EXLS - NASDAQ

Hello, and welcome to the ExlService Holdings, Inc. Q1 2025 Earnings Call. [Operator Instructions] 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 John Kristoff, Vice President of Investor Relations.

Thanks, Abigail. Hello, and thank you for joining EXL's First Quarter 2025 Financial Results Conference Call. On the call with me today are Rohit Kapoor, 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, general economic conditions, those factors set forth in our press release, discussed in the company's periodic reports and other documents filed with the SEC 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 fact sheet. With that, I'll turn the call over to Rohit.

Thanks, John. Good morning, everyone. Welcome to EXL's first quarter 2025 earnings call. I'm pleased to report that we started the year with strong first quarter performance. In the first quarter, we generated revenue of $501 million, an increase of 15% year-over-year. And we grew first quarter adjusted EPS by 27% to $0.48 per share. Our results demonstrate significant momentum across all our segments. Effective this quarter, we are reporting our business performance across 4 new segments, consistent with how we are reviewing financial information and making operating decisions. The new segments are insurance, health care and life sciences, banking, capital markets and diversified industries and international growth markets. We delivered solid growth in the insurance segment, which represented more than one-third of our revenue in the quarter. Insurance is a core strategic market for us, where we have been a consistent leader for many years. We are excited about our growth opportunities in insurance as clients move from digital operations to AI-powered operations. Healthcare and Life Sciences is becoming a larger part of our business, representing about 1/4 of our revenue. We continue to deliver exceptionally strong revenue growth in the segment, driven by higher volumes in payment services and expansion of business with existing clients powered by our data and AI capabilities. Banking, capital markets and diversified industries also represented nearly one-quarter of our revenue and we were able to accelerate revenue growth in the quarter. With a significant customer base in this segment, the opportunity to drive value through integrated capabilities, leveraging data and AI is tremendous. Our International growth market segment enables us to leverage our data and AI strengths in growing markets outside the U.S., diversifying our business geographically, which is a strategic priority. In the first quarter, we grew revenue in this segment, and it now represents over 17% of our total revenue. We have immense potential to grow our revenue with existing clients in this segment, and we have significant opportunities to expand our client base. Beginning with the first quarter and going forward, we will be reporting data and AI-led revenue on a quarterly basis. Our data and AI led revenue is made up of AI-powered solutions and services in which we embed data and AI into client workflows. As clients evolve from digital operations to data and AI-powered operations and outcomes, these capabilities represent the next stage of enterprise transformation. During the quarter, our data and AI-led revenue grew 16% year-over-year and represented 53% of total revenue with strong performance across all four of our reporting segments. The robust execution of our data and AI strategy has positioned EXL as an industry leader in embedding AI into the workflow and deliver business outcomes that are much superior for our clients. As our clients navigate current economic uncertainty, we are increasingly focused on lowering their costs. As a result, our overall market demand environment remains robust. Our sales pipeline remains strong and grew both year-over-year and sequentially in the first quarter. We continue to invest in growing and maturing our data and AI capabilities to bolster our competitive advantage and drive revenue growth. And we have fully leaned into agentic AI as a key value driver for clients and a differentiator for EXL. During the quarter, we launched excelerate.ai, our Agentic AI platform, which enables clients to reimagine their workflows by embedding EXL or third-party AI agents into their business operations. Our platform enables us to deploy AI much more quickly and it is significantly lower cost resulting in substantial return on investment. Autonomous AI agents have the power to unlock exponential productivity gains, especially when they are domain optimized and seamlessly integrated into the workflow. Our open and modular platform includes more than 15 industry-specific proprietary AI agents that have been already deployed with clients across our vertical markets. Examples of our Agentic AI use cases include, a leading specialty insurance company using underwriting agents to efficiently search, extract, enrich and categorize risk from a variety of unstructured data sources. Our top 10 global insurer using specialized claims agents to identify and assist in third-party recovery determine accuracy of payments and identified potential fraud. A Fortune 500 energy company using EXL governance agents to ensure security and regulatory compliance. A large health care client, leveraging our audit agents to identify potential violations, analyzed root causes and ensure compliance with regulatory standards and a large global bank utilizing operational training agents to enable real-time knowledge access, conversation analysis and simulations. These are just a few examples of the many Agentic AI use cases we have deployed. We are thrilled by the overwhelming client response to [Excelerate.AI] (ph) underscoring our leadership as an AI first mover within the industry. We look forward to providing an in-depth update on our data and AI strategy and solutions next Tuesday at our Investor Strategy Update event here in New York. Simply put, we are executing with precision and discipline amid a rapidly evolving macroeconomic landscape. Our financial results and strong sales pipeline demonstrate the strength and durability of our business model. EXL benefits from several differentiators and structural advantages that help insulate us from economic volatility. These advantages include a high percentage of annuity-like revenue, which is tied to mission-critical operations for our clients, a strong diversified client base anchored by Fortune 1000 leaders in stable, less cyclical sectors like health care and insurance. And finally, a business model focused on driving efficiencies and cost savings to our clients, which becomes even more relevant during slower economic cycles. These factors provide us with an incredibly resilient business model, which has historically performed well in a variety of economic environments. While we are encouraged by our strong performance in the first quarter, we are mindful of the potential challenges that our clients face in the current environment. Therefore, we remain confident, but prudent in our outlook for the year. We are raising our revenue guidance range to account for our current business momentum and adjusting for more favorable currency exchange rates. In conclusion, our balanced and resilient mix of business, unique industry exposure and the growing demand to reduce costs and improve business outcomes, positions us well to deliver on our 2025 revenue and earnings growth targets despite broad economic uncertainty. With that, I'll turn the call over to Maurizio.

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 2025. We delivered a strong first quarter with revenue of $501 million, up 14.8% year-over-year on a reported basis and 15.1% on a constant currency basis. Sequentially, we grew 4.3% on a constant currency basis. Adjusted EPS was $0.48, a year-over-year increase of 26.9%. All revenue growth percentages mentioned hereafter are on a constant currency basis unless otherwise stated. Now turning to revenue by segment in the first quarter. The Insurance segment grew 8.7% year-over-year with revenue of $172.1 million. This was driven by expansion in existing client relationships. The insurance vertical, including revenue from international growth markets grew 9.7% year-over-year with revenue of $200.4 million. The Healthcare and Life Sciences segment reported revenue of $125.6 million, representing growth of 24.8% year-over-year and 11.4% sequentially. The year-over-year growth was driven by higher volumes in our payment services business and expansion in existing client relationships. The health care and life sciences vertical, including revenue from international growth markets grew 24.7% year-over-year with revenue of $125.8 million. In the banking, capital markets and diversified industry segment, we reported revenue of $117.7 million, representing growth of 14.3% year-over-year and 6.5% sequentially. This growth was driven by the expansion of existing client relationships and new wins largely in banking and capital market clients. Banking, capital markets and diversified industries vertical, including revenue from international growth markets grew 15.3% year-over-year with revenue of $174.8 million. In the International Growth Markets segment, we generated revenue of $85.7 million, up 17% year-over-year and 2% sequentially. This growth was driven by ramp-ups and higher volumes with the existing clients across banking, capital markets and diversified industries and insurance. SG&A expenses as a percentage of revenue declined 20 basis points year-over-year to 20.2%, driven by operating leverage. Our adjusted operating margin for the quarter was 20.1%, up 120 basis points year-over-year driven by improved gross margins. Our effective tax rate for the quarter was 22.3%, down 90 basis points year-over-year, driven by higher profits in lower tax jurisdictions and reduced U.S. tax -- paid taxes. Our adjusted EPS for the quarter was $0.48, up 26.9% 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 $346 million, and our revolver debt was $307 million for a net cash position of $39 million. We generated cash flow from operations of $3 million in the quarter against a cash deficit of $22 million in the first quarter of 2024. This improvement was driven by higher profitability and onetime earn-out payments related to a prior acquisition in the first quarter of 2024. During the quarter, we spent $13 million on capital expenditures and $8 million on share repurchases. Now moving on to our outlook for 2025. While we remain cautious about the current macroeconomic climate, we are increasing our revenue guidance for the year based on more favorable currency exchange rates our current growth momentum and strong pipeline. We now anticipate 2025 revenue to be in the range of $2.035 billion to $2.065 billion. This represents year-over-year growth of 11% to 12% on a reported basis and 11% to 13% on a constant currency basis with a year-over-year forecasted foreign exchange headwind of approximately $5 million. This represents an increase of $7 million at the midpoint of our previous guidance. We anticipate increased investments in data and AI capabilities and solutions to maintain and expand our competitive advantage going forward and continue to anticipate adjusted operating profit margin improvement of 10 to 20 basis points for the full year. We expect the foreign exchange gain of approximately $2 million to $3 million, net interest expense of approximately $1 million and our full year effective tax rate to be in the range of 22% to 23%. 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 $1.83 to $1.89, representing year-over-year growth of 11% to 14%. To conclude, we had a great start to the year with industry-leading financial performance, which demonstrates our unique competitive position. Despite the current market uncertainty, our leading indicators remain positive, and we have a highly adaptable and resilient business model setting us up for a solid 2025. With that, Rohit and I would be happy to take your questions.

Thank you. [Operator Instructions] Our first question comes from Bryan Bergin at TD Cowen. Bryan, please unmute your audio and ask your question.

Hi, thank you, good morning. I'll start with the '25 growth guidance. So I fully understand the affirmation here despite the 1Q outperformance. But I guess as we all try to test insulation into potential macro slowing, can you remind us on the level of annuitized revenue? And what's contractually committed versus potentially needing to go get and convert within the fiscal '25 growth guidance?

Hi, Bryan, it's Maurizio. When you look at our projection for the rest of the year and you look at our pipeline and our revenue, we have about 87% committed in our revenue for the year at the midpoint of our guidance and right around 95% visibility overall at the midpoint. So we feel like we are in a pretty good spot for the rest of the year. Now we're only one quarter in right now, but that's where we stand today. So we are fairly confident for the rest of the year given those numbers.

Okay. Good to hear. And then my follow-up around AI and data related revenue. Can you just talk about how the labor effort is allocated in AI-driven processes? And does increased AI adoption in certain processes definitively cannibalize a portion of revenue in other services areas like digital ops. Just talk about that and then the net overall impact that you're seeing?

Yes. Sure, Bryan. So for us, -- we think AI is going to be adopted with human in the loop, and therefore, that's a critical element that continues to be part of the equation. What we would expect to see in the data and AI-led revenue piece is that our revenue per head count would start to increase out there. And that's something which is a favorable trend for the business for us to be able to grow our revenues and grow profits faster than our revenue. We think the change in terms of the labor component and the head count that we have, that's something which is going to be gradual, and that's something which will play out over a long period of time. But as we embed more data and more AI into the workflow and into the client operations, we're going to continue to need to add more headcount, but probably at a much slower pace.

All right. Thank you.

Our next question comes from Surinder Thind at Jefferies LLC. You may now unmute your audio and ask your question.

Can you maybe just talk a little bit about -- you emphasize perhaps the first mover advantage in all of the investments that you're making. Can you perhaps talk about the -- what I would call the sustainability of that and how you think that's evolving at this point?

Sure, Surinder. So first-off, some of the foundational elements that we had invested in, that's playing to our advantage at this point of time. So as you know, for the last 25 years, we've been investing in building up our capability on select industry domains and around processes and running operations. And that gives us a huge leg up when it comes to embedding AI into the workflow. Over the past 15 to plus years, we've been investing in building up our analytics capability and therefore our data science and data engineering capabilities, those are very well established, and they allow us to embed AI into the workflow at a much faster pace with greater confidence and with much better results. And over the last several years, we've been investing in building up our data capabilities and having mastery over data. So these three elements of domain data and AI give us a huge advantage. Now that's what has resulted in us being able to build up excelerate.ai, which is our Agentic AI platform. Create 15-plus Agentic AI use cases, which are already deployed, build 100-plus accelerators and that's given us a slight advantage in terms of our peer group, where we've been able to kind of be a little bit ahead of the game -- and that's why we see a much faster client adoption of this and a much higher growth rate for our business. Now in terms of the sustainability of this advantage, we think we have to continue to invest in building up this capability, both from a talent perspective, as well as from a solution and a capability perspective. So that's why we're going to be continuing to increase the monetary investment, both in terms of the number of people and the experts that we will have for deploying AI, as well as some of the solutions that we would create leveraging AI. And I think as long as we can do that successfully, we hopefully should be able to maintain an advantage on a sustained basis.

Helpful. And then when we think about where we are in the business cycle, I think you highlighted a lot of the elements that make your business resilient. Any color on just the clients' willingness or their ability to the level of technology, I guess that they're willing to adapt that in the sense that -- when we look at where things were with AI last year, they've quickly or continue to evolve quickly. So how do clients go about making a decision of what they are going to implement or what they're willing to take a risk on in terms of the implementation? And is that effectively where the outcome base comes into play as the selling point.

Yes. I think that really goes to the heart of our business, Surinder, and tells how we see this. Number one, our clients continue to make increased investments around technology, around AI, around data and then making that work for them and provide them with a huge advantage. But the first thing that they have to do is to make room for that and therefore, they need to reduce costs and create ample room so that they can continue to make these investments. So it's really a dual play that they are making. On the one hand, they are looking at places where they can reduce the cost and create room for investment. And on the other side, they are making that investment. And they'll continue to make that investment despite any kind of an economic environment as long as they get the return on investment. So the critical elements are, can we provide them with the cost savings that can fuel the investments around technology and AI. And then secondly, can we take those investment dollars in technology and AI and create better business outcomes for them and a faster and a more impactful return on investment, so that they continue to leverage the capabilities that are being created and leverage the new technologies that are being launched. And I think that's where we fit in very nicely. We already have been helping our clients manage their cost structure, and we continue to help them create more efficiency and productivity around that. And on the other side, we are helping them innovate and be able to transform their operations and leverage our AI and data in a much more strategic way. So this kind of plays in very nicely to what our clients want to do and how EXL can strategically partner with our clients.

Thank you.

Our next question comes from Puneet Jain at JPMorgan. Please go ahead with your question.

Thanks for taking my question. Rohit, Maurizio, like obviously, like in the current macro environment, like a lot of concerns around like potential impact on various companies from macro news cycle. So in the past, you have talked about marketing analytics as one area, which could be adversely impacted, but that is also an area which has been weak for last few years. So in case like my question is, in an event of a macro headwind, incremental macro headwind potential recession or whatever, how low some of like the things that are more aligned to client discrete can go from current levels? Like maybe if you can talk about your exposure to discretionary spend in an event of adverse macro outlook?

Sure Puneet. So first of all, our viewpoint is that there's going to be increased volatility in the macroeconomic environment. And -- there may be a slowdown in the macroeconomic environment and that's something which our business model is well prepared for because we've got a very diversified business model. A large percentage of our business is annuity based and we are diversified globally as well as we are diversified by a number of clients and by the type of work that we do for our clients. The discretionary elements where clients can cut back some of their spend. That's always going to be the case, and they'll always focus their effort and energy and investment in areas that produces the highest ROI for them. And I think we are in a fortunate place where the kind of work that we do for our clients. Number one, it's mission-critical, and number two, all the transformation and change that we are making for them produces an immediate ROI. So that's something which we think we are very well buffeted from even if there is an economic environment slowdown that might take place. Now there may be certain services or certain solutions that might grow slower or might have an impact, but there are other services and solutions that kind of pick up. And that's why the business model is very, very resilient. And you can see historically as well, whenever there's been an economic slowdown, our business model has performed really well because as clients shift towards cutting costs and focusing in on cost efficiency, we can be a very, very powerful lever for helping them achieve that.

Got it. And follow-up to that, like how should we think about tenants of your revenue growth and margin throughout this year?

So Puneet, when you look at the start of the year in terms of constant currency, we did very well in the first quarter, right around 15.1%. Now when you look at the cadence for the year, in our -- at the midpoint of our guidance, we are going to have a stronger first half of the year versus the second half of the year. And the reason for that is if you go back to 2024, we had a weaker first half of 2024 and a stronger second half of 2024. So the second half of the year as a harder comparable on a year-over-year basis. So think about that and how you think about the cadence on a quarterly basis for the rest of the year. And then in terms of margins, look, we had a very strong first quarter at 20.1% in terms of AOPF. We are still projecting ourselves 10 to 20 basis points higher than the previous year. which will put us right around 19.5% to 19.6%. And what's really you'll see in Q2 through 4, is a higher level of investment for us to really drive more of our AI services solutions and really build our capabilities over the next three quarters to continue to increase our growth or propel our growth going forward into 2026. So you'll see a higher level of investment for the rest of the year so that our margin will be slightly lower than just that average for the rest of the year when I talk about 19.5% to 19.6%.

Can you quickly also talk about like cadence on sequential growth basis, Maurizio, like from Q1 to Q2 to Q3 to Q4.

I think for the rest of the year, when you think about just the overall cadence, I think it would be fairly similar to how we performed in the prior year. When you look at our cadence in the prior year from Q2 to Q3 to Q4, I think that will be fairly similar. We don't see any one significant outlier bump one way or the other in the sequential quarters.

Okay, understood. Appreciate it. Thank you.

Our next question will come from Maggie Nolan with William Blair. Please go ahead with your question.

Thank you and congrats on the quarter. I'm wondering how your 10 new client additions compared to your internal expectations? And then the same question for expansions with existing customers. Are there any changes or nuances with where you are seeing traction just given the kind of client sentiment is changing in response to the economy.

Thanks, Maggie. So the 10 new clients that we signed up, we think the quality of those client relationships that we've signed up are -- is very good and positive. Many of them are what we would call as our named accounts, which means these are accounts that we are proactively chasing and we've been able to convert them. The expansion from existing clients has been quite strong. And I would also add that we've added on a number of new clients and new prospects into our pipeline which increased quarter-on-quarter and year-on-year. So the client activity is pretty healthy and pretty well kind of set up. Though the number of new clients that we did sign up in the first quarter is lower than the number of new clients that we've signed up each quarter last year. But I think what you need to focus in on is much more on the quality of those names and the size of those business deals that we've signed up, and we are pretty happy with what we were able to accomplish in Q1.

Thanks Rohit, that's helpful. My second question is about the Healthcare and Life Sciences vertical has a higher percentage of outcome-based revenue, and it's got a notably stronger gross margin profile, which is great. Do you have the ability to increase outcome-based revenue in your other verticals? And how are you expecting that to trend over several quarters or even several years?

Yes. I think you will see that trend play out over the next several years. We'll probably not see that on a quarterly cycle. But one of the hopes and the priorities for the company is as we embed more data and AI-led solutions and we offer these to our clients, these solutions would have a higher gross margin for us because they are directly linked to the outcome that we can generate for our clients. And we are seeing a healthy momentum of buildup of some of these stand-alone AI solutions that we've created. Today, we have more than 10 different solutions that we sell on an independent basis and the traction that we are picking up on this is very encouraging, and that's something which we will continue to invest behind. So over a period of time, we would expect this curve to shift where we would have more of revenue coming in from independent AI and data led solutions, and more of these would be outcomes linked and with higher ability to earn margin out there.

Got it. Thank you. Our next question will be coming from David Koning with Robert W. Baird & Co Inc. Please go ahead with your question.

Hi guys. Great job. I guess, first of all, I love the new segmentation, data AI. If we look at that and take out the legacy analytics business, I think we're left with what we can kind of back into a new kind of AI subunit. And when we looked at that, it looked like about $185 million of revenue last year and $105 million of the prior year, so $80 million or so of growth, like a huge growth driver for you guys. Is that pretty sustainably growing? Or is that lumpy? Or do you think that will grow another $80 million or so this year?

Dave, it's Maurizio. Thanks for the question. It's -- so when you look at our data and AI-led revenue, it grew 16% on a year-over-year basis overall. We think that's sustainable going forward. That's going to be our big driver now going forward. It is not just us selling more value-added services in both data and AI, but it's also adding more AI into our existing client -- client workflows, and that becoming part of our data and AI revenue now going forward overall. So we do believe that we should -- over time, you should continue to see that sustainability in that growth overall update in AI start to build and become far beyond 53% of our total revenue.

Okay. Okay. Got it. And I guess my follow-up, just the health care business, you called up the massive sequential growth, the 11% sequentially. I think it was $125 million in the quarter. Is -- was there anything lumpy in that business? Or is that kind of the new point to drive higher sequentially from here?

No. Look, I think we had a couple of new client relationships that started off in the beginning of the year and we had strength across some of our service lines as well. The Healthcare and Life Sciences business is a business that we've been investing on very, very deliberately for the last 8 years to 10 years. And actually, we are very pleased with how this business is shaping up for us because it's giving us a very distinct advantage in the ability to leverage data and AI into this vertical. And we think this is an enormous vertical, it is something which we hope to be able to capitalize going forward as well. There is a lot of need of being able to leverage data into the health care and life sciences business. And that's what we are focused in on. And it's a very rich vertical space for us to drive growth.

Sounds good, great job guys.

[Operator Instructions] Our next question will come from Vincent Colicchio with Barrington Research Associates. Please go ahead.

Yes. Rohit, can you provide an update on the AI competitive landscape? Are you seeing any new competitors enter in a meaningful way?

Yes, Vincent. So on the AI side, we compete actually with many nontraditional competitors. And there are a number of different players that we would compete with. We compete against some start-ups. We compete against some of the hyperscalers. We compete against some of the large technology companies that are building up capability within AI. So our competitor set in AI is very large, very distributed and it's very specific to the use case. The big advantage that we have, while competing against many of these players is, number one, we understand our clients' business, their workflow, their operation and their process, and their data much better than any of the others. So that's a distinct advantage. The fact that we are running their operations for them already -- the fact that we've got very high NPS scores with satisfied customers gives us a preferential way for us to be able to introduce AI into these client operations. And then finally, as you all know, ultimately, the success of this is driven by the business outcome that you can drive leveraging AI. So a client or a prospect may give you a try on a particular use case. But unless and until the return on investment is significantly high. They're not going to continue on with you. And we've been very, very successful in terms of being able to deliver that business outcome for our clients and prospects, and therefore, we are seeing good traction and success associated with it. We are going to be sharing a lot of detail around this in our Investor Day next week. And so we'd encourage everybody to come and attend and be able to see some of the demos and some of the capabilities that we've built that we'll be sharing next week with all of you.

And as a follow-up, how is pricing trending? Is there any impact from the macro?

Pricing is definitely when the macroeconomic environment slows down, pricing and cost cutting becomes a priority for clients and prospects. So it is competitive. It is something which is something that comes up quite often. Our focus is to continue to demonstrate value to our clients and we have the focus be on business outcomes and on the value that we generate for them. And I think at this point of time with a number of our clients having experienced us not just over a year or over a couple of years, but really over decades, that is a huge amount of goodwill that we carry and therefore, our ability to manage pricing and competitive pressure.

Thank you.

Our next question will come from David Grossman with Stifel Europe. David, please go ahead with your question.

Hi, good morning thank you. So sorry if I missed this, but I was looking at the restated verticals. And when you include the international markets in the insurance piece, it looks like you grew about 10% and you had been growing mid-teens. Is there anything to discuss there in terms of what are the dynamics that may be impacting the growth of the insurance markets. And as a point of reference, I think one very large competitor based in India had mentioned weakness in the insurance vertical when they reported their March quarter also. So that was a little bit of a surprise to me then and seeing this deceleration seems to be consistent with that dynamic.

Sure, David. So firstly, our insurance business, including international growth markets in calendar year 2024 grew at 14%, which is pretty much in-line with the growth rate of the company. You're right about the first quarter that, that growth rate is close to about, I think, 9.5% and 10%. We've looked at that data, and we've looked at what's happening in that. We don't think it's an issue, it is just a timing issue because we expect the growth rate of that insurance business to increase in the following part of the year, and don't really read much into that. That insurance vertical for us is a very key vertical. It's a vertical where we are an industry leader. It's a vertical that is adopting data and AI in a very aggressive manner. It's a vertical where the return on investment on data and AI is tremendous because it's got a lot of legacy technology. And when you overlay data and AI on top, it can create tremendous value -- and we think that, that market is going to be a great market for us to continue to grow going forward. So won't read too much into that first quarter lower growth rate.

So you'd expect it to grow at least as fast as the overall company in '25?

Yes. I think it should grow in line with the overall company.

Right. And I think this question came up in some context earlier. But as you think about the impact of AI as opposed to the growth opportunity around new opportunities. There's obviously a lot of questions about the impact it has on the installed base of business and how the efficiencies get shared with clients and the potential deflationary impact it may have. And I know this varies by segment because there's some nuances between the different verticals that you participate in the impact it may have. But maybe you could dig in just a little bit deeper and share some thoughts on how we should think about the deflationary impact, if any from deploying AI in the existing book of business?

Yes, sure. So I guess the starting point around that, David is the fact that if you take a look at our existing portfolio and our existing business mix, we only have less than 50% of our business being that installed base of running operations because -- the balance 50% is the work that we do purely around data management, analytics and AI. And so that business mix is a very healthy starting point for us because for some of our competitors or other players, they might have a much larger component of business operations being the starting point. Number two, we've been at this journey of embedding data and AI within digital operations for a while now. And we have been actually probably more aggressive and more proactive about embedding AI into this operation and proactively cannibalizing revenue wherever we can for our clients' advantage. And the ironic part is the players that proactively cannibalize revenue and demonstrate value to their clients, grow faster than anybody else because our clients and our prospects feel confident to give us more business out there. So as long as you kind of continue to drive value for your clients on your existing base in a meaningful way. Actually, the growth rate should accelerate, not decelerate. And we are on that strategic path. We have a very, very ambitious goal of continuing to drive data and AI into existing operations in a very, very meaningful manner for us to be able to grow new solutions and new business that we acquire, leveraging data and AI. And then we also want to embed data and AI into our enterprise functions and use it ourselves because it provides us with the cost efficiency in the way in which we operate. So frankly, all 3 of them, which is an installed base, new activity and enterprise operations, we're going to be embedding data and AI into that.

So if you think about the installed base comment that you just made and you said that you've been -- you've already began that process. Where do you think you are in that journey in terms of because there's a – lot of function right of headwind that comes with that kind of transformation. So would you say you're beyond that point in terms of the biggest impact? Or do you think that that's still coming in the future?

The pace of adoption of this, David is something which I think people tend to get it wrong. I think the pace of adoption when you think about all the challenges of embedding data and AI into the existing installed base is still going to be gradual. It's still going to take time and it's still going to happen over a matter of years, and it won't really happen immediately. And the reason for that is leveraging technology making the AI algorithm work, scaling them up on the enterprise side, being responsible in terms of the use of AI, all the security concerns are associated with it, you have to really balance out all of that. So the way I'd answer your question is, we are still in the early phases of the adoption of AI into the workflow. However, it is going to take some time before a majority of the existing installed base has got AI embedded in every aspect of it. And that's going to happen over a period of time. And we are trying to drive that adoption as quickly as we can. We don't think that there is a tipping point out here. We think this is a shift that is going to take place that is going to provide the business benefit to our clients. And at the same time, it's going to allow us to be able to grow our business in a very meaningful way.

All right. Great. Very helpful commentary. If I may, just one quick question for Maurizio. How much of the FX impact -- or how much of the increase to the revenue guide was FX.

So David, it was right around $5 million overall. So our increase at the bottom end was FX and then the increase at the top end was primarily impact.

Got it. Okay, thanks again.

We have no further questions at this time. I will turn the call back to John Kristoff for closing remarks.