EXLS earnings analysis
What we found in EXLS's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
EXL delivered strong Q2 revenue growth of 15.6% year over year to $594.8 million, with every segment growing and Healthcare and Life Sciences up 22.0%. Gross margin improved 30 basis points to 38.0%, but operating margin contracted to 14.7%, and net income fell 2.3% to $64.6 million because of higher SG&A, weaker other income, and higher tax expense. Cash conversion weakened as first-half operating cash flow declined 20.4% to $89.6 million and DSO rose to 69 days; debt increased to $381.2 million ahead of an expected Q3 refinancing and the planned iMerit acquisition.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Revenue growth remained strong
- Q2 revenue reached $594.8 million, up $80.3 million or 15.6% year over year from $514.5 million and up 4.3% sequentially from $570 million in Q1 2026. Growth was driven by 13.3% expansion with existing clients and 2.6% from new-client wins, partly offset by 0.3% FX pressure.
- Healthcare led growth and margin expansion
- Healthcare and Life Sciences was the fastest-growing segment, rising $28.5 million, or 22.0%, to $158.0 million. Its gross margin expanded 340 basis points to 46.9%, supported by higher volumes from existing clients.
- Broad-based segment revenue growth
- All four reportable segments expanded: Insurance rose 14.9% to $197.8 million, Banking/Capital Markets/Diversified rose 10.5% to $133.9 million, and International Growth Markets rose 14.7% to $105.1 million.
- Gross margin modestly improved
- Consolidated gross margin improved 30 basis points year over year to 38.0% from 37.7%, as revenue growth and operational efficiencies outweighed select-client volume pressure.
- iMerit acquisition expands AI capability
- EXL agreed to acquire iMerit for $170.0 million of upfront cash consideration plus up to $140.0 million of milestone-based cash incentives and earnouts over two years, expanding AI model-training and evaluation capabilities.
- Material shareholder-return deployment
- The company deployed $126.9 million toward treasury-stock purchases in the first six months and had $350.1 million remaining under its repurchase authorization at June 30, 2026.
- Positive cash generation despite investment
- Operating cash flow was $89.6 million for the first six months, while capital expenditures were $27.4 million; implied six-month free cash flow was $62.2 million. Expected FY2026 capex of $58.0 million to $62.0 million implies roughly 5% of first-half revenue.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Operating-margin pressure despite revenue growth
- Operating margin fell 110 basis points year over year to 14.7% and 140 basis points sequentially from 16.1%, as SG&A rose to 20.9% of revenue from 19.2%. SG&A included $1.9 million of iMerit-related costs and $1.8 million of digital and generative-AI investments.
- Profit conversion lagged revenue growth
- GAAP net income declined $1.5 million, or 2.3%, to $64.6 million even as revenue increased $80.3 million. Other income dropped $5.6 million to $0.1 million, including a $3.0 million fair-value change in contingent consideration.
- Working-capital consumption increased
- First-half operating cash flow declined $23.0 million, or 20.4%, to $89.6 million. Accounts-receivable and advance-billing changes reduced cash flow by $50.1 million versus the prior year, while DSO increased to 69 days from 64 days.
- Debt increased and refinancing is pending
- Borrowings rose to $381.2 million at June 30, 2026 from $298.7 million at December 31, 2025, with $381.2 million classified as current. The 2024 Credit Agreement matures April 18, 2027 and management expects refinancing in Q3 2026.
- Volume pressure in key operating segments
- Banking, Capital Markets and Diversified Industries grew only 10.5% to $133.9 million, while its gross margin fell 300 basis points to 34.8% because of lower volumes from certain existing clients. Insurance gross margin also declined 20 basis points to 34.6%.
- No formal risk-factor update; client concentration remains
- Item 1A did not identify newly added or revised risk factors versus the annual report for the fiscal year ended December 31, 2025. Nonetheless, the filing states that the top 10 clients represented 34.1% of Q2 revenue, making client concentration material.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $0.42
- Gross margin
- 38.0%
- Operating margin
- 14.7%
- Segment
- Insurance: $197.8 million, +14.9% year over year
- Segment
- Healthcare and Life Sciences: $158.0 million, +22.0% year over year
- Segment
- Banking, Capital Markets and Diversified Industries: $133.9 million, +10.5% year over year
- Segment
- International Growth Markets: $105.1 million, +14.7% year over year
What they said about what is next.
The 10-Q provides no quantitative revenue or EPS outlook. Management expects fiscal-2026 capital expenditures of $58.0 million to $62.0 million and expects the iMerit acquisition to close in the third quarter of 2026, subject to closing conditions.
The filing reads about the same as the one before it.
What came before.
- 10-Q · April 28, 2026
- EXLS reported Q1 revenue of $570.4 million, up $69.4 million or 13.8% year-over-year, with gross margin improving to 38.9% (up 30 bps) and operating income rising to $91.8 million (16.1% of revenue). Segment growth was…
- 10-K · February 24, 2026
- EXL implemented a strategic reorganization in Q1 2025 to Industry Market Units (IMUs) and is positioning as a data- and AI-led services provider. Revenue momentum continued into Q4 2025 with reported revenue of…
- 10-Q · October 28, 2025
- EXL reported quarterly revenue of $529.6 million, up $57.5 million or 12.2% year-over-year, driven by broad-based growth across all IMU reportable segments and contribution from the August 2024 ITI Data acquisition.…
- 10-Q · April 29, 2025
- EXL reported quarterly revenue of $501.0 million, up $64.5 million or 14.8% year-over-year, with gross margin of 38.6% (up 120 bps) and operating margin of 15.6% (income from operations $78.4 million). Net income rose…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
Read the next one first.
We read every filing EXLS makes the day it lands, and put it next to what the options market did about it. Members get both, and an alert when a filing arrives.
Cancel anytime · Month to month · Switch tiers whenever