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Operator: Hello, and welcome to the ExlService Holdings, Inc. First Quarter 2026 Earnings Conference Call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions with the question-and-answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I will now turn the call over to Andrew Tout, Head of Investor Relations and Capital Markets.

Unknown Executive: Thanks, Jenny. Hello, and thank you for joining EXL’s First Quarter 2026 Financial Results Conference Call. On the call with me today are Robin Kapur, Chairman and Chief Executive Officer; and Maurizio Nicolelli, Chief Financial Officer. We hope you’ve had an opportunity to review the first quarter earnings press release we issued yesterday afternoon. We have also posted a slide deck and investor fact sheet on our Investor Relations website. As a reminder, some of the matters we’ll discuss this morning are forward looking. Please keep in mind that these forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

Such risks and uncertainties include, but are not limited to, those factors set forth in yesterday’s press release and in EXL’s filings with the Securities and Exchange Commission from time to time. EXL assumes no obligation to update the information presented on this conference call today. During our call, we may reference certain non-GAAP financial measures, which we believe provide useful information for investors. Reconciliation of these measures to GAAP can be found in our press release, slide deck and investor Faction. With that, I’ll turn the call over to Rohit. Rohit?

Rohit Kapoor: Thank you, Andrew, and good morning, everyone. We entered 2026 with strong momentum. In the first quarter, EXL generated revenue of $570 million, up 14% year-over-year and adjusted earnings of $0.58 per share, an increase of 20% year-over-year. Our sustained double-digit growth demonstrates the strength of our competitive position as well as strong execution against our data and AI strategy. EXL’s recognized industry expertise and leadership in helping clients adopt AI throughout their enterprise is resonating strongly with the market, and fueling our growth with new and existing clients. Demand is being driven by scaled deployments of AI inside core client workflows where EXL delivers measurable productivity, increased effectiveness and superior risk-based outcomes.

Underpinning this growth is a combination of capabilities that has taken over 2 decades to build, helping our clients adopt AI in complex regulated industries requires more than technology. It requires deep familiarity with the operational workflows, regulatory frameworks and data ecosystems that define how our clients actually operate. This is where our unique combination of domain, data and AI expertise differentiates EXL and drives superior client outcomes. EXL’s proprietary data assets, domain-specific AI models and orchestration capabilities allow us to embed intelligence directly into how work gets done. Not as an overlay, but as an integrated part of the process. It is 1 of the key reasons our renewal rates remain high, and we continue to grow at market-leading rates.

In addition to our segments, we also provide revenue information across 2 categories: data and AI-led and digital operations. Data and AI-led revenues grew 28% year-over-year in Q1 and now represents 60% of the company total. We are seeing strong momentum across our full portfolio of data and AI-led offerings as clients are stepping up the pace of AI adoption and need help with data for AI design of their agentic AI systems and reimagining business processes. Most of our clients across verticals need to improve the way that they capture, enrich and utilize their structured and unstructured data to drive AI outcomes. We are seeing strong market interest in our EXldata.ai platform which helps clients preserve domain-specific, semantic context as they build new AI-ready data foundations.

And we are continuing to leverage AI in solutions that we manage, which is both driving greater efficiencies and creating new value for clients by increasing precision and enabling improved outcomes. We are embedding AI both in our data and AI net solutions as well as the operations that we manage for our clients. This last point is important and worth stressing. When we successfully embed AI into an existing client workflow, the nature of that engagement changes. It becomes more intelligent, more IP-led and more value added. The revenue associated with it moves from our digital operations category into our data and AI-led category. As I communicated to you last quarter, in order to provide greater transparency, we share our investor fact sheet — with a total operations view, which combines digital operations and data and AI-led operations that have migrated into our data and AI-led category.

In Q1, total operations grew 10% year-over-year and remains a growth driver for our company’s revenue. The reported digital operations revenue after that migration was down 2% year-on-year. This is by design we expect this deliberate and planned shift to continue going forward. We saw a strong performance across each of our 4 operating segments to start the year. Insurance grew 13% year-over-year, representing over 1/3 of our revenues. I’m particularly pleased to see it return to double-digit growth. Insurers are accelerating adoption of AI to improve underwriting, claims and customer experience. We are seeing strong deal activity across all market segments. Healthcare and Life Sciences grew 21% year-over-year, representing over 1/4 of our revenues.

Payers and providers are facing rising cost pressures regulatory complexity and margin stream. They are turning to EXL to apply AI at scale to improve productivity and outcomes. Payment Integrity continues to be a significant driver of growth, along with broad-based strength in analytics, AI services and solutions and operations. Banking, Capital Markets and diversified industries grew 8% year-over-year and represented 1/4 of revenue. The quarter saw very high deal activity, and we remain confident in continued progress as the year unfolds. International growth markets grew 13% year-over-year reflecting successful AI-led expansions in new and existing clients. International markets are an important driver of our long-term growth and global expansion strategy and we continue to invest in talent and partnerships to expand our footprint.

During the quarter, we hosted our annual AI inaction flagship event bringing together senior business and technology leaders from across our client and partner ecosystem. The focus this year was on what it takes to make Agentic AI-real inside enterprise operations from building the right data foundations to orchestrating AI across complex workflows. The level of engagement and the participation reinforced what we are seeing in our pipeline. Enterprises are moving from AI curiosity to AI in production and we are the partners who can help them execute. We are also seeing co-innovation with our technology partners continuing to resonate and earn us industry recognition. EXL was recently named Advanced Technology Partner of the Year by NVIDIA, best new partner of the year by Genesis and AI and machine learning market disruptor of the year by AWS.

These partnerships are not only enabling our differentiated solutions they are becoming meaningful go-to-market and pipeline contributors. In summary, EXL entered 2026 with strong momentum and we have excellent visibility for the remainder of the year. Demand for our data and AI-led services and solutions remains robust, continuing the momentum we saw at the end of 2025. We continue to strengthen our competitive position through investments in capabilities, partnerships and talent. Our portfolio is well balanced. Our pipeline is strong and we have high renewal rates. More than 75% of our revenue is recurring or annuity like providing revenue stability and a great line of sight for the year. For full year 2026, we are increasing our revenue guidance to a range of $2.3 billion to $2.33 billion, representing 10% to 12% constant currency organic growth.

We are also increasing our adjusted diluted EPS to $2.18 to $2.23 representing 12% to 14% year-over-year growth. As always, I want to thank our clients, partners and employees for their trust and commitment and to our shareholders for their continued support. Before I hand it over to Maurizio, I’d like to remind you that we will be hosting our Investor and Analyst Day on May 13 in New York. We will share our multiyear growth framework AI monetization model and client case studies that bring our AI strategy to life. For those of you looking to understand the EXL growth story — this is the event to attend. Please reach out to Andrew for details. I look forward to seeing you there. I will now turn the call over to Maurizio to provide more details on our financial performance.

Maurizio Nicolelli: Thank you, Rohit, and thanks, everyone, for joining us this morning. I will provide insights into our financial performance for the first quarter and our revised outlook for 2026. We delivered a strong first quarter with revenue of $570.4 million, up 13.8% year-over-year on a reported basis and 13.4% on a constant currency basis. Sequentially, we grew 5.1% on a constant currency basis. Adjusted EPS was $0.58, a year-over-year increase of 20.2%. All revenue growth percentages mentioned hereafter are on a constant currency basis unless otherwise stated. Now turning to segment revenue for the first quarter. Insurance segment grew 12.6% year-over-year with revenue of $193.9 million. This growth was driven by expansion and higher volumes in existing client relationships and new wins.

Sequentially, insurance grew 4.4%. The insurance vertical, including revenue from international growth markets, grew 12.2% year-over-year with revenue of $226.1 million. The Healthcare and Life Sciences segment reported revenue of $151.9 million representing growth of 21% year-over-year and 6.8% sequentially. The year-over-year growth was driven by higher volumes in our Payment Services business and expansion in existing client relationships with other health care services we provide. The health care and life sciences vertical, including revenue from international growth markets, grew 20.9% year-over-year with revenue of $152.1 million. In the Banking, Capital Markets and Diversified Industries segment, we reported revenue of $127.4 million, representing growth of 8.1% year-over-year and 4% sequentially, this growth was driven by new client wins and expansion of existing client relationships.

Banking, Capital Markets and Diversified Industry Vertical, including revenue from international growth markets, grew 9.4% year-over-year with revenue of $192.2 million. In the International Growth Markets segment, we generated revenue of $97.1 million, up 10.9% year-over-year and 5.4% sequentially. This growth was driven by ramp-ups and higher volumes with existing clients and new wins across banking, capital markets and diversified industries and insurance. SG&A expenses as a percentage of revenue increased 20 basis points year-over-year to 20.4%, driven by investments in data and AI-led solutions. Our adjusted operating margin for the quarter was 20.5%, up 40 basis points year-over-year, driven primarily by improved gross margins. Our effective tax rate for the quarter was 21.9%, down 40 basis points year-over-year, driven by higher profits and lower tax jurisdictions.

Our adjusted EPS for the quarter was $0.58, up 20.2% year-over-year on a reported basis. Our balance sheet remains strong. Our cash, including short- and long-term investments as of March 31 was $266 million, and our revolver debt was $417 million for a net debt position of $151 million. During the quarter, we spent $13 million on capital expenditures and repurchased 4.4 million shares at an average price of $31 per share, totaling $136 million. This includes 3.35 million shares received upfront as part of the settlement of our previously announced $125 million accelerated share repurchase. We expect to receive the remaining shares in the second quarter. Now moving on to our outlook for 2026. While we remain cautious about the current macroeconomic climate and geopolitical uncertainties, we are increasing our guidance for the year, based on our current growth momentum and our strong pipeline.

We now anticipate 2026 revenue to be in the range of $2.3 billion to $2.33 billion, this represents year-over-year growth of 10% to 12% on a reported and constant currency basis. This also represents an increase of $20 million at the midpoint, which includes a $2 million foreign exchange headwind from our previous guidance. We anticipate increased investments in data and AI capabilities and solutions for the rest of the year to expand our competitive advantage and continue to drive top-line revenue growth. We expect a foreign exchange gain of approximately $2 million to $3 million, net interest expense of approximately $6 million to $8 million and our full year effective tax rate to be in the range of 21% to 22%. We expect capital expenditures to be in the range of $50 million to $55 million.

We anticipate our adjusted EPS to be in the range of $2.18 to $2.23 representing year-over-year growth of 12% to 14% and up from our previous guidance of $2.14 to $2.19. To conclude, we had a strong start to the year, demonstrating our unique competitive position and participation in high-growth market segments. Despite the current geopolitical uncertainty, our leading indicators remain positive, and we have a highly adaptive and resilient business model, setting us up well for a solid 2026. With that, Rohit and I would be happy to take your questions.

Operator: [Operator Instructions] Our first question comes from Bryan Bergin with Cowen.

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Bryan Bergin: Good morning. Thank you. I wanted to ask here on the growth guide. So good to see the raise. Can you just dig in on the key assumptions for data and AI-led versus digital ops growth and maybe how your views on the industries may shape up — and Maurizio, despite the strong commentary here, it doesn’t suggest any demand impact to you, but would you still say this feels like a prudent outlook for the balance of the year?

Rohit Kapoor: Brian, so our growth outlook, we’ve increased our guidance for the full year. As you all know, our first quarter is typically a strong quarter, and we had a great first quarter this time. What we’ve seen is that we’ve been able to kind of outperform our own expectations in the first quarter. We continue to see good pipeline and good demand for our services, and therefore, we’ve increased our guidance for the balance of the year. The data and AI-led part of our business is actually resonating very nicely in the marketplace. It now represents 60% of our total portfolio and it’s growing very nicely. Even for digital operations, as we’ve shared with you, our total operations is actually growing quite nicely as well, and we continue to see demand out there.

If you talk about industries, typically, we continue to see good momentum in insurance, in banking and in health care. Some of the industries where we see a little bit of softness is on retail and on communication. But a majority of our portfolio is really made up of banking, financial services, insurance and health care. And those are all very, very strong pipelines and demand for us. We don’t really provide a breakup, Brian, as you know, between data and AI-led and digital operations. But it would be fair to say that our digital operations will grow slightly below the company average. And our data and AI-led piece will be powering the growth of the overall company. I’ll pass it on to Maurizio to talk about the prudent guidance that we’ve given.

Maurizio Nicolelli: Yes. Thank you, Rohit. And Brian, as Rohit talked about, we’re seeing very good momentum coming into the calendar year. The Q1 is normally a strong quarter for us to really start out the year. And we saw that again this year. And we continue to see that momentum going into the rest of the year. One thing to highlight is we did raise our guidance at the midpoint by $20 million, more than our beat in the first quarter, and that does include a $2 million FX headwind from the last time we gave guidance. And then lastly, our guidance is going to be a bit prudent and take into account what’s happening in the current macro environment also the geopolitical uncertainties that are out there. And we have 3 more quarters remaining for the rest of the year.

So look, we have very good momentum going into the second quarter and the rest of the year. And our guide is we’ve increased it — and we’re still early in the year, and we’ll continue to revisit our guide as we go forward. But the big positive here is that it’s — we’ve got a very positive momentum going into the rest of the year from Q1.

Bryan Bergin: Okay. That’s helpful. That’s clear. maybe on margins. So it looks like you outperformed there as well. Can you just comment any change in expectation on adjusted op margin for the year? And just is it investment timing, any cadence expectations just to help.

Maurizio Nicolelli: Yes. Sure. So you saw our adjusted operating margin come in at 20.5% in Q1, and that’s up 40 basis points from Q1 of last year. We always see Q1 being a very strong quarter, both on revenue and profitability. And that sets us up very well for the rest of the year. In terms of investing to continue to drive double-digit growth for the rest of the year and also going into 2027. So you will see us, as you saw last year, start to make additional investments, particularly into our data and AI capabilities during the rest of the year. And our [indiscernible] forecast for the rest of the year will be similar to what we have talked about in that mid-19% range.

Operator: Our next question comes from David Koning with Baird.

David Koning: Yes, thanks and great job again. I guess 1 question, we kind of hear your clients, just all the companies in the environment right now are really looking for AI savings — do you get some of them pushing you on price a little bit, just saying, hey, we need to find ways to save to show our CEO, our Board, et cetera, that we’re saving money. Do you see that as a price headwind at all or more of a demand tailwind?

Rohit Kapoor: Dave. So let me just kind of provide a little bit of context around what we are seeing around the adoption of AI. #1, I think what we are seeing is our clients are switching over from AI pilots and AI POCs to AI in production. So that’s a big change, and that started out early in this year. And frankly, that’s playing to our trends and the value that we can add to these relationships. The second thing that we are seeing is as clients think about AI in production, they are quite willing to open up access to their technology systems to their databases, and allow us to be able to make changes to the end-to-end workflow. As you know, the application of AI has to be driven in conjunction with the transformation of the workflow, and we are in the best position to be able to drive that.

And the third piece is the commercial model is also changing. And what we are seeing is, as clients come to us with the adoption of AI to be implemented and enabled — the commercial model is changing much more towards a fixed fee and a milestone-based payment and an outcome-based model. So that is something which allows us to be able to manage the pricing and the margins and be able to add value to the customer relationship. So the negotiation and the conversations are much more about providing our clients with deterministic benefits associated with AI adoption and for us to be able to do it in a way that allows us to be able to earn a respectable margin associated with that. We’re not really seeing clients come to us just asking for price reduction.

The price reduction is alongside the transformation and alongside with the value creation for them.

David Koning: Yes. And just 1 follow-up. In the international segment, I know you called out a little uncertainty with the conflict. 17% of revenue, it actually accelerated pretty nicely in the quarter. would you expect to see a little deceleration there? Maybe describe kind of what the impacts you think can happen.

Rohit Kapoor: Yes. So Dave, firstly, our international growth market is highly underpenetrated. So frankly, the opportunity set out there is enormous. Second, we have very little and very limited exposure to the Middle East. Most of our revenue from clients really comes in from U.K., from Europe, from Australia and New Zealand and we are seeing healthy adoption of AI in these geographies. Our goal will be to continue to drive a greater and faster adoption of our services in the international growth markets. So we are not really seeing any direct impact due to the conflict as such. There may be some downstream second degree or third degree kind of impacts associated with that with our clients. But frankly, it’s actually a very fertile ground for us in the international growth markets.

So we’re going to continue to invest in that space by adding on more talent, bringing on more capabilities — and we think we should be able to grow our international growth markets business quite nicely, and it should grow at the same level or if not higher, than the company average growth rate.

Operator: Our next question comes from Maggie Nolan with William Blair.

Margaret Nolan: Thank you I’m curious if you can share any perspective on net revenue retention at some of your largest accounts kind of help us get at the question of volume versus some of this work migration between types of offerings?

Rohit Kapoor: Yes. Maggie, that’s a great question and something that we’ve been paying close attention to. So like I said earlier, 1 of the things which is happening with our more mature clients as they ask us to help them adopt AI into their enterprise workflows. What we are able to do is to actually work on much larger pieces of operations for them as compared to the past and also work on a lot of work associated with building the right kind of data foundation and new service lines, which we would not have kind of engaged with them on previously. So frankly, the landscape at which we are operating, that’s expanding. Our TAM is expanding and it’s becoming a much bigger playing field for us. And at the same time, we are able to deploy AI and eliminate and reduce the amount of manual effort that’s required to be able to do some of these processes and pass on this productivity benefit to our clients.

So if you talk about net revenue retention, actually, it still is a growth story for us. because on a net basis, we are seeing a much wider landscape to play in, and we’re seeing the revenue size and the size of the operation actually increased despite providing them with a benefit associated with the manual work — manual portion of the work that was being done previously.

Margaret Nolan: And then I noticed in the prepared remarks, a little bit of an emphasis on partnerships. And I’m wondering if there is anything you can share with us to give us a sense of how that’s progressing, like what the partner sourced pipeline looks like or co-selling metrics? And then any sort of variance in things like the deal cycle when you have partnership involvement?

Rohit Kapoor: Sure. So we’ve been actually very pleased with the progression of our partner relationships — and as you saw, our partners are recognizing our effort, and they are recognizing our differentiated capabilities as compared to some of the other players that they might be dealing with. The 1 unique thing about EXL is that we come at the transformation and the adoption of AI from a process and a workflow and a knowledge of our clients’ business and operations lens. And our partners are finding that to be a unique value proposition because that knowledge of the domain that ability to apply contextual understanding of our clients’ business alongside with the technologies that our partners are providing that’s creating a huge amount of value uplift for our clients.

So frankly, these partnerships are resonating. The motion is becoming a lot easier and smoother in terms of our go-to-market strategies and our partners are recognizing us and giving us these awards as compared to other players. The go-to-market is actually the more exciting part because now when we go in and we interact with clients, we are able to take our partners there. And our partners are also bringing us into deals which they are participating in. So frankly, the activity and the deal flow has increased substantially. And I think that’s something which we would foresee going into the future as well.

Operator: Our next question comes from Surinder Thind with Jefferies LLC.

Surinder Thind: Rohit, can you help me understand the step down in the digital ops segment. We kind of take a look forward. Over the past couple of years, that was a high single-digit grower. I think the expectation is more muted. Is the idea here that, that correlates with the advancement in agentic bottle capabilities — and should we expect maybe a year or 2 from now, see a further step down in that segment as the models further advance? And then ultimately, as all of the get recaptured in the data and AI-led segment?

Rohit Kapoor: Yes. So let me try and go through this in a step-by-step basis. Firstly, if you take a look at total operations, that continues to grow, and that continues to expand. And in the first quarter, total operations grew 10% year-on-year. Within total operations, you could split it up into 2 buckets. One is digital operations and the other is data and AI-led operations. As the adoption of AI increases, we are going to see there being a bigger shift towards data and AI-led operations. And frankly, that is a very good thing from our perspective because as the operations shift towards data and AI led, we are putting in more IP, more proprietary assets of EXL and creating more value for our clients as such. And that business becomes much stickier, much bigger in size, and we control the outcome end to end.

So going forward, for the remainder of this year, digital operations will likely continue to have the same kind of deceleration of growth that has happened in the first quarter. But the shift towards data and AI-led operations, that’s the critical piece — and that’s something that is positioning the company to be a future forward company for our clients. And that’s something which other clients are looking at, our prospects are looking at and they’re engaging with us in an even more determined manner. And that’s why we’re seeing our pipeline being extremely full, and the level of activity is very high. and we feel very confident about continuing to grow our overall business in this double-digit kind of range going forward.

Surinder Thind: And then turning to headcount. — you continue to see a strong uptick there. Is that how we should expect the model to evolve over the next couple of years? Where there’s a spread between revenues and headcount? Or should that spread expand in the coming years when we think about getting to a more revenue per head count model, as you build out your IP?

Rohit Kapoor: Yes. So if you take a look at Q1, our revenues have increased by 14% and and our head count has increased by about 11%. If you take a look at previous quarters and previous years, typically, that’s been the trend where the head count increase is lower than the revenue increase, and we would expect that to continue on our business model as such. Now going forward, it depends upon the type of service mix that we are providing to our clients and the kind of activities that we are undertaking. As we move from digital operations to data in AI-led operations — that is definitely going to result in a lower head count addition and a much higher revenue uptick. But if we get into newer service lines, there, it will depend upon what the dynamics of those new service lines are.

And the revenue per head count will be determined by the characteristics of that particular service line. So I think on a steady-state basis, as this transition takes place, you would expect a delta between the revenue head count and the revenue head count to be 3% or so, which is what the case is right now. But as we go forward, that can shift 1 way or the other.

Operator: Our next question comes from Abe Horie with JPMorgan.

Unknown Analyst: It’s Avi on for Puneet. I was wondering if you could talk about the specific drivers on such strong traction in AI and data services. you provide to operations, management clients? Was it in any way related to AI model evolution or just clients embracing AI with new budgets?

Rohit Kapoor: Yes, sure. So our data and AI-led portion of our business has multiple elements within that, right? It’s got our data management business, it’s got our analytical model and services and solutions business. It’s got our Payment Integrity business as part of that. It’s got our data and AI-led operations — so frankly, we are seeing broad-based traction and growth across all of these different service lines that we have in that category. I would say that the data management part is foundational, and that’s something which we are seeing, frankly, a huge amount of demand in — and the challenge for us is actually being able to hire talent, quick enough to be able to fulfill that demand. In other areas, we are seeing a pivot to take place.

So we’re seeing some of our analytical services switch over to AI services. And that’s a very strong pivot that’s being made associated with that service line. We are also seeing a very sharp increase in the data and AI-led operations — and that conversion, when it’s moving into production, that’s something which is actually driving a faster growth rate of our data and AI-led category. So we are very pleased with the fact that we’ve got multiple service lines in that category. And each of these service lines has got a tremendous amount of headroom and they’re all growing very nicely, and it’s very broad-based. So it’s not 1 particular service line that’s driving that growth. It’s actually multiple service lines driving growth, and that’s what gives us confidence in terms of the sustainability and the durability of our business in terms of our business growth.

Unknown Analyst: Got it. Seems very broad-based. And maybe as my follow-up, so our checks are showing that AI-driven automation of business processes from 50% to 80% is 10x harder than going from 0 to 50%. So could you touch on what you’re seeing and your clients and embracing this next milestone? And is there any progress within the quarter?

Rohit Kapoor: I’m sorry, the 50% to 80% refers to what metric?

Unknown Analyst: AI-driven automation of business processes.

Rohit Kapoor: Right. So what what our sense is when clients want to adopt AI into their operations, — it’s not just simply taking an LLM model and pasting it on top of that operation. There’s a whole series of work that needs to be undertaken. #1, the data foundation has to be correct and the ability to use structured and unstructured data and make that be readily usable. That’s a key foundational step. Secondly, the application of the LLM or the AI model that needs to be iterated upon and refined as we go forward. Third, there’s a very big piece associated with the knowledge and understanding of context. And therefore, bringing together all of the policies and rules and regulations and how a particular transaction needs to be processed.

That knowledge needs to be clearly kind of defined with the use and the application of the AI model. And finally, the semantic layer, which is the key for creating value for any enterprise AI adoption. That needs to be combined using both the probabilistic elements of Nederland, but also combining it with deterministic elements, particularly for regulated industries. So bringing together all of these things and then putting together guardrails putting together security, putting together a number of elements associated with token economics — this is all very, very complex. And I think we are in a fortunate position that we have done this several times over, and we can deliver the business outcomes to our clients. And our clients trust our ability to execute, and that’s what’s driving the growth there.

Operator: Our next question comes from David Grossman with Stifel.

David Grossman: Good morning. Thank you. So I think Rohit you had mentioned in an earlier question that the NRR is above 100%. We can clearly see that in the numbers. So perhaps you can help us understand how that number has trended over the past couple of years as well as perhaps compare and contrast that with what the IT service companies are seeing, who are struggling and and kind of what’s making you different there as well as maybe talk about the backlog and just how far out you can see that dynamic continuing.

Rohit Kapoor: Yes, David. So the NRR for us is actually quite strong and positive. And I think the big reason is that with the adoption of AI, clients are actually getting more comfortable outsourcing more work and outsourcing more end-to-end process journeys. In the past, they were just comfortable outsourcing tasks and pieces of it. But now they are quite comfortable actually allowing a partner like EXL to manage that journey end-to-end. And the reason for that is that’s the only way to transform the journey to take control of the data assets to be able to deploy AI across the workflow and to be able to be held accountable for the outcome. So frankly, the business model change with AI is allowing this to be a very, very favorable sort of a shift that is taking place as compared to previously.

Previously, with the adoption of any other technology, whether it was some of the — some of the bots that were being put into place, it always used to be about whether more work can be outsourced — but now it is the full end-to-end life cycle that can be outsourced. So actually, it’s a lot better in this AI adoption wave.

David Grossman: And how long, Rohit, does it take to go from kind of the beginning to more of a steady state?

Rohit Kapoor: It takes a while, David. I think what we are seeing is the — setting up the data foundation that itself takes a fair amount of time because most of our clients do not have very mature data estates and putting that in place does take a lot of heavy lifting. And then iterating on the model and making sure that it’s working along with the contextual pieces of our clients’ business, — that’s also something which requires a fair amount of effort, a fair amount of complexity and a fair amount of time. And also, the last thing I would tell you is — this is not a once and done piece. This is — once you do implement AI into the workflow, you have to constantly maintain upkeep and there is a managed service portion to it that needs to be in place because these models will drift over a period of time, and you need to apply new context to these models, and that needs to be done on an ongoing basis.

So frankly, it’s a fairly complex piece of work that needs to be done to deliver the outcome and then to maintain it and to upkeep it — there is an ongoing piece of work that needs to be there as such.

David Grossman: So can the NRR stay above 1 when you go into the maintenance mode?

Rohit Kapoor: I don’t know. We’ll have to see how that progresses. It’s certainly — 1 of the things which we are seeing is — as we deploy AI into the workflow, our clients are now starting to offer newer feature sets to their customers in their offerings. They’re also willing to offer newer service lines — so frankly, there’s more being added to the existing piece of work. And if that continues, yes, I think the NRR will continue to remain above 1.

David Grossman: Great. And just 1 quick 1 on margins. I know you’re guiding Maurizio to flattish margins year-over-year or at least that’s what it would appear in the mid-19% range. And that’s despite kind of what looks like favorable mix shift. So is there some dynamic when you migrate from kind of kind of a person-based billing model to more of an outcomes-based model on a short-term basis, where there are just some transition costs when you’re going through that? Or — is there something else going on that would drive kind of result in flattish margins on such strong revenue growth?

Maurizio Nicolelli: Yes, David, we had a very good quarter on just overall on profitability. And so you continue to see kind of that uptick in gross margins overall. If you look at the second quarter of last year, we were at 37.7% this quarter at 38.9%. So you’re seeing — and each quarter since then just continues to rise. What you’re seeing is just us being able to drive profitability there. But the offset there is continued investment — if you look at our investment line and you look at the level of investment we’re making, it’s exponentially higher than revenue growth overall. And so we’re going to have to — we need to continue to invest, particularly in R&D now going forward as we develop more and more AI capabilities now going forward. So that’s what really leads us back to a mid-19% range overall in margins. And if you just look at our just overall guidance, we still have driving EPS slightly higher than overall revenue, which is 1 of our stated goals.

Operator: Our last question comes from Vincent Colicchio with Barrington Research.

Vincent Colicchio: Yes. Rohit, you had mentioned the commercial model has changed, and it also incorporates outcome-based pricing AI deals. I’m curious what portion of new AI deals involve outcome-based pricing?

Rohit Kapoor: Yes. So look, I think — that’s an area where we are seeing some of the AI deals have outcome-based pricing models, particularly those where the clients are allowing us to transform their end-to-end processes — that’s where they’re holding us accountable for the outcomes and the pricing model is switching over to that. Keep in mind that the the adoption of AI is gradual and then that’s a shift that’s happening over a period of time. There are portions of our business, which are already outcome based. So the payment integrity work that we do is completely outcome-based driven. So that’s — as that business continues to grow and use a lot more AI in its service line, that portion continues to increase. Anytime we are adopting more AI into the workflow that’s something which is kind of kicking in.

But the biggest barrier to this is clients don’t have good metrics associated with how to define that outcome and how to be able to attribute the responsibility for the outcome. So some of this tends to be a portion of it being on a fixed fee basis and then over and above that, there is some sharing of the gain and the productivity that we can provide to our clients. And that model is something that works well for — particularly for newer clients that are kind of going into this and wanting to see the benefit of that outcome.

Vincent Colicchio: And could you update us on your — how — the robustness of your acquisition pipeline and where your priorities may lie?

Rohit Kapoor: Yes. So look, I think in this environment, we are seeing a fairly strong pipeline of assets — we want to be very careful in terms of the choice of these assets and make sure that these are something which will further our ambitions in terms of being able to be the AI strategic partner of choice for our enterprise clients. There are capability sets within the AI enablement work stream that we want to kind of add to — and so we’ve consciously picked and chosen the areas where we’d like to kind of add more capability. And we’re looking at acquisitions on a fairly active and a fairly regular basis. But as you know, the acquisitions are, I guess, only when you consummate an acquisition, can you really be sure about doing an acquisition. And so — we hope that we’d be able to kind of close an acquisition soon, but we can’t really comment on the timing of that as of now.

Operator: We have no further questions at this time. This concludes our call. Thank you, and have a good day.

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