Exlservice Holdings, Inc. (NASDAQ:EXLS) Q2 2019 Earnings Conference Call Transcript

Jul 30, 2019 • 08:00 am ET

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Exlservice Holdings, Inc. (NASDAQ:EXLS) Q2 2019 Earnings Conference Call Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] Our first question comes from Maggie Nolan of William Blair. Your line is open.

Analyst
Maggie Nolan

Thank you. Can you give us an updated outlook for adjusted operating margin this year? But then also, how you're kind of expecting that margin to trend in the medium term with Health Integrated behind you?

Executive
Vishal Chhibbar

Yes. Hi, Maggie. Thanks. As I stated in my prepared remarks, the OPM for first half is 14.6%. In the second half, we expect that the adjusted operating margins will expand, and we expect that to be in the range of 15.4% to 15.6%. That's an improvement of 90 basis points to 100 basis points in the second half. That would be driven primarily by gross margin expansion due to more productive ramps of first half becoming more productive in our areas of insurance, healthcare and improving utilization in analytics and consulting, coupled with operating leverage, which we'll get in the second half as our revenue expands.

In terms of long-term trends, we do -- I had said before that our expectation is that we will be, for the year, with this profile in the second half end up at between 15.1% to 15.2% adjusted operating margins. And we think in the long-term, the expansion of margin will continue, but we're not giving any specific ranges and amounts at this time.

Analyst
Maggie Nolan

Okay. Thanks. And then, so you've obviously had some strong growth within insurance and finance and accounting within ops management, but that has been offset by some weaker verticals. So can you talk through what's been going on maybe in travel and transportation, logistics and the other vertical and how you expect those to perform over time as well?

Executive
Rohit Kapoor

Yeah, sure, Maggie. The growth of business actually is pretty broad-based across the industry verticals. Obviously, we report out five different industries and analytics separately. And there will be periods of time when one particular industry may not grow in a particular quarter. I think the overall demand environment, as well as our ability to serve clients and grow our business with existing clients, as well as win new clients, remains quite healthy across industry verticals and across geographies. In a number of these industry verticals, we are creating very effective digital solutions that are helpful to the clients to solve some of their biggest and most complex problems. And therefore, the engagement takes a little bit of time. But our expectation is that the growth will be pretty broad-based. Certainly, in insurance and finance and accounting, we've been able to demonstrate that leadership. We're also seeing that traction build up in healthcare and in banking, and our expectation is that the same will be true for travel, transportation and logistics and the other industry verticals.

Analyst
Maggie Nolan

Thank you.

Operator
Operator

Thank you. And our next question comes from Mayank Tandon with Needham & Company. Your line is open.

Analyst
Mayank Tandon

Thank you. Good morning. Rohit, at a high-level, could you talk about the automation opportunity or a threat? How do you