David Grossman

David Grossman asked about the expected cadence of EXL's growth over 2026, specifically if it would be relatively even or skewed across quarters. He also sought insight into a large Q4 win with a top five healthcare payer for payment integrity, questioning why the client expanded scope given potential AI innovations and in-house capabilities.

Answer

Rohit Kapoor, Chairman and CEO of EXL, indicated better visibility for the first half of 2026, expecting a strong start, with updates for the second half as visibility develops. Vivek Jetley, President and Head of EXL Analytics, EXL, explained that healthcare is a strong growth driver, with payers turning to EXL's payment integrity offerings to optimize costs. Rohit Kapoor added that clients prioritize superior business outcomes, and EXL's proven ability to deliver better results, even for clients with in-house capabilities, led to the expanded business.

David Grossman asked about the expected cadence of growth throughout 2026, specifically whether it would be relatively even across quarters or if certain periods might be skewed.

Answer

Rohit Kapoor (Chairman and CEO, EXL) indicated that visibility for the first half of 2026 is stronger than the second half, expecting a strong start to the year based on Q4 2025's performance. He noted that guidance updates would follow as second-half visibility develops.

David Grossman asked about the requirements for deploying enterprise AI, specifically data preparation, and how EXLdata.ai is being sold (standalone vs. integrated), inquiring about the typical multiplier effect for follow-on revenue. He also sought clarification on how 30% productivity gains for a client could result in flat revenue, and whether this is an upfront event leading to growth from a higher-value base.

Answer

Vikas Bhalla, Chief Operating Officer, detailed two sales motions for EXLdata.ai: standalone engagements to prepare data for AI, and integrated engagements where EXL manages the end-to-end charter of embedding AI into workflows. He noted that while data management is a large part, the multiplier effect for AI enablement is not yet strong but expected to grow. Regarding the 30% productivity gain, Mr. Bhalla clarified that if initial revenue was $100, a 30% productivity benefit reduced it to $70, but EXL secured an additional $30 in new work (from internal shifts or other providers), bringing revenue back to $100 with better margins and increased client penetration. This also opened new, higher-value, higher-margin revenue streams like Agentic AI. He also stated that new client acquisition contributes less than 5% of annual revenue, with the majority of growth coming from existing clients.

David Grossman inquired about the requirements for deploying enterprise AI, the role of EXLdata.ai as a standalone offering, and the typical multiplier effect on follow-on revenue from such engagements.

Answer

Vikas Bhalla (COO) outlined two engagement motions: EXLdata.ai as a standalone service to prepare clients' data for AI, and an integrated approach where EXL embeds AI into workflows, taking end-to-end responsibility for the data estate. He noted that both resonate, with data management being the heavy lifting. While the multiplier effect isn't strong yet, it's expected to grow. He also clarified that for existing clients, high renewal rates (north of 90%) and additional business from them drive growth, with new clients contributing less than 5% of annual revenue.

David Grossman questioned the guidance architecture, which implies a back-half EPS decline, the dynamic of revenue outpacing headcount, a competitor's acquisition, and new client additions.

Answer

EVP & CFO Maurizio Nicolelli explained that after a strong first half, the company will increase investments in Data & AI in the second half to drive future growth, impacting short-term EPS. Chairman & CEO Rohit Kapoor addressed the competitive landscape by stating the market is large enough that a single acquisition has no material impact. He also pointed to strong double-digit pipeline growth as a better indicator of demand than the number of new client adds in a single period.

David Grossman questioned the growth deceleration in the Insurance vertical and asked for management's outlook, noting a similar trend from a competitor. He also sought deeper insight into the potential deflationary impact of deploying AI on the existing book of business and how efficiency gains are shared with clients.

Answer

Rohit Kapoor, Chairman and Chief Executive Officer, explained that the Q1 slowdown in Insurance was a timing issue and expects the vertical to grow in line with the overall company for the full year. Regarding AI's impact, he argued that proactively cannibalizing revenue to deliver value actually accelerates overall growth by building client trust. He characterized the adoption of AI into the installed base as a gradual, multi-year journey still in its early phases. Maurizio Nicolelli, CFO, added that FX contributed about $5 million to the revenue guidance increase.

David Grossman asked for a deeper explanation of the fundamental business reasons motivating the operating model change. He also inquired about how Generative AI is impacting service delivery beyond code conversion, its pervasiveness, and its expected financial impact on revenue growth and margins.

Answer

Rohit Kapoor, Chairman and CEO, explained the operating model change was driven by the maturity of the analytics business and a strategic need to get closer to clients, focus on international markets, and better execute on cross-selling and large integrated deals. He stated that Gen AI is a tailwind to revenue, expanding the size of engagements and access to new buying centers like the CIO. This is evidenced by the 18% year-over-year growth in the Digital Operations business in Q4.

David Grossman requested more detail on the growth drivers within the Digital Ops business, the revenue model for stand-alone digital solutions, and an explanation for the quarter-to-quarter volatility in EBIT margins.

Answer

CEO Rohit Kapoor detailed that Digital Ops growth comes from both stand-alone digital solutions (sold as licensed tools with implementation services) and digital capabilities embedded into operations workflows. CFO Maurizio Nicolelli addressed margin volatility, explaining that while quarterly figures fluctuate due to investment timing, the company manages for marginal, incremental AOPM expansion on an annual basis and investors should focus on the annual trajectory rather than quarterly shifts.

David Grossman asked about the impact of pricing (positive or negative) and mix shift dynamics, particularly concerning India, on EPAM's 2026 revenue growth. He also questioned when the 'dam' of accelerated spending might break, given the trend of slowing decision-making but larger deal sizes, and requested data points on building momentum or accelerating conversion.

Answer

Jason Peterson, CFO, indicated an improving pricing environment with low single-digit rate increases from many clients in Europe and North America. He noted India's faster growth, premium pricing, and expanding profitability, which is margin accretive despite lower dollar-per-hour rates. Balazs Fejes, CEO and President, expressed optimism about the increasing number of larger AI transformation programs, suggesting a nearing inflection point where clients can no longer delay investments. He mentioned that while larger deals naturally slow down procurement, they represent substantial opportunities. Mr. Fejes highlighted the expectation for AI-native revenues to reach $600 million in 2026 as a key indicator of accelerating momentum.

David Grossman asked about the impact of pricing (positive or negative) year-over-year in 2026 and any mix shift dynamics, specifically regarding India, on revenue growth. He also inquired when the 'dam has to break' for spending acceleration despite uncertainty, given slowing decision-making but larger deals, and asked for data points on building conversion momentum.

Answer

CFO Jason Peterson noted an improving pricing environment with low single-digit rate increases from clients in Europe and North America. He explained that India is growing faster, priced at a premium, and its expanding profitability is margin accretive despite lower dollar-per-hour rates. CEO Balazs Fejes expressed optimism about more large programs, indicating that some industries can no longer delay transformations and AI investments are triggering bigger initiatives, though larger deals naturally involve slower procurement. Mr. Fejes mentioned that EPAM expects AI-native revenues to reach $600 million in 2026, demonstrating rapid scaling.

David Grossman of Stifel Financial Corp. asked if the Q4 margin exit rate would be a good baseline for the following year and about the current pricing-wage dynamic. He also questioned the narrative of AI's impact on revenue, seeking insights into the risks and opportunities versus market perception.

Answer

CFO Jason Peterson advised against using the seasonal Q4 as a baseline, pointing to the full-year guidance, and noted the pricing environment feels better than six months ago. CEO Arkadiy Dobkin addressed AI fears, stating that the increasing complexity of AI-enabled enterprise systems will drive greater demand for high-quality engineers. He highlighted a trend of clients returning to EPAM after attempting complex AI projects themselves.

David Grossman asked about growth dynamics outside the top 20 clients, the trend of clients returning to EPAM, and the maturity of the India delivery center.

Answer

CEO Arkadiy Dobkin confirmed that the trend of clients returning is visible and accumulating. CFO Jason Peterson noted growth outside the top 20 is partly driven by M&A and new logos. Regarding India, Dobkin explained that while its maturity is growing, its talent pyramid differs from established locations, and it now represents nearly 20% of EPAM's capacity.

David Grossman inquired about EPAM's capacity to accelerate growth as demand improves, the potential revenue headwind from geographic mix shifts in 2025, and whether there are unique factors driving its margin compression compared to peers.

Answer

CFO Jason Peterson expressed confidence in the company's ability to scale talent across its global delivery locations. He acknowledged a continued, though perhaps lessening, headwind on revenue per headcount from the mix shift to lower-cost regions. On margins, Peterson and CEO Arkadiy Dobkin attributed the pressure to strategic investments in retaining high-quality talent for complex 'change the business' work, which they believe is a larger part of their mix than for many peers, in a challenging pricing environment.

David Grossman of Stifel asked for a distinction between macro-driven demand improvement versus clients getting comfortable with EPAM's diversified delivery. He also sought explicit clarification on the 2025 margin outlook and questioned the sequential growth in non-production headcount.

Answer

CEO Arkadiy Dobkin found it difficult to quantify the demand drivers but noted clients are increasingly investing in data and cloud infrastructure to prepare for future tech benefits. CFO Jason Peterson added that some clients are returning due to quality issues with other vendors. Peterson explicitly confirmed that his guidance for 2025 margins to be 'slightly below 16%' is inclusive of the expected Poland R&D benefit. He also corrected the headcount premise, stating production headcount saw the majority of the increase.

David Grossman asked about the WSE dynamic, specifically the magnitude of the Q1 'divot' and its impact on the full year, and whether TriNet's go-to-market changes would prevent a similar WSE 'grow over issue' in 2027 if the macro environment does not improve.

Answer

Mike Simonds, President and CEO, emphasized the impact of healthcare cost inflation on retention and the completion of catch-up pricing by January 1. He expressed optimism for the back half of the year due to growing new sales, improved retention, and market-aligned healthcare pricing, which he believes will slow the WSE decline and work towards sustainable growth. He refrained from making a precise 2027 prediction but expressed high confidence in an improving trend through 2026.

David Grossman sought clarification on the CIE commentary, asking if 'improving year over year' meant less negative growth. He then asked if, in a stable environment with lower attrition, improving pricing gaps, and improving CIE, there was any reason WSEs wouldn't grow in 2026. He also asked if attrition had been diminishing sequentially in 2025 due to the compressing pricing discrepancy and about the character of business coming through the broker channel versus the existing book.

Answer

Kelly Tuminelli (CFO) clarified that CIE is expected to be low single-digit positive for the year, driven by fewer layoffs, making it about half a point better than last year. Mike Simonds (CEO) stated that while TriNet is on track for medium-term revenue growth, he would stop short of predicting WSE growth for 2026 due to CIE being a wild card. He expects attrition to remain above the historical 80% average through the January 1st renewals, after which the 'catch-up' period should conclude. Mike Simonds noted that broker channel business matches well vertically, with the average prospect size tending to be slightly larger.

David Grossman asked for a review of major year-over-year comparison dynamics for the second half, progress in the broker channel, and more color on the drivers of CIE growth. He also followed up to ask if the outsized claims were related to the Change Healthcare disruption.

Answer

EVP & CFO Kelly Tuminelli and President & CEO Mike Simonds reviewed the back-half outlook, noting WSEs are expected to be down but that execution on pricing and retention is on track. Simonds stated he 'fully expects' the broker channel to be additive in H2 2025, with proposal volume already increasing. Tuminelli clarified that the CIE beat was driven more by fewer layoffs than by seasonal hiring. She also confirmed that an investigation found no evidence linking the outsized claims to the Change Healthcare situation, viewing it as an isolated anomaly.

David Grossman questioned if the multi-year plan to reprice the underperforming healthcare book could be accelerated. He also asked for more details on the new benefit bundles and their expected impact, and inquired about the size of the Main Street vertical.

Answer

President and CEO Michael Simonds responded that the repricing plan remains on a similar multi-year track, balancing retention with achieving appropriate pricing, noting that attritted clients had a significantly higher insurance cost ratio. He explained that the new benefit bundles will simplify plan choices for clients and streamline the sales process, which could improve sales velocity. CFO Kelly Tuminelli clarified that the Main Street vertical represents roughly 20% of PEO worksite employees.

David Grossman questioned the long-term potential for TriNet's WSE growth to match peers with different business models. He also asked for details on the strategy to penetrate the benefits broker channel, its current contribution to sales, and the potential financial impact of the ASO model if it gains traction.

Answer

CEO Michael Simonds stated he sees no structural reason for TriNet's long-term WSE growth to lag the industry, citing plans to mature the direct sales force and expand the broker channel. He revealed the broker channel already contributes 'well into the double digits' of new business and will be enhanced with new technology. Regarding the ASO model, Simonds positioned it as part of a flexible continuum of high-value HR outsourcing services, viewing it as a potentially exciting growth area for the company.

David Grossman of Stifel asked about competitive dynamics for an at-risk PEO, the timing of pricing for October renewals, the impact of a one-time item on Q4 revenue, and the expected workers' comp headwind in 2025.

Answer

CEO Mike Simonds expressed confidence that TriNet's at-risk model and enhanced risk management can be a long-term competitive advantage. CFO Kelly Tuminelli confirmed that October renewal pricing was set in early July with adequate data to implement a double-digit increase. She also reiterated the $8 million non-recurring item impacting Q4 professional services revenue and noted that favorable 2024 workers' comp reserve adjustments are not expected to recur in 2025.

The analyst, represented by Aiden, asked for clarification on why the lost health plan contract is not indicative of a broader trend, inquired about the restructuring of the partnership program, and sought details on how AI will drive OpEx reductions to meet the revised cash flow timeline.

Answer

The company explained the lost contract was an anomaly from the acquired Twill business for a non-core service and that current trends are positive with larger, national-scale client wins. The partnership program is being strategically expanded to add capabilities like virtual care (RULA) and sleep apnea services without internal development. AI is expected to reduce OpEx by 15% over 12-15 months by implementing AI agents in member management, G&A, and sales, targeting a quarterly OpEx of around $8 million.

David Grossman from Stifel sought clarification on the lost health plan contract, asking how it differed from new wins and the risk of similar future reductions. He also inquired about the restructuring of the partnership network and the specific AI initiatives driving the projected OpEx reduction.

Answer

CEO Erez Raphael explained the lost health plan contract was an exception tied to the Twill acquisition and a non-core service, contrasting it with the positive trend of signing large, national accounts. CCO Steven Nelson detailed the partnership strategy, focusing on adding capabilities like virtual care with Rula and expanding into new areas like sleep apnea. Erez Raphael elaborated on the AI strategy, targeting a 15% OpEx reduction over 12-15 months by deploying AI agents in member management, enrollment, and G&A.

David Grossman asked for details on the pharma pipeline and deal structure, the impact of transitioning contracts, the timing of a key health plan RFP, clarification on the breakeven timeline, visibility into achieving the required revenue run rate, and the fully diluted share count.

Answer

Erez Raphael detailed the pharma pipeline, which includes a revived Sanofi deal and two new large pharma contracts, all based on the "DarioConnect" platform with recurring revenue models. He clarified that contract "transitions" refer to a single large client moving to a broader platform, not client losses, with revenue expected to return in Q3. Breakeven is targeted for a Dec/Jan run rate, supported by several large new client launches and aggressive OpEx management. The fully diluted share count is approximately 99 million.

David Grossman of Stifel asked for a detailed update on large pharma activity post-Twill acquisition, the nature of new pharma contracts, the financial impact of discontinuing certain legacy contracts, the timing of a key health plan RFP, and visibility into achieving the revenue run rate needed for cash flow breakeven.

Answer

CEO Erez Raphael detailed that the Sanofi deal is now commercial, and two new large pharma deals for the 'DarioConnect' platform are signed and expected to contribute revenue from Q2/Q3. He clarified that the main headwind is from one large health plan client, inherited from Twill, transitioning to a new, broader contract, which he expects to be resolved and contribute to revenue again in Q3. He expressed confidence in reaching the cash flow breakeven run rate by year-end, driven by these large new contracts and hedged by aggressive OpEx management. He also provided a fully diluted share count of approximately 99 million.

David Grossman asked for statistics on vendor consolidation trends, specifically how many customers are adopting multiple solutions. He also requested an update on the Sanofi partnership and the broader pharma pipeline, and asked for more detail on the new pricing model tied to clinical results and claims-based billing.

Answer

CEO Erez Raphael stated that over 50% of new clients take more than one condition and projected that a third of new 2025 wins will be for the full suite. He confirmed the Sanofi relationship has converted to a commercial, recurring revenue model as of Q1 2025. CCO Steven Nelson elaborated on the new pricing model, explaining it involves billing through medical claims, which opens new budgets and enables outcome-based payments where Dario is compensated upon members meeting clinical milestones.

David Grossman from Stifel Financial Corp. asked for details on the specific actions driving improved retention rates, whether major renewals could occur earlier, and how current remaining performance obligations (CRPO) performed relative to expectations.

Answer

CEO Kevin Coop attributed the improved retention to a focus on customer success, noting that integrated customers renew at a ~10% higher rate. He detailed changes in talent, process, and visibility. CFO Casey Heller added that CRPO was in line with expectations, slightly better due to renewals, and noted the multi-year data partnership has a significant positive impact on the metric.

David Grossman from Stifel Financial Corp. asked for specifics on what drove the encouraging retention rate improvement, the potential for operational changes to pull forward year-end renewals, and the performance of current remaining performance obligations (CRPO).

Answer

CEO Kevin Coop attributed the strongest renewal levels in over a year to a sharpened focus on customer success, noting that integrated customers renew at a rate approximately 10% higher. CFO Casey Heller added that CRPO performance was slightly better than expected, aided by the renewal improvements and a notable positive impact from a multi-year data partnership.

David Grossman asked for a reconciliation of the Q1 outperformance with the Q2 and full-year guidance, which implies flattish sequential revenue for the rest of the year. He also sought to clarify whether the decline in customers spending over $100,000 was driven more by customer churn or by clients reducing their spend below that threshold.

Answer

An executive explained that Q1 results were boosted by better-than-expected professional services revenue and favorable timing of subscription deals, which lessens the sequential growth into Q2. The full-year guidance is intentionally prudent; while the midpoint implies flat revenue in the second half, the high end of the range allows for sequential growth. The executive confirmed that the decline in enterprise customers is driven by a roughly even mix of complete customer losses and existing clients reducing their spend (down-sell).

David Grossman requested more specific reasons for client downsells and a direct link to the operational changes being implemented to address them. He also asked for the driver behind the projected increase in G&A expenses as a percentage of revenue for 2025.

Answer

CEO Kevin Coop explained that downsells are being addressed through improved operational execution, including integrating customer success teams, aligning compensation with post-sales success, and a more segmented approach to pricing and packaging. CFO Richard Booth clarified that the increase in G&A expense is due to the expansion of the senior leadership team and provided detailed color on the 2025 margin profile.

David Grossman of Stifel Financial Corp. requested an update on revenue visibility, the specific impact of managed services on the Q2 beat, and guidance on future operating leverage. He also asked for commentary on macro trends and regulatory headwinds affecting the pharmaceutical industry.

Answer

CEO Steve Silvestro confirmed contracted revenue is up over 30% year-over-year, improving Q4 visibility, but noted guidance remains conservative and excludes potential Q4 budget flushes. CFO & COO Edward Stelmakh clarified that while managed services contributed, it was not the primary driver of the beat. He guided for a flat OpEx run-rate, stating the current team could support revenue up to ~$150M. Silvestro concluded that pharma clients are increasingly prioritizing efficient, data-driven digital partners.

David Grossman sought to confirm the calculation of revenue visibility based on the $70 million in committed revenue, asked about the expected growth trajectory for the 5% of revenue already converted to a subscription model, and inquired about the percentage of revenue represented by the data business. He also asked for the reason behind the sequential decline in the Net Revenue Retention (NRR) rate.

Answer

CEO Stephen Silvestro and Executive Andrew D'Silva clarified that revenue visibility was over 80% currently, up from the end of Q1. CFO Edward Stelmakh and Silvestro noted that the subscription model's target is the DAAP and audience data business, with progress being good but still in early stages. D'Silva explained the NRR decline was an expected result of lapping the Medicx acquisition in the trailing 12-month calculation.

David Grossman asked for more detail on the customer incentive to switch to a subscription model, the customer acquisition cost difference between models, and clarification on the high net revenue retention rate for modeling purposes.

Answer

CEO Stephen Silvestro explained that the need for real-time, dynamic patient and physician data is the key driver for clients to adopt a subscription for the data component of DAAP, while message delivery remains transactional. He confirmed there's no material difference in customer acquisition costs. Executive Andrew D'Silva clarified that upfront DAAP revenue recognition was more pronounced in 2024 and that the company is targeting 100% net revenue retention for 2025.

David Grossman requested details on the four large clients expected to generate over $10 million each in 2025, including the mix of HCP versus DTC business and their margin profile. He also asked about the expected impact of the DTC business's shift from managed services to a self-service model on 2025 revenue growth and margins.

Answer

Executive Stephen Silvestro clarified that these are four clients, not contracts, and the majority of the spend will be from the HCP business, led by DAAP. He also mentioned a strategic shift towards a subscription model for DAAP to create stickier, more predictable revenue. CEO William Febbo added that the self-service DTC model is a higher-margin business, but its growth is not expected to fully offset the decline from managed services in the near term. The key differentiator is the ability to offer dynamic, compliant audiences.

Aidan Conniff, on behalf of David Grossman, asked for additional detail on the assumptions for total operating expenses for 2025. He also inquired about the expected conversion rate of the sales pipeline throughout the year.

Answer

CFO Norman Rosenberg projected full-year 2025 gross margins to be around 35%. To achieve the mid-single-digit EBITDA margin target, this implies SG&A will average around 30% of revenue for the year, a significant improvement from the 39.7% in Q4 2024. CEO Lee Bienstock added that pipeline conversion varies by vertical: payer deals tend to cluster at year-end, hospital system deals are more consistent, and the "Project Prime" initiative is designed to smooth out the historically lumpy municipal contract cycle.