Good morning, ladies and gentlemen, thank you for standing by. And welcome to the Q2, 2020 ExlService Holdings Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

[Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to your speaker today, Mr. Steven Barlow. Please go ahead, sir..

Thank you, Amy. Hello, and thanks to everyone for joining EXL's second quarter 2020 financial results conference call. I'm Steve Barlow, EXL's Vice President of Investor Relations. With me today by telephone are Rohit Kapoor, our Vice Chairman and Chief Executive Officer; and Maurizio Nicolelli, our Chief Financial Officer.

We hope you've had an opportunity to review our Q2, 2020 earnings release we issued this morning. We've also updated our investor fact sheet in the Investor Relations section of EXL's website. As you know, some of the matters we'll discuss in this call 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 today's press release, discussed in the company's periodic reports and other documents filed with the Securities and Exchange Commission from time to time.

EXL assumes no obligation to update the information presented on this conference call. During our call today, 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 as well as the investor fact sheet.

Now I'll turn the call over to Rohit Kapoor, EXL's Chief Executive Officer.

Rohit?.

Thank you, Steve. Good morning, everyone. Welcome to our Q2, 2020 earnings call. I hope you and your families are all safe and healthy. As each day brings headlines about the economic recovery, a resurgence of COVID-19 cases and concerns about what comes next, I am reminded of the lessons we learned during the early days of the pandemic.

We need to stay agile, embrace uncertainty and keep focused on the things that matter. This is no small task in this environment, but we are progressing, thanks to the efforts and the innovation of our people and close partnerships with our clients. Today, a vast majority of our employees are working from the safety of their homes.

Over 95% of our client demand is currently being fulfilled through work from anywhere business models. We are slowly reopening offices throughout parts of India, Europe and the Philippines, as stay-at-home orders are relaxed, and conditions in those countries allow us to operate with enhanced safety protocols.

We have taken a methodical and thoughtful approach aligned with local guidelines on social distancing, sanitization and other safety measures. At the same time, we continue to improve our work from anywhere capabilities, to enable the flexibility to switch between the two models seamlessly, and provide uninterrupted service delivery for our clients.

In fact, we have seen tremendous appreciation from our clients, who have recognized our commitment to keeping critical functions operational, and our flexibility in creating new solutions to address sustained volatility in the marketplace. Our efforts to-date have positioned us very well for success in this environment.

Our business model has not only remained intact, but is even more relevant today. With an increased need for digital and analytics capabilities and pressure to manage costs, client organizations are ready to embrace change and to collaborate with EXL to pursue new operating models.

We are seeing a robust demand across industry verticals and business lines to elevate customer experience, drive end to end operations, digitization and optimize cost structures. To illustrate this, I'd like to share three specific developments over the last quarter that reaffirm my confidence in our current growth trajectory.

One, we signed several significant long-term renewals in Q2. Two, we have developed new solutions, leveraging our data and analytics capabilities to cater to the unique market requirements of this crisis. And three, we have signed multiple new clients in a completely virtual sales cycle.

First, we signed three strategic renewals in Q2, which included one of our top five operations management clients, and two of our top 10 analytics clients.

Each of these renewals faced strong competition, but in each case, EXL came out as the key strategic partner, differentiated by our innovative approach, strong execution focus and the trust built across the organization.

Second, we rapidly launched new solutions in direct response to the crisis, which helped our clients manage volatility in consumer demand, and respond to the disruption from the pandemic. These solutions include managing loan servicing demand for the U.S.

small business Paycheck Protection Program and the development of breakthrough recovery indicators, to help our clients predict the shape and timing of the recovery across the U.S. These new recovery indicators are an important example to demonstrate how we are innovating to help our clients improve their agility.

Because this crisis is unprecedented in its scale and impact, traditional models and crisis management plans are limited in their ability to support growth and recovery related decisions.

Our solution leverages a large number of high frequency, granular, non-traditional data elements, aggregated across government directors, infection and hospitalization, consumer behavior and business activity across industries to create a composite score.

We use this score to predict a range of metrics, such as infection progression, spending patterns, unemployment trends and consumer confidence. One of our large global bank clients is using these indicators to better align their marketing initiatives with the uneven recovery across the U.S.

Understanding these emergent trends has been critical to optimizing the timing of marketing and new business strategies, and EXL is playing a key role in unlocking these insights. Third, I wanted to give you some color on new client wins.

We signed a leading Australia-based property and casualty insurer as a part of their operational resiliency enhancement plan. We were able to ramp up in a matter of weeks in the middle of the crisis, to support their finance and accounting operations and ensure uninterrupted closing of their books.

In another deal, EXL was selected to transform complex actuarial services, for a leading global investment management and insurance companies. This win was as a direct result of the early successes and impact delivered for other clients in this complex area. Another compelling win was a utilization management engagement with a large U.S.

health plan, that had never previously outsourced its operations. All of these wins are great examples of opening new clients, with strong potential for expansion into new bank centers and product lines. This gives us confidence that we will continue to win, grow and develop our business in a work from anywhere operating model.

As a result of these efforts, our Q2, '20 financial performance was better than expected on both revenue and adjusted EPS. Our Q2 revenue was $222.5 million, which represented a 9.3% decline quarter-over-quarter on a constant currency basis, versus the expected 15% sequential decline. There are three key drivers for this strong performance.

One, better than expected fulfillment of the available demand due to faster work from anywhere enablement across our businesses. Two, higher than expected revenues from ramp-ups and new wins, driven by our pivot to new offerings relevant to our clients in the current market. And three, lower than expected decline in demand as the quarter progressed.

Operations management revenue declined 8% sequentially on a constant currency basis. The most significant drop as expected was in our travel business. In insurance, we saw some impact from decrease in claims volume, and our premium audit and survey businesses were impacted by stay-at-home mandates.

This was partially offset by new growth in insurance business, resulting in a relatively lower impact in the business. Our analytics business revenue declined 11.5% sequentially on a constant currency basis, which was also better than our projection.

We expected a steeper decline in analytics revenue due to a higher proportion of project revenue in the business, and marketing budgets being temporarily put on hold by our clients. However, we proactively and swiftly pivoted our teams to develop and launch new solutions, to help our clients navigate the pandemic.

This resulted in new demand and new revenue in Q2. Notably, we also added new relationships with PE firms to assist their portfolio companies in data management and predictive analytics to respond to the crisis. As the quarter progressed, we saw clients resume their customer acquisition efforts and other projects.

As a result, the monthly revenue run rate of the analytics business has continued to improve. With the implementation of Q2 wins, ongoing client conversations for engagement expansions and a strong pipeline for our new solutions, we expect a strong bounce back in the analytics business in the second-half of the year.

Our adjusted EPS for the quarter was $0.53, higher than our guidance of $0.20 to $0.40. This was a result of better than expected performance on revenue and the timely and proactive cost containment actions taken during the quarter.

As you know, we temporarily reduced senior leadership compensation and took a sharp look at discretionary expenses, such as professional fees and subscription costs. We also took some employee actions to align our cost base with our revenue. Overall, we continue to have a solid financial position, and we are well-prepared to withstand the crisis.

Throughout this period, I have been inspired by the selflessness and the resilience of the EXL community. We have navigated through a challenging few months, and we continue to build momentum, both in terms of new business development and personal growth.

I am very proud to be part of that effort, and I want to thank all of our associates for that commitment.

As we move ahead, we continue to collaborate closely with our clients on new solutions and operating models, leveraging our ability to unlock the full power of our data and analytics capabilities and striking the right balance of work from anywhere flexibility will be critical to future growth and to our growth of our clients' businesses.

This is why we continue to invest in and develop our robust digital capabilities across due diligence and knowledge capture, virtual transition and process training and performance management. Our ability to ramp-up new businesses in a virtual environment has given our clients the confidence to continue with new ramp-ups without hesitation.

This is a strong foundation for business development and growth for EXL in a work from anywhere model. Our focus remains on the long-term sustainability of EXL, and we are optimistic about our future growth. In the near-term, the crisis continues to be volatile.

Collectively, the overall health of the global economy remains uncertain, and the pace of recovery is likely to be gradual and uneven, causing some clients to delay decisions or slow transitions. At the same time, EXL and our clients both have increased confidence and better visibility into Q3, and Q4 financials than we did three months ago.

Our full year revenue guidance is in the range of $922 million to $938 million, with growth coming from the implementations of wins from the first-half of the year, and conversion of our pipeline across new and existing accounts.

We expect an adjusted EPS in the range of $2.60 to $2.80, driven by higher revenue, lower work from home enablement expenses and the full benefit of cost actions taken over the past few months. Overall, we are well-positioned to acquire our share of market growth as the economy recovers.

The pandemic has created many business challenges, but it has also sparked a mandate to innovate and introduce new ways of working that are driving companies of all types to challenge the status quo. We are encouraged by what we are seeing in our own business as well as in our client businesses.

Our client relationships were strengthened by working even more closely throughout this period of heighten stress, and we continue to collaborate and innovate to find solutions to emerging challenges. Look forward to embracing this culture of change as an opportunity to grow. I will now 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 second quarter of 2020, followed by our outlook for the business. All revenue growth numbers mentioned, hereafter, are on a constant currency basis.

My discussion of year-over-year growth percentages or improvements will be excluding health integrated for 2019 for a true comparison with 2020 performance, unless mentioned otherwise. For the quarter, we generated revenue of $222.5 million, down 6.8% year-over-year. This includes onetime COVID-related pass-through revenue of $3.3 million.

Sequentially, from Q1, revenue was down 9.3%. Revenue for the quarter was higher than the guidance we provided, due to more than anticipated demand and a higher level of fulfillment.

Revenue from our operations management business as defined by three reportable segments, excluding analytics, was $140.8 million, down 6.7% year-over-year, compared to Q1 of this year, revenue was down 8%. Insurance had revenue of $81.3 million down 4.2% year-over-year.

This decline was driven by lower volumes and supply constraints, related to clients' refusal to allow work from home due to data sensitivity. Healthcare showed strong improvement with revenue of $25 million, up 33.2% year-over-year. This growth was driven by the ramp-up of new client wins in 2019, in the area of clinical services.

Emerging reported revenue of $34.5 million, which was a year-over-year decline of 26.8%, due to the reduction in travel, transportation and logistics volumes. Analytics had revenue of $81.7 million, down 6.8% year-over-year.

This decline was driven by lower volumes in banking and financial services clients, due to COVID-related demand contractions, while insurance analytics continue to grow year-over-year. Our SG&A expenses declined 80 basis points year-over-year to 18.8% of revenue, driven by cost initiatives we announced in May and lower discretionary spending.

The full quarterly impact of these cost initiatives should be reflected in the second-half of the year. Adjusted operating margin for the quarter was 9.4%, down 520 basis points year-over-year, driven by lower revenue due to COVID-related demand and supply constraints, higher employee cost and net COVID-related expenses of $6 million.

Our GAAP income tax rate for the quarter was 32.4%, excluding the impact of a onetime discrete tax expense totaling $1.3 million, related to the remeasurement of deferred tax balances in India, our income tax rate was 22.1%. Our adjusted EPS for the quarter was $0.53, down 28.4% year-over-year on a reported basis.

During this pandemic period, liquidity and cash conservation remains a key priority. We exited the quarter with a very strong balance sheet. Our cash flow from operations for the quarter was $72.5 million, which is the highest quarterly amount we have ever achieved.

We ended June with $336 million of cash and short-term investments, and borrowings of $249 million, resulting in a net cash position of $87 million, up from $32 million on March 31. As a reminder, in April, we've repaid $100 million of amounts previously drawn from our credit facility in March. Now moving to our six-month performance.

Our revenue for the period was $468.5 million, down 0.9% year-over-year. This decline was driven by COVID-related supply and demand constraints, as mentioned earlier. Adjusted operating margin for the period was 12.3%, down 220 basis points year-over-year, driven by a onetime COVID-related headwind and negative operating leverage.

Adjusted EPS for the period was $1.35, down 7.5% year-over-year on a reported basis. In the first-half of the year, we generated cash flow from operations of $58.9 million, compared to $47.7 million in the same period last year. This reflects an effective implementation of our cash conservation strategy and efficient working capital management.

During the first months of the year, we spent $22 million on capital expenditures, as we continue to invest in the business for the long-term. We expect our capital expenditures to be between $32 million and $38 million in 2020.

Our effective tax rate for the first-half of the year was 25.5%, and we expect the 2020 effective tax rate to be between 25% and 26%. During the first quarter, we've repurchased $12 million of our shares.

We suspended our repurchase program in the second quarter, but we have resumed purchases in the third quarter with our intent to keep our share count flat in 2020 over 2019. Now, moving on to the outlook for the year. The economic environment remains uncertain, and the pace of recovery evolves each day given the nature of the pandemic.

So there are a number of factors that we may not be able to predict accurately. Thus, our outlook could change later this year. However, as mentioned by Rohit, we have better visibility in the business today, as we look at the second-half of the year compared to May this year.

We have seen increased demand in operations management, as the economy slowly opens up and the pandemic has provided multiple opportunities in analytics, as our clients reevaluate their risk models and opportunities. This gives us confidence to resume providing full year 2020 guidance.

We expect revenue for the year to be in the range of $922 million and $938 million, which represents a year-over-year decline of 3.5% to 5% on a constant currency basis. Sequentially, we expect steady quarter-over-quarter revenue growth for the rest of the year.

Analytics should have a higher growth rate than operations management, as the pipeline is strong and the sales cycle is shorter. Our guidance for adjusted EPS is for a range of $2.60 to $2.80. In conclusion, we think the second quarter was the trough in revenue and adjusted EPS.

We cannot control outside economic forces created by the pandemic that may impact our business, but our visibility gets better as each month goes by. We do have the flexibility to manage our costs, and we have shown that we can adapt our infrastructure to the changing conditions. Now, Rohit and I will be happy to take your questions..

Amy, are we queuing up the questions?.

[Operator Instructions] We have our first question from the line of Dave Koning from Baird. Your line is open. You may ask your question..

Yes. Hey, guys. Thanks, and nice job..

Thanks, Dave..

Yes. I guess, I was wondering, so Q2, the revenue decline in the high-single digits. It seems like the guidance for the rest of the year is also kind of along those same lines, kind of mid to high I guess, high single digit decline.

Why wouldn't that get a little bit better? Or maybe this is a little bit of conservatism just kind of weaved in?.

So Dave, the guidance for the full year for us at the - is basically between a decline of 3.5% to 5% on a constant currency basis. And as you know that in 2019, we had revenues from health integrated, which was completely gone down.

So the decline really is only 3.5% to 5% from last year, which is much better than the decline that has taken place in the second quarter. So, we do see a sequential improvement in our revenues to take place in Q3 and Q4. And that's how we've modeled out our business..

Okay. Got you. And I guess the second thing, we look at margins ex-health integrated from last year. I think they were around 14% or 14.5% or something like that.

This year, when we look at the revenue decline it seems like give or take, a $50 million revenue decline, let's say, but about a $25 million adjusted EBIT decline, which is pretty high incremental margin. I'm wondering, I guess, why is that? And then I would imagine next year, you get a lot of that back again.

But maybe you can just talk through the margin dynamics..

Yes. Dave, I'd be happy to take that question. So we've done a lot of work in terms of our cost initiatives in many different areas. Compensation is 60% of our costs, and we've done a lot of work in the last three months to really bring down that cost to be better aligned with our revenue now going forward.

If you look at our margin in our guidance, you're going to see that Q3 and Q4 margin is getting very close to what our historical margins are. And we feel very confident about that, because we've put a lot of that in place, and we feel like we've put ourselves in a nice position for the next six to 12 months, as we get out of this pandemic.

And then what you'll see is revenue growth start to grow later on in the year and into 2021. And that's when you'll see some of the costs come back.

But I think the one thing that has shown us in this last three to four months is that, we can adjust our models and get back to our historical margins, even in a period that we have reduced revenue versus the prior period..

Yes. That's helpful. It seems like you're really well-positioned for the snapback. So, thanks a lot..

Thank you. We do have another question from the line of Moshe Katri from Wedbush Securities. Your line is open. You may ask your question..

Hey, thanks. Good job, guys. Can you comment on new logos for the quarter, maybe some color there? The booking pipeline also for the quarter and maybe for the first-half? And then in this context, where do you see the most promise in terms of your pipeline into the second-half and maybe even into calendar 2021? Thanks..

Sure, Moshe. So look, I think we are very proud of the fact that we were able to sign up 19 wins in the first-half of the year, and many of these are large renewals in addition to the new wins that we had. And also in the second quarter of the year, we had, as we announced nine wins.

So actually, it's a fairly even-paced activity, a little bit better than 2019. In terms of bookings, we really don't provide any information on that. But in terms of our pipeline, our pipeline at the end of the second quarter is much stronger where we were at the end of the first quarter.

So actually, we've seen new deals coming into the pipeline, larger deals coming into the pipeline and the total size of the pipeline has increased at the end of the second quarter. So we are very encouraged by the client conversations that are taking place, and how that pipeline is progressing. Looking forward into the second-half of the year.

The one thing that we've been pleased about is that not only have we been able to effectively operationalize the work from anywhere business model, but we are also being able to do remote transitions, remote hiring and remote processing.

So frankly, that is giving us the confidence to be able to build and grow our business in Q3 and Q4, and that's giving our clients and our prospects to commit to us and engage with us in terms of creating more demand and more revenue growth in the second-half of the year.

So frankly, we think we are well-positioned to benefit from this, as we move forward into the next two quarters..

Thank you, sir. Our next question comes from the line of Bryan Bergin from Cowen. Your line is open. You may ask your question..

Hi, all. Good morning. Thank you. I wanted to key in on the deal signings that you called out, particularly the new ones.

Can you give us a sense on whether those were competitive takeaways or more so initial outsourcing relationships? Just curious how you're seeing demand play out in those two subsets?.

Sure. So, I think the three deals that we highlighted in our prepared remarks, two of those were actually sole-sourced deals, and that's where we had client relationships. And I think the clients felt that we were best-positioned to support them in those endeavors. One of them was a competitively bid deal, and we won that against competition.

I think in this period of uncertainty and volatility there will be a shifting of client relationships, and I think we will see winners and losers.

So clients will gravitate toward those players that they have higher confidence in terms of providing them with uninterrupted service delivery and a high-quality service delivery, but also, as they're thinking about embracing digital transformation and using a lot more data and analytics, they're going to gravitate toward those players that can effectively deploy digital transformation and effectively deploy a better use of data management and analytics.

And I think that trend plays very favorably for us..

Okay. And then a follow-up here on fulfillment.

First, are there still some short-term fulfillment constraints in 3Q and 4Q? And then just longer-term, how are you thinking about the operating model here, given how it's working well in this work from home environment?.

Sure, Brian. So yes, there still is a fulfillment issue for us, and we think it's roughly about 5% at the present moment. We think it's going to get a little bit better in Q3, and we think it might only be 2% or 3%, and then it will probably remain 2% or 3% in the fourth quarter.

The reason for that is, as you know, there are the spikes in the COVID cases taking place all across different geographies and different cities and countries are being impacted by that on a continuous basis. So, as that takes place, there is a shifting of our working in an operating business model that we have to enable.

And that definitely calls for some amount of slippage. Now, going forward into the future, we are really trying to build up this work from anywhere business model, which will allow us to seamlessly transition from work from home on a remote operating model, to a work from office and work in our facilities and in our premises.

We really think that we, as an organization and as a strategic partner to our clients, needs to have the fluidity and the flexibility to rapidly move from one business model to the next.

And this kind of volatility and this kind of uncertainty is going to remain for a long period of time, so we need to be prepared to be able to make that shift as it's needed.

And I think introducing that level of resiliency into our business model is going to give our clients increased amount of confidence of partnering with us, giving us more work to do, more strategic work to do and more complex work to do, as they move forward.

And again, we think that, that is a very, very positive development that we can see as a long-term trend as we partner with our clients..

Okay. It makes sense. Thank you..

Thank you. We do have another question from the line of Puneet Jain from JPMorgan. Your line is open. You may ask your question..

Hey, thanks for taking my question. And good to hear your voice and that all of you are healthy. Rohit, are you seeing clients willing to outsource work that they would not have considered offshoring before? You mentioned one health client that had never outsourced and you signed that client in the quarter.

I'm wondering if your addressable market within some of your existing clients could also increase as a result of this pandemic..

Sure, Puneet. And good to hear you as well, and know that you are safe and healthy as well. Let's hope everybody stays that way. Yes, we are seeing a number of new clients emerge that previously would not have considered outsourcing or using a partner for operations management, as well as for our analytics practice.

And I think in many ways, this pandemic has been a catalyst in terms of companies thinking about resiliency in a much, much more broader way and in a much more open way as such.

So today, what we are seeing is clients and prospects are willing to engage with partners if that relationship is going to help them improve their resiliency, improve their ability to provide uninterrupted service delivery to their end customers, and actually lower that cost and allow them to use data and analytics in a much more significant way.

So we did see one healthcare client embrace this for the first time in the second quarter, and there are many other clients and prospects that we have in the pipeline, that are thinking of going in the same direction.

Now our fear when we entered Q2 was that the transition might be difficult, the due diligence on these processes by us might be difficult and clients would, in general, be hesitant to embrace operations management and outsourcing in this environment. It seems like that's not proving out to be correct.

What we are seeing is, actually, we are quite effective in recruiting remotely, training remotely, migrating remotely and actually introducing a lot more resiliency into the system. And that's visible to us, and that's visible to our prospective customers as well. So frankly, this has been quite positive..

And how should we think about the sales cycles and transition expenses, like you mentioned, in a virtual model.

Any changes to long-term changes to the cost structure, margins or pricing in our virtual sales and transition model?.

Yes. So there are several questions that you've asked in that Puneet. I'll try and address each of the elements. So on the sales cycle, we clearly are seeing a bipolar decision making by our clients. On the one side, we are seeing clients actually accelerate their decision making and their cycles.

They want to move forward much more rapidly and enjoy the benefits of the kind of value that we can deliver to them, and the kind of partnership that we can provide to them.

On the other side, we are seeing some clients who are pushing out decision making as well, because they don't want to undertake this kind of a transition in this kind of an uncertain and volatile environment. So frankly, we've got clients and prospects at both ends of the spectrum which are there.

But I would tell you that taking a look at our pipeline and taking a look at the deal activity, on average, we are actually seeing an improved decision making on behalf of our clients. The second question around virtual transition and migration and that reducing the cost.

Absolutely, because there is no cost for people to travel, that cost certainly goes down very significantly. There are no issues in terms of visas and things of that, that takes down the time line quite significantly.

But on the other hand, the time period and the tools that need to be developed in order to have knowledge transfer and learning that is an investment that we are making to allow our employees to be able to learn much more quickly in a remote environment.

So there's a fair amount of investment that is being made in terms of enhancing the learning and reskilling opportunities for our employees, and that kind of offsets some of the travel-related costs that are there for migration and transition.

I think, overall, the cost structure and the margins, our expectation is that it would largely remain the same as what it was before. So that should not really change, and this should be perhaps a much more stable kind of a situation that we will enter into..

Got it. Thank you..

Thank you. Our next question is from the line of Vincent Colicchio from Barrington Research. Your line is open. You may ask your question..

Yes.

Rohit, curious, are you seeing opportunities to outsource more processes at clients in some of your weaker verticals, such as travel to sort of offset some of the current weakness?.

Sure, Vincent. So first of all, for us, the travel industry vertical is a very small percentage of our total revenues. And therefore, the impact to us out there has been minimal. But at the same time, you're right.

I think in those industries and in those areas where our clients' business models have been more significantly impacted, there is a greater propensity for them to think about innovative ways of being able to reduce their cost structure, be able to create increased amount of flexibility into their operations and introduce a lot more resiliency.

So, we are seeing that the traditional conventional ways in which clients would partner with us, those business models are being changed. And now people are looking at this with a much, much more holistic and open way of thinking about it. And the drivers of this really are resiliency, flexibility and cost. And that plays very well to our strength..

And we're hearing that there's some captive opportunities out there.

Is that something you would consider now? Or is that something that's off in the distance?.

Yes. So first of all, a captive for us and a growth in the captive is always a positive trend because it validates the business model.

But I think your question is much more about whether there's an opportunity to take over operations from a captive, or might that actually happen the other way around where a client might set up a captive and try and build something on their own.

I think, we are definitely seeing that those captives, which did not perform well during the second quarter and during the height of this crisis, clients are definitely rethinking as to how they should be setting up their operating business models for the long-term.

And there certainly are a number of opportunities for us to partner with these clients and to help them with our size, our scale, our geographic distribution and our leadership talent that can manage large-scale operations. And so there are definitely a number of opportunities out there for us to be able to manage.

On the other hand, there are definitely concerns on information security, and that is something which will lead to a greater creation of captives as well. So again, we're going to see this trend play out in both directions. And I think on balance, this is, again, going to be positive for the industry and positive for us..

Thank you..

Thank you. So, we do have another question from the line of Justin Donati from Wells Fargo. Your line is open. You may ask your question..

Hi, thanks for taking my question.

The first one, are you seeing any sort of volume or transactional work in your healthcare or insurance business that could be just temporarily deferred rather than lost in general?.

Sure, Justin. So we have seen a reduction in volume, particularly around claims in the insurance space on the P&C side, on the property and casualty side. But on the flip side, we have actually seen greater volumes on disability and life and annuities.

In healthcare, again, some of the work that is done around pre-certification, we've seen a reduction in volume out there because, obviously, the number of elective surgeries came down quite significantly, and that's been reduced.

Now longer-term, our expectation is that in the healthcare side, particularly with elective surgeries that this is going to come back over a period of time, because those folks that need to undertake those surgeries are going to undertake them, and therefore, that volume will come back.

On the property and casualty side, with things like auto claims, it's obviously dependent on the number of new cars and car sales and auto sales that take place, and the amount of usage of automobiles that takes place.

And there, it's a mixed picture because clearly, people are moving away from a shared ride model and going more into a direct ownership or leasing of their own automobiles and taking more control of things themselves. And therefore, we see that as a positive trend.

And also since less people are flying, more people are actually taking road trips, I think eventually, we'll see more traffic as such. So it obviously depends on how things play out. Some of the recovery indicators that we monitor on this, which is on the basis of mobility seems to indicate that, that volume will come back for us.

But that's something we'd have to wait and watch and see how it progresses..

I appreciate the color there. And then just as a follow-up.

Can you talk a little bit about how you're managing your talent pool, having on staff and capacity to - sorry, to fulfill the demand when it comes back, versus some of the near-term decisions to maybe put people on the bench or furlough?.

Yes. I think that's an incredibly important question. And we're dealing with that in a very thoughtful, strategic and planned manner.

So we know that there will be some ebbs and flows with regard to the requirement of the deployment of talent at EXL, and when there's a reduction of volume in a particular client area or in a particular process, we'd look at ways in which we can redeploy that talent in other client areas where there is actually an increase in requirements.

And therefore, what becomes really critical is an ability to quickly reskill and relearn capabilities and redeploy resources. We've actually been very successful in terms of redeploying our resources, not only across clients and processes, but also across geographies and that's been very helpful.

And I think maintaining that agility and giving the right tools to our employees to be able to reskill and redeploy them, that's going to be very, very critical. In areas where we do have surplus talent, we've actually used this time to train and develop them.

And we've undertaken a huge amount of training and development of our talent pool during this time period. And with the higher productivity that we are seeing, that's been very, very effective. Now going forward, we do see a number of areas there where we will be adding on new talent.

So for example, in our analytics business, we do have an annual cycle of hiring from campus and from college campuses. That program for us is fully intact, and we are hiring new employees from the campuses.

And we'd be hiring more than 300 employees there in the analytics side over the next several months, to be able to help us with the growth that we anticipate in the analytics business..

Thank you..

Thank you. [Operator Instructions] We do have another question from the line of Maggie Nolan from William Blair. Your line is open. You may ask your question, please..

Hey. This is Ted on for Maggie. I kind of wanted to build on that last point there. Could you expand on the deal pipeline sorry, the pipeline that you're seeing within the analytics and just add a little bit more color to what you're seeing there? Thanks..

Sure. So Ted, one of the things which we anticipated and expected is that the use of data and the use of analytics will increase, given the increased volatility in the market environment.

So every single client in order to be able to take better decisions in a volatile economic environment, needs to actually leverage data and analytics and make decisions based on the data and not on the basis of a gut feel. And that's being highlighted very, very clearly in this environment.

So, what we are seeing is, there are many clients who actually have a lot of data internally as well as externally, but this data is dark for them. And they are unable to use it because the data has not been stored in a manner that is usable, it has not been cleansed in a manner that allows it to be used for a predictive model.

And there's a lot of effort that's required in terms of helping them with their data management architecture and the data management capabilities, so we are seeing amount of focus out there. We also saw that some of the marketing initiatives were initially pushed back in the months of March and April and May.

And now that the economy is reopening, we are seeing all of those marketing efforts come right back. And as you know, whether it's a bank or an insurance company or a retail company or whatever, there are risks associated with marketing, where if you acquired the wrong kind of customers, you'll have higher level of credit losses.

And on the other hand, if you do not acquire the right kind of customers, you will lose market share.

So frankly, our ability to deploy analytics and help these clients precisely figure out, where they should be extending more loans and more credit or more underwriting and more risk, and where they should be pulling back is a critical component to their eventual success or failure.

And therefore, the use of analytics is actually going up very, very significantly. So the pipeline for us today in analytics is actually very full, and this is across industry verticals.

And I think the other thing that happens in analytics is that the decision cycles are small and they're much shorter in time frame, and our ability to deploy and quickly realize revenue from this is also much better. So frankly, we have increased confidence in our analytics business, the growth of that in the second-half of the year..

All right. Thank you.

And then just what's in your current level of visibility into the full year guidance? And then what kind of takes you from the low end of the range to the top end of the range?.

Yes. I'll let Maurizio answer that question for you..

So Ted, could you just repeat your question? You came in and out a little bit..

Yes, sure.

So what is the current level of visibility into guidance? And then what is kind of represented at the bottom end of the range? And then what gets you to the top end of the range?.

Yes. So we are very focused at that midpoint of the range. We have about 90% visibility into the second-half of the year, which has come up significantly since we released back in early May.

And it really come - we start to see it in each of the different segments in a lot of what Rohit just went through, particularly in analytics, whereby we have a much stronger pipeline and also a lot more visibility. When you look at our range of $922 million to $938 million, we are focused at the midpoint at that $930 million area.

$922 million is more of conservatism because we really don't know, to a certain extent, if the environment will change at all between now and the end of the year, in terms of the pandemic and how business conditions could change, if there is a worsening condition that occur because of the pandemic. And that's what that $922 million really reflects.

The $938 million is more of a best case scenario, within our pipeline, if potentially everything comes through that we believe would give us the ability to get to that high end. But for modeling purposes and how we're kind of looking at the second-half of the year, it's really at that midpoint is what we're focused on..

All right, great. Thank you very much..

Thank you. We do have another question from the line of Ashwin Shirvaikar from Citi. Your line is open. You may ask your question..

Thanks. Hey, guys. Hope you guys are doing well. My question, I just wanted to kind of think past the current situation and ask about how you feel with regards to the industry.

Exiting all of this, do you think that you guys will be in a situation you can grow faster than before? I mean, how well-positioned are you as it relates to the types of conversations that you're currently having with your clients? You need to add any capabilities, can you comment on that?.

Sure, Ashwin. And I hope you're staying indoors and safe as well. Look, I think thinking about our business model and the industry over a longer-term period, we certainly think that this pandemic has actually been a catalyst for an acceleration of the use of digital transformation. It's been a catalyst for the use of data and analytics.

And over a period of time, cost management is going to become really, really critical for a number of the businesses that we serve. So frankly, all three of these are extremely positive trends for the industry and for our business model as such.

The areas that we will need to invest in a lot more around is going to be about how do we enable digital transformation, particularly by serving our clients on the cloud. And how do we transition a lot of that data onto the cloud and make this basically a model, which can allow us to work from anywhere.

There are also a number of remote execution, remote training, remote learning, remote transition that we will need to invest in, and a number of tools and technologies to be able to enable that.

If you think about it, we're going to go to a much more distributed workforce, rather than a workforce that is focused in and concentrated in a few cities, in a few geographies.

So enabling that, enabling collaboration, enabling learning, enabling well-being of our workforce, those are going to be critical elements that we'll have to invest in and continue to focus in on.

But I think the opportunity set for our industry does become a lot better with how these trends are going to play out, and it's something which I think should benefit the industry greatly..

Understood. And if I can hone in a little bit more on the investments you mentioned. Many of them sound collaborative tools and things like that, that sounds more like internal investment that you might make in your own technology, rather than an acquisition.

Would that be - so these are not necessarily the capability set from the perspective of domain expertise. These are more how do you deliver.

Is that an accurate representation?.

Well, there are two different things, Ashwin. I think when you talk about collaboration, learning and well-being, I think it's important to think about that as what we might need to do internally.

But actually, I think about it as we need to create an ecosystem with our clients to be able to ensure ongoing collaboration with our clients, because a lot of the innovation on digital transformation, a lot of the innovation around analytics is going to be in a partnership mode with our clients.

So as you know, today, the business relationship is much more intertwined. And I think the talent relationship is also going to be much more intertwined.

So many of these collaboration tools, learning tools, workflow tools are going to involve not only us, but also our clients and therefore, being able to put them on the cloud and be able to engage with any client, any person anywhere is going to become extremely important.

The second part that you just spoke about is for us to be able to add on new capabilities and new services that we can offer to our clients. Many of those, we are going to create organically ourselves, as we've already demonstrated that capability.

But you're right, there will be others where we will acquire, and we will integrate in those capabilities and those services, so that we can be much more of a full-service firm for our clients..

Got it. Thank you for that. Certainly, there have been interesting times..

Yes, we do..

Thank you all for your interest. This concludes today's call..