Good day, and thank you for standing by, and welcome to the Q1 2021 ExlService Holdings, Inc. Earnings Call [Operator Instructions]. I would now like to hand the conference over to your speaker today, Mr. Steven Barlow. Please go ahead..

Thank you, Amanda. Good morning, everyone. Thank you for joining EXL's first quarter 2021 financial results conference call. I'm Steve Barlow, EXL's Vice President of Investor Relations. With me today in our offices in New York 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 Q1 2021 earnings release we issued this morning. We've also updated our investor fact sheet in the Investor Relations section of the EXL's Web site. 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 those measures to GAAP can be found in the press release as well as the investor fact sheet.

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

Rohit?.

one, enabling better business decisions by leveraging deep data and analytics capabilities; and two, delivering superior customer outcomes by applying cloud-enabled AI solutions. The increased demand for data and analytics is moving in lockstep with the large-scale transition of customer interaction to digital channels.

Our clients are investing in highly personalized, direct-to-consumer marketing to enable more effective customer acquisition and retention. This results in a larger addressable market for our data-led marketing solutions and proprietary marketing analytics algorithms.

The second vector where we are gaining market traction is the adoption of EXL's AI-powered solutions in the cloud. Our clients are pursuing speed as their primary goal, which in turn drives enhanced customer experience, superior business outcomes and improved efficiency.

However, current business processes are constrained by legacy technologies and heavy dependence on manual intervention. In order to become data-driven and effectively harness the power of AI, our clients would have had to redesign enterprise-wide platforms and processes, which is expensive, time-consuming and has a low success rate.

In contrast, EXL's AI solutions are deployed upstream on the cloud and are easily configurable. This generates clean data flows that this intermediates downstream legacy processes and technology.

The cloud ecosystem allows us to swiftly deploy machine learning and AI-driven interventions along with automation to enable what we call as the AI operating system. Our ability to transition clients to an AI operating system creates powerful business impact.

The understanding of current state business processes, combined with AI-powered cloud solutions minimizes execution risk and accelerates speed of transition. An example of this work in action is an engagement we entered into with one of the largest independent title insurance businesses to modernize their title search process.

The company's legacy title search process was time-consuming, entirely manual and distributed across several vendors.

Using EXL's AI operating system, the firm was able to seamlessly migrate to an entirely cloud-based automated search process that improved both the speed and accuracy of the title search and will enable our clients to capture market share much faster than competition.

This engagement positions EXL as the cloud-enabled AI transformation partner of choice. In addition to delivering for our clients, our mission to find a better way means we are committed to doing our part as a global citizen to build a better future by operating in a responsible and sustainable manner.

At EXL, we have taken several actions to enhance our sustainability programs over the past year. In the fall of 2020, we published our first annual sustainability report, which was developed in accordance with the Global Reporting Initiative Standards and aligned to the United Nations Sustainability Development Goals.

We recently signed up to become a participant of the United Nations Global Compact. More recently, we expanded our sustainability disclosures in our proxy statement and have provided metrics and long-term goals relating to our environmental commitments and workforce diversity.

Among such goals, we intend to raise the representation of women, particularly in leadership positions at EXL from 18% to 25% by 2025. Lastly, as you know, after 19 years of service, Pavan Bagai has decided to retire from EXL on October 1, 2021.

Pavan has been an architect of EXL as well as a mentor and confident of many within the company, including myself. He has been a great partner for me in building the organization into what it is today. Pavan's career with EXL mirrors the company's own growth.

His leadership established the foundation of our Operations Management business, his guidance helped develop the Analytics business and it is his insight that has enabled our shift to digital. Pavan has been instrumental in navigating the company through every challenge it has faced.

Pavan will leave an indelible mark on the organization and for each of us. Over the next several months, Pavan's responsibilities will be transitioned to other members of the leadership team at EXL. We are fortunate to have the next cohort of leaders who are now ready to pick up the manteau.

All of us at EXL will miss him, and we wish him all the very best. With that, I will turn over the call 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 of 2021, followed by our updated outlook for 2021. As Rohit mentioned, our quarter was better-than-expected with revenue of $261.4 million, up 6.3% year-over-year and adjusted earnings per share was $1.18.

All revenue growth numbers mentioned hereafter are on a constant currency basis. Revenue from our Operations Management business, as defined by 3 reportable segments, excluding Analytics, was $159.1 million, up 2.8% year-over-year. Sequentially from the fourth quarter, revenue was up 5.1%.

Insurance generated revenue of $91.2 million, up 7.6% year-over-year, driven by expansion in existing client relationships. Compared to the fourth quarter of 2020, revenue was up 2.1%. Healthcare reported revenue of $30.3 million, up 12% year-over-year, driven by higher volumes in our Clinical Services business and new wins of 2020.

Sequentially, Healthcare grew 25%. Emerging reported revenue of $37.7 million, down 12.5% year-over-year due to the reduction in travel and transportation volumes. However, we are seeing good traction in this business now, and we won several new logos in the first quarter of 2021. Analytics had revenue of $102.3 million, up 10% year-over-year.

This growth was driven by higher volumes across all industry verticals with expansion in existing client relationships and new wins in 2020 as clients embrace data-led solutions. Compared to the fourth quarter of 2020, revenue was up 4.1%.

Our SG&A expenses increased by 100 basis points year-over-year to 18.7% of revenue, driven by investments in front-end sales and marketing. Our adjusted operating margin for the quarter was 20.2%, up 540 basis points year-over-year, driven by improved operating margins due to cost optimization measures and lower infrastructure expenses.

Our GAAP tax rate for the quarter was 21.9%. Excluding the impact of discrete items, our normalized effective tax rate for the quarter was 24.2%. Our adjusted EPS for the quarter was $1.18, up 45.7% year-over-year. EXL's balance sheet continues to remain strong with a focus on liquidity and cash flow generation from operations.

Our cash and short-term investments at March 31 was $376 million, and our debt was $239 million for a net cash position of $137 million. We generated cash flow from operations in Q1 of $15.2 million compared to a negative cash outflow of $13.6 million in Q1 of 2020. Our DSOs at March 31 was 54 days.

During the quarter, we spent $12.7 million on capital expenditures, as we continue to invest in the business for long-term growth. We repurchased 313,000 shares at a cost of $27 million. Now moving on to our guidance for 2021. The economic environment in the U.S. and U.K.

is improving, while COVID-19 is surging in our delivery geographies, such as India and the Philippines. We will continue to assess the situation and respond to changing circumstances with the primary focus being the health and safety of our staff. We feel confident that we can manage our delivery commitments.

In addition, we know our business model is resilient and agile, as demonstrated by our improving sequential quarter-over-quarter performance since the trough in the second quarter of 2020. We are increasing our revenue guidance for 2021 to be in the range of $1.04 billion to $1.07 billion, up $10 million at the top end of the range.

The increase in our revenue guidance is driven by our strong first quarter exit momentum and better visibility in our business despite an FX headwind of approximately $1 million. This represents a year-over-year growth rate of 9% to 12% on a reported basis and 8% to 11% on a constant currency basis.

This guidance also aligns to the medium-term revenue targets we disclosed in our Investor Day in November. We expect Analytics to grow over 15% and Operations Management to grow in the range of 6% to 8%.

We expect a foreign exchange gain between $2.5 million and $3.5 million, net interest expense of $3 million to $4 million and our effective tax rate to be in the range of 23.5% to 24.5%. In terms of capital allocation, we will continue to invest in analytics, digital solutions and technology.

We expect capital expenditures to be in the range of $35 million to $40 million. We anticipate buying back our shares at a pace slightly higher to what we did in 2020.

Based on the above, we expect our adjusted earnings per share to be in the range of $4 to $4.30, up 13% to 22%, driven by our higher revenue expectation, along with increased business efficiencies. As the year unfolds, we expect our margins to decline in subsequent quarters of the year.

We plan to increase our investments in digital, data and analytics to accelerate growth in 2022 and beyond. As we discussed last quarter, we expect to incur increased costs due to the reinstatement of salary increments and higher technology costs related to the hybrid operating model.

In addition, during the latter part of the second half of the year, we anticipate increased operating expenses on facilities, transportation and travel dependent on a return to a more normalized operating environment. In conclusion, we had a good start to 2021, despite the challenges created by the pandemic.

We have demonstrated a flexible and resilient business model, which enables us to create new data-led and digital solutions to meet our clients' transformation agendas. Now Rohit and I would be happy to take your questions..

Amanda, could you queue up the questions, please?.

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

Well, I wanted to ask just on the India surge impact and the risk around that.

Does the risk impact certain businesses more than others? Can you dig in a bit more there on the potential service disruption magnitude and where -- and how we should be thinking about that? I know you mentioned minimal service disruption so far, but what are you thinking forward here?.

So for us, the India geography represents about 45% of our revenue delivery capabilities. And it really represents all industry verticals across the board, perhaps a little less so in health care, which is much more skewed towards Philippines and to Colombia.

I think at this current point of time, like we mentioned on the call, almost a 100% of the work that's being done is being done by our employees working from home. So we really do not have anybody coming into the office and it really depends on how the surge of the virus and the infections continues and for how long it continues in India.

The situation on the ground is not very good right now because the medical infrastructure is unable to cope with the demand for health care right now in the country. And that creates a problem, not only for our employees, but also for their families and that's creating the challenge and the issues.

But the impact is going to be across all the businesses as such. It's not really tied into any one business..

And a follow-up here on margins. So specifically, Ops Management gross margin looks to be at record levels.

Can you unpack the drivers there in the quarter? Is it mix of work, anything that's onetime? Can you really give us a sense of what is lasting within that outperformance?.

A few things that are happening within that margin. One is, we did have some additional revenue during the quarter that flowed through to the bottom line that really helped the Ops Management margin. On top of that, we're also seeing a good amount of efficiencies in our Ops Management.

So we've been able to really run our business and keep headcount much more efficient than over the last 12 months, and you're starting to see some of that come through within our Ops Management margin. And the last part I would say is, we are getting a certain amount of benefit right now in cost from the environment that we're in.

So that is also helping the Ops Management margin. Going forward, the one piece that should last going forward is really that cost efficiency piece as we really focus on being lean going forward..

Your next question comes from Maggie Nolan with William Blair..

I'm curious about what specific considerations are given in the guidance, considering the developments in India and the Philippines, and in particular, around those margins that you were just talking about with Bryan?.

So as of right now, our business has not been impacted at all. Like we said, there's been minimal disruption to our ability to fulfill the demand of our clients, and we are seeing strong demand and a strong pipeline of activity right now. Our assumption in terms of our guidance really assumes that we will have minimal disruption going forward.

However, that's something which we'd have to see how things play out. We really don't know how this will unfold in India and in the Philippines. I think in the Philippines, the rate of infection seems to have somewhat stabilized and that is creating a better hope for us out there.

In India, the rate of infection has really gone very, very high and very significantly up. And that does create its own challenges. And so it depends on how long it continues to be as such and what time period this might subside in and what the impact to our employee population might be.

As you can imagine, our #1 priority is to make sure that we can keep our employees healthy and safe, and that's what we're going to do. So we're going to make sure that each of them has the best possible medical care and attention that we can provide for them. And we can keep them isolated and safe and healthy.

And our focus is going to be based on that. How this plays out? We really don't know. But our guidance assumes that we have minimal disruption..

So just to dig into that a little bit further, are you talking about disruption from a logistical delivery standpoint or are there additional considerations in terms of productivity? And then my second question is about your AI solutions.

Can you talk a little bit about kind of the proprietary components of that versus what does the partner ecosystem around this look like? And then how are the AI solutions incorporated into your pricing structure within contracts?.

So the disruption is basically on account of if the infection has an impact on our employees or their immediate families. As you know, in India, many of our employees live in an extended family kind of environment and they have to take care of their family as well.

So it's really about our employees themselves and their families as to how they kind of fair out here. We do have adequate amount of planning and a buffer that we maintain in terms of a bench of resources that we have. And it allows us to be able to flex up or down in terms of managing this across in our employee population.

But like I said, it just depends on how this progresses and for how long it stays there. For the second part of your question pertaining to AI solutions and the proprietary nature of it and the partnerships component of it, that is something which is being developed by us very, very rapidly.

And over the last 12 to 15 months, we've made a tremendous amount of progress out there. We've built both proprietary solutions as well as we've embedded some partner solutions into our proprietary capabilities.

The part that is proprietary is also our understanding of the domain of our customers' business and the application of technologies, specifically in those processes within our client industry verticals and the client businesses.

We have obviously now got track records and data and performance scorecards associated with the intervention of these proprietary capabilities. And our ability to plug-and-play and do this in a very effective and a very fast manner that's becoming better and better.

So these AI solutions, which are on the cloud and which are placed upstream and they don't need to interfere or disturb the existing legacy technology or for that matter how the work is currently being performed, I think it's working really well with our clients.

And our clients are engaging with us more and more actively in terms of the adoption of these AI solutions on the cloud. And so we see a tremendous amount of opportunity out here..

And your next question comes from Puneet Jain with JPMorgan..

Following up on Maggie's question in Analytics.

So as you offer more solutions, is revenue model also going to be different from what it used to be in the past? Will it be more SaaS-based, software-like model for some of those offerings? Or will it still be FTE based?.

I think overall, we would expect that as we move towards more solutions, more proprietary and partner interventions that we're going to be bringing into bear, that we're going to move towards outcome-based pricing models and transaction-based pricing models.

We have seen a noticeable shift in Q1 towards transaction-based and outcome-based pricing models, both in Operations Management, where we've started to deploy digital technologies and capabilities and use AI-based solutions as well as in Analytics where some of the work that we are now undertaking is driven of outcome-based pricing models.

The data-driven marketing initiatives that we had, which had a strong component to it in first quarter of 2021, that is primarily driven on an outcome basis as such. So we're going to see more and more of outcome- and transaction-based pricing in Analytics..

And what was the incremental license fee revenue that drove margin upside in Healthcare vertical in this quarter?.

There's nothing that we've shared on the Healthcare vertical from a license perspective. So I'm not sure where that's coming from.

Our Healthcare business in Operations Management grew very, very nicely over the previous quarter and year-over-year because of a number of new clients that we had signed up in 2020, which we onboarded through the year and the revenue was visible in first quarter.

But all of that is really based off the Operations Management work that we do for our clients there..

[Operator Instructions] Your next question comes from Vincent Colicchio with Barrington Research..

[Technical Difficulty] India, do a meaningful number have COVID in their families as of yet?.

Vincent, I think we missed the first part of your question.

So could you please repeat that?.

I'm curious if a meaningful portion of your employees in India have COVID or have COVID in the family as of yet?.

a, helping them out; b, supporting them at this point of time to be able to take time and devote attention to their families..

And then a question on your guidance.

What needs to happen to hit the high end of your revenue outlook for the year?.

I think one of the things which has been really positive for us is that the demand environment is very strong. Our pipeline is very good. We would need to have the pipeline conversion take place into real revenue. And we would need to have no real disruption in terms of our ability to fulfill the demand that we are seeing from our clients.

I think we're seeing a tremendous amount of strength in data and analytics and in digital as well as in our industry verticals. So frankly, the demand side seems to be much more broad-based. And that's less of an issue. The challenge might be from a fulfillment standpoint and ability to kind of execute and convert the demand into revenue..

And your final question comes from David Grossman with Stifel..

I wonder if you could just review the commentary about the margin trend during the year? Just trying to understand what you have visibility on today in terms of higher expenses as the year rolls out? And what component of that margin guide is more variable depending on the pace of reopening, travel, all the other elements that come with getting back to normal?.

Let me dig a little deeper into our AOP and margins for the rest of the year. Look, we had a very good Q1 in terms of margins, just over 20%.

A lot of that is really driven by the increase in revenue that really fell to the bottom line and also a certain amount of cost efficiencies for the environment that we're currently working in, in terms of this work-from-home environment that we have some cost optimizations from that.

Going forward, there's a number of areas that we're going to be investing in. We're doing some additional investments in digital, data and analytics in the next 3 quarters. We're also going to be investing in technology to have a hybrid operating model going forward.

So there's a certain amount of technology that we need to invest in to have a portion of our workforce really working from home on a longer-term basis. And then the last piece is really the return to office that we project in the second half of the year. And that is really a moving target for us right now.

We had anticipated more of our return to the office in the third quarter of this year. And that still is the case potentially for certain offices, potentially here in the U.S. and maybe the U.K.

But that will get pushed out to later on in the year, most likely in the kind of the fall or early fourth quarter for other locations, especially for India and the Philippines. So that is kind of our thinking in terms of our margins really going for the rest of the year.

There's a certain amount of investment that we're going to be making later on in the year, knowing that our margins are going to be significantly higher this year than they were last year and right in line with what we talked about at Investor Day.

And I would say layered in all of this, to a certain extent, is a little bit of conservatism because there's uncertainty in the market right now in our business to a certain extent, just because of the surge in COVID in India and the Philippines..

Can you size some of those items for us, the three big buckets in terms of how much of a margin impact they'll have on the year, the investments, the hybrid work from home and the return to office, just so we have a sense for how impactful each of these initiatives are?.

I would say, if you looked at kind of each one of these -- the additional investments we make, the technology investments that we'll end up making and some of the return to office expense, I think they're fairly similar in terms of the total. There's not one that significantly more than the other.

So I would try and space the three kind of fairly ease, evenly throughout the rest of the year..

And I'm not sure I heard this right, but I think you may have mentioned that in the first quarter, the OM business had some, I don't know if it was onetime, but there were some revenue that drove the margin.

How much of an impact is that in the first quarter?.

It has some. But the real driver is more volumes coming back on the Ops Management side, especially in insurance and health care. I mean that's really the drivers to a certain extent..

And then just kind of a higher-level question, just about how this evolves with the clients. I know there was just -- everyone had a kind of morph their model immediately -- or just overnight virtually last year. And I'm just wondering how the conversations are going with clients.

It looks like you're committed to a hybrid work-from-home model on a longer-term basis. And how does that impact kind of contracting and pricing at all with your clients? Just kind of curious what to expect there..

So David, the conversation with the clients is, obviously, very transparent and very, very much in a partnership mode. Our clients are being very, very flexible in terms of having us perform the work for them, and they're driving more and more responsibility to EXL to take ownership of the work.

In terms of the commercial arrangement and the hybrid construct that we have, it really works both ways because when we do have people and our employees coming to work in the office, because of social distancing, we have to make sure that there is more office space available for our employees to work in our offices and our facilities.

And therefore, the cost of infrastructure per employee goes up. So there are pieces of the cost structures and the cost stack that will go up because of working from the office. Working from home clearly is a little bit lower, and there is a benefit.

But when you combine the two together and you combine a certain proportion of the work being done from home and a certain proportion of the work being done from the office, actually, the cost structure is fairly neutral. So there's not much of a change that, that is out there. And our clients can see that.

They they appreciate that and they do want us to get to a structure where even those employees that are working from home at some point of time will need to come to the office for meetings and for making sure that we can have the right kind of alignment of business objectives, culture creation and innovation so that we can have them all be tied in together to the organization and to meeting the needs of our clients..

And so the anticipation, at least at the client level, is that even if they don't come back working full time, they would come back certain days of the week or the month?.

It's going to be very specific by client and by geography, and we're going to continue to work with our clients on that. And it clearly depends on what they are comfortable with, what their regulators are comfortable with and how this evolves. Absolutely..

And so your read today, though, is that it's a net neutral to margins going forward, though, at this point?.

I think it's net neutral to pricing and to margins..

And then just one last question. I mean you've referenced the pipeline being pretty strong a couple of times on the call already. But I'm just curious as you look at what activity you're ramping in 2021.

Since you don't disclose specifics, I'm just curious what is -- when you compare new client starts in '21 to what you had in '20 and '19, I'm wondering if you could just give us a sense for just how that compares.

And then when you look at the pipeline that you're working on to close in 2021, what that looks like relative to what you're ramping in 2021 -- or excuse me, that you're trying to close in 2021 and how the ramp in '22 may compare to the '21 ramp that you're experiencing?.

So just to give you a sense on the pipeline, the pipeline when we say is strong, it is significantly stronger, which means it's high double-digit stronger than previous periods. And in terms of velocity of decision-making, we are seeing acceleration in the velocity of decision-making. So the sales cycle also is much shorter for our clients.

And I think that is very helpful as we scale up our business and as we support our clients in terms of moving forward.

Our clients, I think this is all being driven by the fact that their end customers and the consumers are adopting digital channels for their interactions with our clients and, therefore, enabling this kind of work is very important and it needs to be undertaken quickly. So very positive momentum from that perspective..

So is any of that pipeline increase in velocity of decision-making a function of some catharsis last year and catch up this year? Or -- I mean, again, since you don't disclose the specific numbers, we don't really have that information. So perhaps you could reflect on that..

I think there may be a little bit of a catch-up, but largely, the adoption of the digital channel as a means of interaction for their customers and the hyper personalization that needs to be done and the use of data and analytics, that's just driving this decision-making into a much faster gear.

And so what we are seeing is, the client's willingness to accept change, that's become a lot better and it's not only a catch-up from 2020, it's actually the business model has changed and the realization that if you don't speed up some of these changes, you may not be competitive anymore, I think that's become far more urgent and critical..

And your next question comes from Ashwin Shirvaikar with Citi..

I have a head count question. It's obviously down sequentially, down year-over-year against the backdrop of improving demand and the acceleration that you guys have mentioned.

So I want to ask, first of all, how much of the headcount trend is perhaps due to productivity that you've gotten due to automation and things like that versus specific verticals where demand is down and not yet recovering like travel? And then the second part of the question would be in the current environment, what's the process that you're using to hire lower level delivery employees in geographies like India and Philippines?.

So Ashwin, let me give you a little bit of insight just on your headcount question. So when you look at our headcount, you do see a bit of a decline in Q1 versus Q4, and you do see some productivity gains on a year-over-year basis. If we bifurcate that, if you look at Analytics, we've been hiring in Analytics.

So the headcount increase in Analytics is more in line with that revenue growth on a year-over-year basis. Those are critical employees and really in high demand in the market. And so we have been investing in that area to really meet the demand.

If you look at in the Operations Management area, we have gotten some cost efficiencies over the last 12 months that we've realized and that's a little bit more long term now going forward. We've seen a little bit of a decrease in our headcount there, while our business is starting to expand in Operations Management.

And you see that on a year-over-year basis, you also see on a, I'd say, sequential quarter-to-quarter basis. And that's in all three of our business segments within Ops Management..

And Ashwin, to your question about hiring, the hiring is all being done virtually and remote hiring. So far, we've been able to actually hire very effectively and onboard our talent quite nicely. So it hasn't really created an issue for us.

But given the surge in the pandemic levels in India in the last 4 weeks, that's something certainly which we will need to be watchful about..

And then my second question is with regards to margins. There's a lot of good color with the factors that puts and takes into margins. I was wondering why you didn't necessarily provide an updated margin outlook for the year? I mean I would imagine that we are now ticking up perhaps maybe 50 to 100 basis points higher than where you started the year.

Is that fair?.

Ashwin, if you look at the increase in our adjusted EPS, it's implied in there. It's going to be a higher margins for the rest of the year.

The one thing that you have to keep in mind is, we are cognizant of our margins in terms of making additional investments and then also cognizant of the uncertainty that's still wide out there in our delivery centers.

And so we we wanted to take up margins, but we we cautiously brought them up, but there is implied an increase in margins just because adjusted EPS coming up..

And your next question comes from [Robbie Ememberg] with Baird..

So it's been a couple of years since you did M&A.

And with $4 a share in net cash, when do you think you'll be ready to do a deal again? And I guess, which segments seem the most interesting to you?.

So we are still very active in looking at opportunities in the market for acquisitions. Our pipeline is fairly significant in terms of what we've been looking at. The one thing to keep in mind in terms of M&A is the market is very frothy right now in terms of valuations.

So really, when we look at M&A targets, and we're looking at them throughout our business. We're looking at them in terms of digital, we're looking for additional capabilities, we're looking at opportunities within Analytics also to even further strengthen our capabilities today and we're also looking for solutions within Insurance and Healthcare.

But really, the two big hurdles for us on M&A is, one, is it the right strategic fit for us going forward? And two, is it at the right valuation to drive ROIC now going forward? Given the market that we're in right now, those are two fairly significant hurdles, but I will tell you that we have been looking at a number of opportunities that are in the market.

And so I would foresee at some point, you're going to see an M&A acquisition come down the pike.

And I can't tell you whether it's going to be three months or six months, or 12 months, but there's plenty of activity that we are looking at and that's just an inevitable that, that's going to happen, given the amount of capital we have on our balance sheet now and the amount of cash flow generation that you're seeing on a quarterly basis..

And then maybe just one question on EPS guidance. Q1 was $1.18 and the rest of the quarter is now, it looks like it's about averaging about $1 per quarter.

So I guess, is there some conservatism in that outlook? And maybe any color around just the cadence of EPS growth throughout the year?.

one is the pandemic in India and the Philippines; and two, also, we talk about the return to office, but even that is a little bit of a moving target in terms of different geographies. So our EPS guidance there takes into all of that account. And as we go on later on the year, we'll update it as we need to..

Thank you for joining. That does conclude today's call. You may now disconnect..