Executive Summary

EXL delivered a solid Q4: revenue $481.4M (+16.3% Y/Y; +2.0% Q/Q reported) and adjusted diluted EPS $0.44 (+26.1% Y/Y); GAAP diluted EPS was $0.31 (+28.4% Y/Y) .
Operating leverage and mix supported margin expansion: Q4 GAAP operating margin 14.8% (13.1% in Q4’23), adjusted operating margin 18.8% (17.8% in Q4’23) .
FY25 outlook introduced: revenue $2.025–$2.060B (+10–12% reported; +11–13% cc), adjusted EPS $1.83–$1.89 (+11–14% Y/Y); mgmt expects ETR 22–23%, net interest ~$(1)M, FX gain ~+$1M, capex $50–55M .
Structural/catalyst update: new operating model and financial reporting segments from Q1’25 to accelerate data & AI execution; mgmt disclosed data & AI was 53% of revenue in 2024, underpinning deal size and stickiness .

What Went Well and What Went Wrong

What Went Well

Broad-based growth and mix: Q4 revenue rose 16.3% Y/Y to $481.4M, with Analytics +14% Y/Y to $207.7M and Insurance +16.6% Y/Y to $162.0M; consolidated gross margin improved to 38.1% (36.7% in Q4’23) .
AI-led execution and client wins: 17 new clients in Q4 (9 analytics; 8 digital ops/solutions); launched agentic AI platform EXLerate.AI; mgmt emphasized data & AI made up 53% of 2024 revenue, enabling integrated deals and higher ROI for clients .
Margin discipline: Adjusted operating margin rose 100 bps Y/Y to 18.8% in Q4 (20 bps FY lift to 19.4%); SG&A down 70 bps Y/Y as % of revenue, partially offset by AI investments .
- Quote: “Our adjusted operating margin for the quarter was 18.8%, up 100 basis points year-over-year, driven by improved gross margin and SG&A operating leverage” .

What Went Wrong

Adjusted operating margin ticked down sequentially (19.9% in Q3 to 18.8% in Q4) as EXL leaned into AI R&D and solution development; mgmt expects annual gross margin expansion but quarterly choppiness in 2025 .
Healthcare segment gross margin softened Y/Y (31.7% vs 36.9% in Q4’23), despite revenue growth; Emerging Business gross margin also slightly below prior year (40.7% vs 41.0%) .
Estimates context unavailable: S&P Global consensus for Q4 and FY25 was not retrievable at run time, limiting explicit beat/miss determination (Street comparison not shown due to data unavailability).

Financial Results

Consolidated P&L Summary

Metric	Q4 2023	Q3 2024	Q4 2024
Revenue ($M)	$414.1	$472.1	$481.4
Gross Margin (%)	36.7%	37.8%	38.1%
Operating Margin (GAAP, %)	13.1%	14.7%	14.8%
Adjusted Operating Margin (%)	17.8%	19.9%	18.8%
Diluted EPS (GAAP)	$0.24	$0.33	$0.31
Adjusted Diluted EPS (Non-GAAP)	$0.35	$0.44	$0.44

Notes: Q4’24 revenue +16.3% Y/Y and +2.0% Q/Q reported; +2.4% Q/Q constant currency . Non-GAAP definitions and reconciliations provided by EXL .

Segment Revenue and Gross Margin

Segment	Q4 2023 Rev ($M)	Q3 2024 Rev ($M)	Q4 2024 Rev ($M)	Q4 2023 GM (%)	Q3 2024 GM (%)	Q4 2024 GM (%)
Insurance	139.1	157.6	162.0	36.2%	36.3%	36.9%
Healthcare	26.0	30.5	31.6	36.9%	33.6%	31.7%
Emerging Business	67.0	80.0	80.1	41.0%	40.2%	40.7%
Analytics	182.0	204.0	207.7	35.4%	38.5%	39.0%
Total	414.1	472.1	481.4	36.7%	37.8%	38.1%

KPIs and Balance Sheet/Cash Flow (FY 2024 unless noted)

KPI	Value
Data & AI revenue mix	53% of revenue (FY24)
New client wins	17 in Q4; 69 in FY24
Cash incl. short/long-term investments; revolver debt; net cash	~$350M cash & investments; $288M revolver; net cash ~$62M (12/31/24)
Cash flow from operations	$269M (FY24)
Capital expenditures	$46M (FY24)
Share repurchases	$196.5M for 6.3M shares at avg $31.30 (FY24)
Effective tax rate	~22.3% (FY24)

Non-GAAP reconciliation detail provided by EXL (adjusted operating income, EBITDA, adjusted EPS) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	N/A (initial)	$2.025B–$2.060B (+10–12% reported; +11–13% cc)	Initial
Adjusted Diluted EPS	FY 2025	N/A (initial)	$1.83–$1.89 (+11–14% Y/Y)	Initial
Effective Tax Rate	FY 2025	N/A	22–23%	Initial
Net Interest Expense	FY 2025	N/A	≈$1M expense	Initial
FX Gain (net)	FY 2025	N/A	≈+$1M gain; ≈$10M revenue headwind	Initial
Capital Expenditures	FY 2025	N/A	$50–$55M	Initial

No segment-specific or OpEx/SG&A line guidance disclosed. FY24 guidance history (for context): Raised in Q2 and Q3; ultimately delivered $1.838B revenue and $1.65 adj EPS for FY24 .

Earnings Call Themes & Trends

Topic	Q2 2024 (Prev Q-2)	Q3 2024 (Prev Q-1)	Q4 2024 (Current)	Trend
AI/Tech initiatives	Strategic collaboration with NVIDIA; ITI Data acquisition announced	Launched Insurance LLM with NVIDIA; Databricks partnership expansion	Launched agentic platform EXLerate.AI; 100+ accelerators; 2 proprietary LLMs for health/finance; 53% of rev from data & AI	Accelerating scope and monetization
Operating model/segments	—	—	New operating model with four market units; reporting segments change in Q1’25	Structural shift to enable scale
Demand/macro	Double-digit growth; raised FY24 rev guidance	Double-digit growth; raised FY24 outlook again	Strong demand into 1Q; pipeline healthy; IT spend shifting to AI	Sustained demand, AI-led budgets
Margins	Q2 adj op margin 19.8%	Q3 adj op margin 19.9%	Q4 adj op margin 18.8%; mgmt targets annual gross margin expansion in 2025 with quarterly choppiness	Investing in AI; aim to lift GM annually
M&A contribution	ITI Data neutral to adj EPS; $7–$9M H2’24 revenue	—	~+$9M FY24 contribution from ITI	Integration contributing modestly

Management Commentary

Strategy and competitive positioning: “Data and AI are at the core of our business and accounted for 53% of our revenue in 2024… facilitating more complex engagements… leading to more integrated deals” .
Operating model rationale: “Be much closer to our customers… develop and deploy new capabilities at a much faster pace” with limited leadership disruption; deeper cross-sell and integrated deals expected .
AI deployment examples: Healthcare GenAI platform delivering ~$10M operational savings; insurance LLM for claims adjudication; U.K. utility agentic AI improving customer ops efficiency by 45%; CPG agentic AI reducing manual effort by 75% .
Margin outlook: “You’ll see in 2025… progression of us increasing our gross margins on an annual basis… [with] 10 to 20 basis point increase in overall AOPM for the year” .

Notable quotes

“We are proud of our industry-leading financial performance… leading indicators remain positive, setting us up for a solid start to 2025.”
“The development of IP is going to be critical… IT spend is shifting over to AI… we want to participate in that broader TAM.”
“AI agents need to be embedded into the workflow… stitched to client data estates… in a hybrid environment. That’s our sweet spot.”

Q&A Highlights

Demand and pipeline: Mgmt cited strong 4Q demand, continued into 1Q; AI budgets shifting from IT to workflow-embedded AI, supporting pipeline quality .
Operating model changes: Goal is proximity to clients and faster capability deployment; minimal leadership disruption; more detail to be provided at May 6 Investor Day .
IP and infrastructure readiness: EXL focusing on IP/accelerators, code modernization (Code Harbor), and data estate readiness, enabling faster AI adoption vs peers .
Margins: Expect annual gross margin expansion in 2025 with ongoing AI/R&D investments; AOPM targeted to increase 10–20 bps for the year .
M&A/ITI Data: FY24 contribution ~+$9M; organic growth 12.1% vs total 12.7% .

Estimates Context

S&P Global/Capital IQ consensus for Q4 2024 and FY 2025 was not available at run time due to system request limits, so explicit beat/miss vs Street cannot be determined in this report. If needed, we can refresh and append a Street vs Actual table once S&P Global data is accessible.
Management provided FY25 guidance (revenue $2.025–$2.060B; adj EPS $1.83–$1.89), implying continued double-digit growth on a reported basis .

Key Takeaways for Investors

Q4 showed durable, broad-based growth with improving mix and consolidated margin progress; Analytics and Insurance remain key engines; adjusted EPS held Q/Q at $0.44 despite stepped-up AI investments .
Structural catalyst: New operating model and segment reporting in Q1’25 should clarify data & AI monetization and support larger, integrated deals across buying centers (COO, CIO, CDO) .
AI flywheel gaining traction: Proprietary LLMs, 100+ accelerators, and EXLerate.AI platform enable faster deployments and higher adoption by embedding AI into client workflows; showcased tangible client ROI .
Margin playbook: Mgmt targets annual gross margin expansion in 2025 while investing in AI and go-to-market—watch quarterly volatility but expect annual improvement and slight AOPM lift .
Healthy balance sheet and cash generation provide flexibility to fund AI investments and buybacks (FY24 CFO $269M; $196.5M repurchases) .
Near-term trading lens: Narrative likely centers on AI monetization, operating model transition, and FY25 guidance credibility; Investor Day (May 6) could be a stock catalyst as EXL details segment reporting and data & AI disclosures .
Medium-term thesis: Increasing AI penetration (53% of revenue) and integrated deals expand TAM and stickiness; execution on gross margin expansion is a key proof point for sustained EPS compounding .

ExlService Holdings, Inc. (EXLS)·Q4 2024 Earnings Summary