Attached files
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| 8-K - 8-K - ExlService Holdings, Inc. | a8-kxhiclosurexpressre.htm |
Exhibit 99.1
EXLSERVICE HOLDINGS, INC. UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
On December 31, 2019, ExlService Holdings, Inc. (“EXL” or “we” or “us” or “our” or the “Company”) completed substantially the previously announced wind down of the operations of the Health Integrated business, which is reported within the Company’s Healthcare reportable segment.
The following unaudited pro forma condensed consolidated balance sheet as of September 30, 2019 is presented as if the Health Integrated business wind down, as described in the notes to these unaudited pro forma condensed consolidated financial statements, had occurred at September 30, 2019.
The unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 2019, and for the year ended December 31, 2018, are based on the historical financial statements of the Company for such periods after giving effect to the winding down of the Health Integrated business as if it had occurred on January 1, 2018. Also included in the unaudited pro forma condensed consolidated statements of income for the year ended December 31, 2018, is the effect of the SCIOinspire Holdings Inc. (“SCIO”) acquisition, completed on July 1, 2018, as if the transaction occurred on January 1, 2018. Refer to the Company's Current Report on Form 8-K/A filed on September 7, 2018, for more information regarding the pro forma effects of the SCIO acquisition on the unaudited pro forma consolidated statement of income for the year ended December 31, 2018.
The unaudited pro forma condensed consolidated financial statements are based on the historical financial statements of the Company for each period presented and in the opinion of the Company’s management, all adjustments and disclosures necessary for a fair presentation of the pro forma data have been made.
These unaudited pro forma condensed consolidated financial statements are prepared to meet the rules and regulations of the Securities and Exchange Commission ("SEC"), are presented for informational purposes only and should not be considered indicative of the results of operations or financial condition that would have been achieved had events reflected been completed as of the dates indicated or of the results that may be obtained in the future. These unaudited pro forma condensed consolidated financial statements and the notes thereto should be read together with the Company’s audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2018, and Management’s Discussion and Analysis included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as well as the Company’s unaudited consolidated financial statements and the notes thereto as of and for the nine months ended September 30, 2019, and Management’s Discussion and Analysis included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.
EXLSERVICE HOLDINGS, INC. | ||||||||||||
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET | ||||||||||||
AS OF SEPTEMBER 30, 2019 | ||||||||||||
(In thousands, except share and per share amounts) | ||||||||||||
Reported | Adjustments | Pro Forma | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 101,432 | $ | (1,004 | ) | $ | 100,428 | |||||
Short-term investments | 179,340 | — | 179,340 | |||||||||
Restricted cash | 5,412 | — | 5,412 | |||||||||
Accounts receivable, net | 179,702 | — | 179,702 | |||||||||
Prepaid expenses | 9,364 | (444 | ) | 8,920 | ||||||||
Advance income tax, net | 3,002 | — | 3,002 | |||||||||
Other current assets | 27,974 | — | 27,974 | |||||||||
Total current assets | 506,226 | (1,448 | ) | 504,778 | ||||||||
Property and equipment, net | 78,471 | — | 78,471 | |||||||||
Operating lease right-of-use assets | 88,753 | (641 | ) | 88,112 | ||||||||
Restricted cash | 2,441 | — | 2,441 | |||||||||
Deferred tax assets, net | 6,190 | — | 6,190 | |||||||||
Intangible assets, net | 78,845 | — | 78,845 | |||||||||
Goodwill | 349,530 | — | 349,530 | |||||||||
Other assets | 32,967 | — | 32,967 | |||||||||
Investment in equity affiliate | 2,555 | — | 2,555 | |||||||||
Total assets | $ | 1,145,978 | $ | (2,089 | ) | $ | 1,143,889 | |||||
Liabilities and equity | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 3,658 | $ | — | $ | 3,658 | ||||||
Current portion of long-term borrowings | 20,876 | — | 20,876 | |||||||||
Deferred revenue | 9,585 | — | 9,585 | |||||||||
Accrued employee costs | 59,568 | — | 59,568 | |||||||||
Accrued expenses and other current liabilities | 69,876 | (1,078 | ) | 68,798 | ||||||||
Current portion of operating lease liabilities | 23,516 | — | 23,516 | |||||||||
Income taxes Payable | 575 | — | 575 | |||||||||
Current portion of finance lease liabilities | 248 | — | 248 | |||||||||
Total current liabilities | 187,902 | (1,078 | ) | 186,824 | ||||||||
Long term borrowings | 223,916 | — | 223,916 | |||||||||
Finance lease liabilities, less current portion | 436 | — | 436 | |||||||||
Deferred tax liabilities, net | 720 | — | 720 | |||||||||
Operating lease liabilities, less current portion | 76,080 | — | 76,080 | |||||||||
Other non-current liabilities | 9,241 | — | 9,241 | |||||||||
Total liabilities | 498,295 | (1,078 | ) | 497,217 | ||||||||
Commitments and contingencies | ||||||||||||
Preferred stock, $0.001 par value; 15,000,000 shares authorized, none issued | — | — | — | |||||||||
ExlService Holdings, Inc. Stockholders’ equity: | ||||||||||||
Common stock, $0.001 par value; 100,000,000 shares authorized, 38,322,354 shares issued and 34,107,851 shares outstanding as of September 30, 2019 | 38 | — | 38 | |||||||||
Additional paid-in capital | 386,060 | — | 386,060 | |||||||||
Retained earnings | 530,547 | (1,011 | ) | 529,536 | ||||||||
Accumulated other comprehensive loss | (86,153 | ) | — | (86,153 | ) | |||||||
Total including shares held in treasury | 830,492 | (1,011 | ) | 829,481 | ||||||||
Less: 4,214,503 shares as of September 30, 2019, held in treasury, at cost | (182,809 | ) | — | (182,809 | ) | |||||||
Stockholders' equity | $ | 647,683 | $ | (1,011 | ) | $ | 646,672 | |||||
Non-controlling interest | — | — | — | |||||||||
Total equity | $ | 647,683 | $ | (1,011 | ) | $ | 646,672 | |||||
Total liabilities and equity | $ | 1,145,978 | $ | (2,089 | ) | $ | 1,143,889 | |||||
EXLSERVICE HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2019
(In thousands, except share and per share amounts)
Reported | Health Integrated Adjustments | Pro Forma | ||||||||||||
Revenues, net | $ | 734,474 | $ | (9,699 | ) | (a) | $ | 724,775 | ||||||
Cost of revenues (1) | 487,228 | (13,322 | ) | (a) | 473,906 | |||||||||
Gross profit (1) | 247,246 | 3,623 | 250,869 | |||||||||||
Operating expenses: | ||||||||||||||
General and administrative expenses | 93,349 | (4,203 | ) | (a) | 89,146 | |||||||||
Selling and marketing expenses | 53,996 | (314 | ) | (a) | 53,682 | |||||||||
Depreciation and amortization | 39,466 | (584 | ) | (a) | 38,882 | |||||||||
Impairment and restructuring charges | 7,296 | (7,296 | ) | (b) | — | |||||||||
Total operating expenses | 194,107 | (12,397 | ) | 181,710 | ||||||||||
Income from operations | 53,139 | 16,020 | 69,159 | |||||||||||
Foreign exchange gain, net | 3,471 | — | 3,471 | |||||||||||
Interest expense | (10,626 | ) | — | (10,626 | ) | |||||||||
Other income, net | 13,088 | (822 | ) | (a) | 12,266 | |||||||||
Income before income tax expense and earnings from equity affiliate | 59,072 | 15,199 | 74,271 | |||||||||||
Income tax expense | 12,571 | 3,612 | (c) | 16,183 | ||||||||||
Income before earnings from equity affiliates | 46,501 | 11,587 | 58,088 | |||||||||||
Loss from equity-method investment | 198 | — | 198 | |||||||||||
Net income attributable to ExlService Holdings, Inc. stockholders | $ | 46,303 | $ | 11,587 | $ | 57,890 | ||||||||
Earnings per share attributable to ExlService Holdings, Inc. stockholders: | ||||||||||||||
Basic | $ | 1.35 | $ | 1.68 | ||||||||||
Diluted | $ | 1.33 | $ | 1.67 | ||||||||||
Weighted-average number of shares used in computing earnings per share attributable to ExlService Holdings Inc. stockholders: | ||||||||||||||
Basic | 34,382,787 | 34,382,787 | ||||||||||||
Diluted | 34,744,968 | 34,744,968 | ||||||||||||
(1) Exclusive of depreciation and amortization.
EXLSERVICE HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2018
(In thousands, except share and per share amounts)
Reported | SCIO Acquisition Adjustments(1) | Health Integrated Adjustments | Pro Forma | |||||||||||||||||
Revenues, net | $ | 883,112 | $ | 41,060 | (a) | $ | (17,718 | ) | (b) | $ | 906,454 | |||||||||
Cost of revenues (2) | 584,855 | 24,771 | (a) | (20,031 | ) | (b) | 589,595 | |||||||||||||
Gross profit (2) | 298,257 | 16,289 | 2,313 | 316,859 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
General and administrative expenses | 116,202 | 6,301 | (a) | (5,798 | ) | (b) | 116,705 | |||||||||||||
Selling and marketing expenses | 63,612 | 3,847 | (a) | (2,464 | ) | (b) | 64,995 | |||||||||||||
Depreciation and amortization | 48,566 | 1,817 | (a) | (3,505 | ) | (b) | 46,878 | |||||||||||||
Impairment charges | 20,056 | — | (20,056 | ) | (c) | — | ||||||||||||||
Total operating expenses | 248,436 | 11,965 | (31,823 | ) | 228,578 | |||||||||||||||
Income from operations | 49,821 | 4,324 | 34,136 | 88,281 | ||||||||||||||||
Foreign exchange gain, net | 4,787 | 140 | (a) | — | 4,927 | |||||||||||||||
Interest expense | (7,227 | ) | (380 | ) | (a) | — | (7,607 | ) | ||||||||||||
Other income, net | 12,989 | 11 | (a) | (1,245 | ) | (b) | 11,755 | |||||||||||||
Income before income tax expense and earnings from equity affiliate | 60,370 | 4,095 | 32,891 | 97,356 | ||||||||||||||||
Income tax expense | 3,397 | 1,438 | (a) | 6,392 | (d) | 11,227 | ||||||||||||||
Income before earnings from equity affiliates | 56,973 | 2,657 | 26,499 | 86,129 | ||||||||||||||||
Loss from equity-method investment | 247 | — | — | 247 | ||||||||||||||||
Net income attributable to ExlService Holdings, Inc. stockholders | $ | 56,726 | $ | 2,657 | $ | 26,499 | $ | 85,882 | ||||||||||||
Earnings per share attributable to ExlService Holdings, Inc. stockholders: | ||||||||||||||||||||
Basic | $ | 1.65 | $ | 2.49 | ||||||||||||||||
Diluted | $ | 1.62 | $ | 2.45 | ||||||||||||||||
Weighted-average number of shares used in computing earnings per share attributable to ExlService Holdings Inc. stockholders: | ||||||||||||||||||||
Basic | 34,451,008 | 34,451,008 | ||||||||||||||||||
Diluted | 35,030,984 | 35,030,984 | ||||||||||||||||||
(1) Represent adjustments to record the historical revenues and expenses for the period January 1, 2018 to June 30, 2018
(2) Exclusive of depreciation and amortization.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2019
Adjustments reflect the elimination of assets and liabilities attributable to the Health Integrated business, as they are non-recurring in nature given the previously-announced wind down of the operations of the Health Integrated business.
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Nine Months Ended September 30, 2019
(a) | Health Integrated adjustments reflects the elimination of income and expenses attributable to the Health Integrated business. |
(b) | Impairment and restructuring charges represents pre-tax costs recognized in connection with the wind down of the Health Integrated business of $4,129 and impairment of Right-of-Use assets and long-lived assets of $3,167. |
(c) | To adjust income tax expense for the effects of the pro forma adjustments of wind down of the Health Integrated business, the Company used tax rate of 23.8% for the Health Integrated business. |
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Year Ended December 31, 2018
(a) | SCIO acquisition adjustments represent pro forma adjustments to record the historical income and expenses for the period from January 1, 2018 to June 30, 2018, the date the SCIO acquisition closed. Refer to the Company's Current Report on Form 8-K/A filed on September 7, 2018, for more information regarding the pro forma effects of the SCIO Acquisition for the unaudited pro forma consolidated statement of income for the year ended December 31, 2018. |
(b) | Health Integrated adjustments reflects the elimination of income and expenses attributable to the Health Integrated business. |
(c) | Impairment charges relate to recognition of an impairment charge of $20,056 during the fiscal year 2018 to write down the carrying value of goodwill of $14,229 and intangible assets of $5,827 to their fair values related to the Company’s Health Integrated reporting unit. Refer to the footnote 10 of Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on February 28, 2019. |
(d) | To adjust income tax expense for the effects of the pro forma adjustments of wind down of the Health Integrated business, the Company used tax rate of 25.9% for the Health Integrated business. |