $43.7 million and $32.0 million for the six months ended June 30, 2026 and 2025, respectively. The increase in income tax expense was primarily as a result of higher profit and lower excess tax benefits related to stock-based compensation, partially offset by a decrease in non-deductible compensation expenses, as compared to the six months ended June 30, 2025.

Previous wording

As of March 31, 2026 and December 31, 2025, we had $253.8 million and $328.4 million, respectively, in cash, cash equivalents and short-term investments, of which $206.9 million and $285.8 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. 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 three months ended March 31, 2026, some of our foreign subsidiaries repatriated $13.0 million to the United States.

Current wording

As of June 30, 2026 and December 31, 2025, we had $283.8 million and $328.4 million, respectively, in cash, cash equivalents and short-term investments, of which $249.3 million and $285.8 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. 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, 2026, some of our foreign subsidiaries repatriated $13.0 million to the United States.

Previous wording

Operating Activities: Net cash provided by operating activities was $1.7 million during the three months ended March 31, 2026, compared to $3.2 million during the three months ended March 31, 2025, reflecting lower cash earnings, partially offset by changes in working capital. The major drivers contributing to the decrease of $1.5 million year-over-year included the following:

Current wording

Operating Activities: Net cash provided by operating activities was $89.6 million during the six months ended June 30, 2026, compared to $112.6 million during the six months ended June 30, 2025, reflecting higher working capital needs, partially offset by higher cash earnings. The major drivers contributing to the decrease of $23.0 million year-over-year included the following:

Previous wording

•Changes in accounts receivable, including advance billings, contributed lower cash flow of $5.0 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. Our days sales outstanding were 63 days as of March 31, 2026, compared to 67 days as of March 31, 2025.

Current wording

•Changes in accounts receivable, including advance billings, contributed lower cash flow of $50.1 million during the six months ended June 30, 2026, compared to the six months ended June 30, 2025. Our days sales outstanding were 69 days as of June 30, 2026, compared to 64 days as of June 30, 2025.

Previous wording

•Decrease in cash earnings, including adjustments for non-cash and other items contributed lower cash flow of $2.5 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. These adjustments include unrealized foreign currency exchange (gain)/loss, net, fair value mark-to-market on investments, stock-based employee compensation, depreciation and amortization of long-lived assets and intangibles acquired in business combinations, among others.

Current wording

•Increase in cash earnings, including adjustments for non-cash and other items contributed higher cash flow of $16.0 million during the six months ended June 30, 2026, compared to the six months ended June 30, 2025. These adjustments include unrealized foreign currency exchange (gain)/loss, net, fair value mark-to-market on investments, stock-based employee compensation, depreciation and amortization of long-lived assets and intangibles acquired in business combinations, among others.

Previous wording

•Changes in other assets, accounts payables including other liabilities contributed to a lower cash payout of $6.0 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

•Changes in other assets, accounts payables including other liabilities contributed to a lower cash payout of $11.1 million during the six months ended June 30, 2026, compared to the six months ended June 30, 2025.

Previous wording

Investing Activities: Net cash provided by investing activities were $44.0 million for the three months ended March 31, 2026, compared to net cash used of $22.3 million for the three months ended March 31, 2025. The increase of $66.3 million was primarily due to higher proceeds from redemption of investments of $65.7 million during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.

Current wording

Investing Activities: Net cash used for investing activities were $6.2 million during the six months ended June 30, 2026, compared to net cash used of $36.3 million for the six months ended June 30, 2025. The decrease of $30.1 million was primarily due to higher proceeds from redemption of investments of $30.2 million during the six months ended June 30, 2026, as compared to the six months ended June 30, 2025.

Previous wording

Financing Activities: Net cash used for financing activities were $44.6 million during the three months ended March 31, 2026, compared to net cash provided of $3.4 million during the three months ended March 31, 2025. The decrease of $48.0 million was due to higher purchases of treasury stock of $148.0 million under our share repurchase programs, partially offset by higher net proceeds from borrowings of $100.0 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

Financing Activities: Net cash used for financing activities were $100.8 million during the six months ended June 30, 2026, compared to net cash used of $84.6 million during the six months ended June 30, 2025. The increase of $16.2 million was primarily due to higher purchases of treasury stock of $126.9 million under our share repurchase programs, partially offset by higher net proceeds from borrowings of $111.0 million during the six months ended June 30, 2026, compared to the six months ended June 30, 2025.

Previous wording

We incurred $12.9 million of capital expenditure during the three months ended March 31, 2026. We expect to incur total capital expenditures of between $50.0 million to $55.0 million in fiscal 2026, primarily to meet our growth requirements, including additions to our facilities and infrastructure, as well as investments in technology applications, product development and other digital technologies.

Current wording

We incurred$27.4 million of capital expenditure during the six months ended June 30, 2026. We expect to incur total capital expenditures of between$58.0 million to$62.0 million in fiscal 2026, primarily to meet our growth requirements, including additions to our facilities and infrastructure, as well as investments in technology applications, product development, and other digital technologies.

Previous wording

We believe that our existing cash, cash equivalents and short-term investments and sources of liquidity will be sufficient to satisfy our cash requirements over the next 12 months. Our future cash requirements will depend on many factors, including our rate of revenue growth, our investments in strategic initiatives like acquisition of complementary businesses, capital expenditures and continued stock repurchases, including accelerated stock repurchases, under our board-authorized stock repurchase program, which may require the use of significant cash resources and/or additional financing. We anticipate that we will continue to rely upon cash from operating activities to finance most of our above-mentioned requirements, although if we have significant growth through acquisitions, we may need to obtain additional financing.

Current wording

We believe that our existing cash, cash equivalents and short-term investments and sources of liquidity will be sufficient to satisfy our cash requirements over the next twelve months. Our future cash requirements will depend on many factors, including our rate of revenue growth, our investments in strategic initiatives like acquisition of complementary businesses, capital expenditures and continued stock repurchases, including accelerated stock repurchases under our board-authorized stock repurchase program, which may require the use of significant cash resources and/or additional financing. We anticipate that we will continue to rely upon cash from operating activities to finance most of our above-mentioned requirements, although if we have significant growth through acquisitions, we may need to obtain additional financing.