ExlService Q2 Earnings: Excellent Smaller Player In BPM Market (NASDAQ:EXLS)

Global communication network concept. Digital transformation. DX.

metamorworks/iStock via Getty Images

Introducing ExlService

ExlService (NASDAQ:EXLS), a business process management company, offers operations management and analytics services to clients. The company offers business process outsourcing, automation, and data-driven solutions to clients in a range of industries, including insurance, healthcare, utilities, banking and finance, travel, and retail, among others. The company operates in four segments: analytics, insurance, healthcare, and developing markets, depending on the areas it serves. The majority of the company’s sales are made in the United States, and more than half of the company’s income comes from business process management and related services.

Industry Outlook

The field of business process management involves using a variety of techniques to identify, model, analyze, measure, improve, optimize, and automate business processes.

In the digital world these days, the development of intelligent business process management systems is being aided by the adoption of artificial intelligence (AI) in several reputable firms. By fusing AI with cloud capabilities, BPM (business process management) software, and software solutions, it is accomplished. BPM platforms are consequently always changing. As a result, it is also integrating a variety of enhanced processes, including the internet of things (IoT), monitoring of business activities, cloud capabilities, message-oriented middleware, and others. For example, BPM systems with AI are frequently used in the banking industry to streamline operations including report preparation, document generation, contract administration, and sales analysis.

These technologies could nicely boost the future of business process management.

According to Fortune Business Insight research, the business process management industry is predicted to grow from USD 10.65 billion in 2020 to USD 26.18 billion in 2028, at a healthy CAGR of 12{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471}


Intense competition is present in the market for data analytics and digital operations and solutions.

Accenture (ACN), Cognizant Technology Solutions (CTSH), Genpact (G), Infosys (INFY), NTT DATA (OTCPK:NTDTY) (OTCPK:NTTDF), Tata Consultancy Services, and WNS (Holdings) (WNS) are a few examples of large global companies with digital operations and solutions and operations capabilities with which ExlService competes. Other competitors include niche industry-specific digital operations and solutions providers like Cotiviti and Optum Health.


Business Description

Market Cap

Last Year’s Revenue Growth

ExlService (EXLS)

ExlService, a business process management company, offers operations management and analytics services to clients.



Accenture (ACN)

Leading international IT services provider Accenture offers consulting, strategy, technology, and operational services. These services cover a wide range, from assisting businesses with digital transformation to providing procurement services and integrating software systems.



Infosys (INFY)

With around 250,000 people worldwide, Infosys is a top provider of IT services. The Indian IT services company, based in Bangalore, relies on its offshore outsourcing strategy to get 60{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471} of its income from North America.



Cognizant Technology (CTSH)

A leading supplier of IT services globally, Cognizant works with some of the biggest companies in the consumer goods, media and communications, healthcare, natural resources, and financial services sectors.



Genpact (G)

A company that offers business process management services is Genpact Ltd. Clients are business entities that operate in the banking and financial services, insurance, capital markets, consumer products, life sciences, infrastructure, manufacturing, and healthcare industries, as well as high-tech.



WNS (Holdings) (WNS)

With a hybrid onshore, nearshore, and offshore delivery strategy, WNS (Holdings) Ltd. is a global supplier of business process management (BPM) services, providing complete data, voice, analytics, and business transformation services. The two reportable business segments for the firm are WNS Global BPM and WNS Auto Claims BPM.



Source: Morningstar and Seeking Alpha

Competitive Position

According to the latest annual report, ExlService claims that they compete by…

…working to differentiate itself as a strategic partner for businesses with deep industry expertise, sophisticated data, and analytics capabilities, innovative digital operations and solutions and technology, strong client relationships, leading industry talent, superior process capabilities, and differentiated technology, which enable ExlService to respond rapidly to market trends and the evolving needs of its clients.

ExlService operates a so-called industry vertical strategy. I am a big fan of this approach as it enables the mentioned “deep industry expertise” which helps tailor solutions to maximize solution effectiveness and thus optimize customer satisfaction.

I believe its earlier claimed differentiations regarding data and analytics capabilities can be backed up by the countless mentions by analysts.

For instance, the company is named a 2022 Leader for Business Process Outsourcing in Finance and Accounting by Gartner. Gartner estimates that…

…through 2024, finance outsourcing for artificial intelligent process technologies will rise from 6{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471} to 40{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471}, primarily focused on the digital transformation of transactional operations.

I believe that this recognition evidences its strong AI-enabled solution offering.

Moreover, in 2022, ExlService is named

Furthermore, users rate its products on Gartner an impressive 4.9 out of 5 in the last 12 months, which is slightly higher than most of its other competitors.

With its deep industry expertise, high user satisfaction, and leadership position in its industries, they have built up a respectable client base in several industries.

Important clients

Important clients (RW Baird 2021 Global Consumer, Technology & Services Conference in 2021)

Despite intense competition with much larger companies, ExlService seems to have a solid position in its market due to its deep industry expertise and a very robust product offering.

The Latest Earnings Report

On July the 28th, ExlService reported financial performance statistics that exceeded the estimates of analysts. The CEO stated that…

…EXLS had a strong second quarter with revenue of $346.8 million, a 26.1{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471} increase from the second quarter of 2021. Analytics continued to lead our growth with a 44.8{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471} revenue increase from the second quarter of 2021. Adjusted diluted earnings per share for the quarter was $1.50, a 31.6{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471} increase year-over-year. Our focus on data-led solutions that leverage domain expertise, AI and digital capabilities is resonating with clients and driving significant growth. Our value proposition to help our clients improve their growth and profitability remains relevant throughout the economic cycle. The market for our services remains strong as we look to the second half of 2022.

In my opinion, these statistics demonstrate its strong current offering.

The stock price rose by 17{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471} in the last 5 days because of the earnings numbers.

Valuation & Financial performance

Basic statistics comparison:


Forward PE

Gross Margin

Free Cash Flow Margin

3Y sales growth

3Y EPS growth

Debt / Equity






















Cognizant Technology














WNS (Holdings)







Source: Seeking Alpha

ExlService is the most expensively valued company in the competitor group. Furthermore, its revenue growth isn’t out of the ordinary, its free cash flow margin is a bit lower than the other companies, and its debt to equity is higher.

Something that the company has in its favor is its very high 3Y earnings-per-share growth rate of 27{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471}. Furthermore, the stock has the highest gross margin of the group.

A more detailed look at its EPS over time since 2015:

EPS growth

EPS growth (Data from Seeking Alpha, Graph by Author)

This translates to a very healthy CAGR of 12{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471} since 2015. I don’t think it’s realistic to use the historical 3-year EPS growth rate of 27{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471} for the following years. However, I believe something around 12 to 16 percent annually would be more appropriate.

Final Take

I believe that ExlService offers a very solid offering and is liked by many renowned clients and analysts because of it. As a result, they have historically shown great growth rates. The latest earnings performance was so good that it drove up the stock price by 17{8ba6a1175a1c659bbdaa9a04b06717769bcea92c0fdf198d429188ebbca09471}. Because of it, the valuation is now quite a bit higher than that of its competitors. Nevertheless, I still think there is a buying opportunity here. ExlService is only a fraction of the size of other competitors, and with its earnings growth momentum, I believe that its earnings growth can continue at a higher rate than its peers, albeit lower than its historical 3-year EPS growth.

Maria Flores

Next Post

How This Ex-Home Health Aide Built a Successful Business Helping Caregivers Grow Their Skills and Chart a Career Path

Sun Jul 31 , 2022
When Helen Adeosun, 37, started a masters system in schooling policy and administration at Harvard’s graduate faculty of education and learning, she failed to imagine of herself as an entrepreneur. But one eye-opening training course–paired with her preceding experience as a dwelling-care employee–gave her, in 2015, the assurance she required to […]
How This Ex-Home Health Aide Built a Successful Business Helping Caregivers Grow Their Skills and Chart a Career Path

You May Like