EXLS - ExlService Holdings: AI At A Reasonable Price

2024-02-02 16:02:15 ET

Summary

• Revenue growing in linearity, resiliently expanding business.
• EXLS has high-quality clients and long-term contracts with a high renewal rate.
• Founder-led management, growing ROC numbers, and a healthy balance sheet contribute to the company's favorable prospects.
• The price is reasonable; I see potential for multiple expansions here.

Opener

I like linearly growing companies because linearity indicates resilience in business. If a company can grow its top line in different economic environments, that is an ideal situation because it's a defensive play along with growth, and not many can do it. ExlService Holdings, Inc. ( EXLS ) is one of those companies. Even in 2020, the COVID year, revenue only decreased by 3%. Also, in 2023, where guidance is at 15-16% growth in a year when companies look to cut costs, the CEO, Rohit Kapoor, explained it well in the Q3 earnings call.

The slowdown in the macroeconomic growth environment is driving our clients to increase their focus on cost efficiency and improve productivity. As they make this pivot towards a lower cost operating structure, they are also looking to transform their operations. With EXL's technological capabilities of data, digital and AI, combined with our domain expertise, we are able to create significant impact for our clients in an accelerated manner and with much greater certainty than they can achieve on their own. This has led to a material increase in demand for integrated digital operations which plays to our strengths across both our Data Analytics and Digital Operations & Solutions businesses.

For further details see: