EXLS

MKT CAP $6.3BP/E 26.3DIV YIELD —FCF YIELD 4.73%REV TTM $2.2B +13.4%NET INCOME $251.5M +16.4%NET DEBT $272M52W 25.22 – 43.38NEXT EARNINGS Oct 27 EST.SEC XBRL · TTM TO Invalid Date

How EXLS rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

40%

of sentences unchanged

Added

131

new sentences

Dropped

124

sentences removed

Length

+135

words, now 10,265

New in FY2025

Our success depends in part on the demand for our services and solutions, which could be negatively affected by several factors that may be outside of our control, including, for example, economic and political volatility or changed market conditions.
As a global data and artificial intelligence company, our ability to maintain and grow demand for our services and solutions requires that we continue to develop and implement offerings that keep pace with changes in the industry and anticipate and respond to rapidly evolving technology and our clients’ evolving needs in areas such as advanced AI, including generative AI, agentic AI, digital transformation and solutions, advanced analytics, cloud based solutions, data management, robotics and process automation, and data engineering, among others.
If we do not sufficiently invest in new and rapidly evolving technologies, including advanced AI and automation, adapt to industry developments, evolve and expand our business at sufficient speed and scale and successfully drive innovation, our ability to develop and maintain a competitive advantage, our growth strategy and our results of operations could be adversely affected.
This has caused, and may in the future cause, clients to delay or stop using some of our existing services as they evaluate and pivot to newer technologies, including our own data and AI-led solutions and services.
Such technological developments and spending delays can negatively impact our results of operations, if our existing services are displaced by such newer technologies and we are unable to similarly pivot to offering services and solutions that incorporate such technologies or if we are unable to introduce new pricing or commercial models that reflect the value of these technological developments or if the pace and level of spending on new technologies are not sufficient to make up for any shortfall.
Developments in the industries we serve, which are likely to remain rapid, also could shift demand to new services and solutions.
AI technologies, including cutting-edge technologies like agentic AI and generative AI, are complex and rapidly evolving, and we face significant competition, including from our own clients, who may potentially develop their own internal AI technology, or acquire such technology from third parties, which in each case, can lead to reduced demand for our services and solutions.
Several jurisdictions where we operate are applying, or considering laws and regulations related to intellectual property, cybersecurity, export controls, privacy, data security and protection to AI and automated decision-making.
Broader frameworks such as the EU AI Act, are also coming into force.
Compliance with new or changing laws, regulations, industry standards or ethical requirements and expectations relating to AI, the eventual scope and extent of which are currently unknown and which may vary across jurisdictions may impose significant operational costs.
Our use of, and/or reliance on, AI, or our clients’ use of AI that does not comply with the use restrictions in our agreements or unauthorized modification thereof, could give rise to legal or regulatory action or increased scrutiny or liability and may damage our reputation or otherwise materially harm our business.
Client demand may be impacted by the selling cycle and terms of our client contracts, including for our AI-related offerings.
Consistent with industry practice, most of our client contracts may be terminated by our clients without cause and do not commit our clients to provide us with a Ta ble of Contents specific volume of business.
The term of our project-based engagements generally does not exceed one year and may not produce ongoing or recurring business for us once the project is completed, and these contracts typically permit a client to terminate the agreement with shorter term notice.
Most of our digital operations solutions and services contracts are long term, typically ranging from three to five years, generally require a longer termination notice period and may include an early termination fee to be paid to us, which might not be sufficient to cover our costs or the loss of revenues and profit upon termination of the contract.
In particular, the sales cycle for our AI-related services and solutions may be longer and more uncertain than for our other offerings.
Clients may require extended proof-of-concept phases, pilot programs, internal governance and compliance reviews, and additional negotiations regarding data usage, privacy, intellectual property ownership, and model performance before deciding to proceed with, expand, or renew AI-related engagements.
As a result, we may devote significant time and resources to pursuing AI-related and other opportunities without realizing corresponding revenues on a timely basis, or at all, and any delay, reduction or cancellation of such projects could adversely affect our revenues and results of operations.
Our success depends heavily on attracting, hiring, and retaining employees skilled in cutting-edge technologies, particularly artificial intelligence (AI), machine learning, data science, and digital transformation.
The shortage of AI and data experts in the global market, which may be further affected by changes in the U.S. immigration laws and policies limiting the availability of H-1B or other visas, exacerbates this issue, impacting our ability to deliver on client commitments and innovate effectively.
Additionally, retaining employees with leadership capabilities who can lead strategic data and AI initiatives is critical for achieving long-term organizational goals.
Failing to secure such talent could create risks of revenue losses, reduced market competitiveness, and missed opportunities in key geographies.
If we are unable to hire, reskill and upskill our employees in strategically important business areas our ability to effectively lead our current projects and develop new business could be jeopardized, and our business, results of operations and financial condition could be adversely affected.
Specifically, the loss of the services of our key members of our senior leadership team could impair our ability to continue to manage and expand our business.
We do not maintain “key person” insurance covering any member of our management team.
Our asset utilization levels are affected by several factors, including our ability to transition employees from completed projects to new assignments, attract, train and retain employees, forecast demand for our services (including potential client terminations or reductions in required resources) and maintain an Ta ble of Contents appropriate headcount in each of our locations, as well as our need to dedicate resources for employee training and development, other typically non-chargeable activities and optimizing our operational infrastructure.
In many of our digital operations solutions and services contracts we commit to long-term and alternative pricing structures, rather than annual or hourly billing rates, with our clients and therefore may bear the risk of cost overruns, completion delays, resource requirements, wage inflation and adverse movements in exchange rates in connection with these contracts.
In addition, there are privacy and data localization regulations in other jurisdictions, such as the General Data Protection Regulation in the European Union, the International Data Transfer Agreement in the United Kingdom and the Digital Personal Data Protection Act, 2023 in India.
Although we devote substantial resources to protect our information assets and our clients’ confidential information, any network infrastructure is vulnerable to rapidly evolving cyberattacks, employee error, malfeasance, or a combination of the foregoing.
Outside parties may attempt to fraudulently induce employees or clients to disclose sensitive information in order to gain access to our data or our clients’ data.
Our clients, suppliers, subcontractors, and other third parties with whom we do business, including in particular cloud service providers and software vendors, generally face similar cybersecurity threats, and we must rely on the safeguards adopted by these third parties.
If these third parties do not have adequate safeguards or their safeguards fail, it may result in a security breach of our systems and technology infrastructure, or our solutions, or those of our clients.
Security breaches or any negative impact resulting from such incursions into our systems and technology infrastructure and those of our clients, partners and suppliers, may expose us to a risk of loss of sensitive information, lawsuits from our employees, clients or their customers for breaching contractual confidentiality provisions or privacy laws, or investigations and penalties from regulators or criminal prosecution, remediation costs, increased costs for security measures, loss of revenue, damage to our reputation, and potential liability.
Ta ble of Contents The growing use of AI in our offerings presents additional cybersecurity and privacy risks and could result in increased legal exposure.
Our growing use of AI in our offerings presents additional risks such as cybersecurity vulnerabilities, bias, and reputational or legal exposure.
Testing and managing AI systems is complex and costly, requiring processes that meet industry standards and customer expectations.
AI technologies also depend on high-quality datasets, models, and other components, many of which we source from third parties.
If our clients use AI that is provided by us in a manner that does not comply with the use restrictions in our agreements or if they modify such AI without our authorization, those actions could further subject us to competitive, brand or reputational harm and legal liability.
Further, the increased prevalence of misuse of AI identities, accesses and privileges and advanced use of social engineering tactics by bad actors, state-sponsored cyber activities, and the risk that these cyberattacks could spread globally, showcases the increasing sophistication of cyber threats and could dramatically expand the global threat landscape and increase the difficulty of threat attribution and mitigation.
Further, we rely on certain vendors and partners for software, technology, and data communications, including high-quality datasets, related equipment and maintenance services, as well as third-party components—such as cloud services—that are integral to the delivery of our AI solutions and services.

and 91 more.

Gone since FY2024

Our success depends in part on the demand for our services and solutions, which could be negatively affected by a number of factors that may be outside of our control, including, for example, economic and political volatility or changed market conditions.
Our ability to maintain and grow demand for our services and solutions requires that we continue to develop and implement offerings that keep pace with changes in the industry and anticipate and respond to rapidly evolving technology and our clients’ evolving needs in areas such as AI, including generative AI, digital transformation and solutions, advanced analytics, cloud based solutions, data management, robotics and process automation, and data engineering, among others.
If we do not sufficiently invest in new technologies, adapt to industry developments, evolve and expand our business at sufficient speed and scale and successfully drive innovation, our ability to develop and maintain a competitive advantage, our growth strategy and our results of operations could be adversely affected.
If we are successful in responding to these developments, as we expand our services and solutions into these new areas, we may be exposed to operational, legal, regulatory, ethical, technological and other risks specific to such new areas, which may negatively affect our reputation and demand for our services and solutions.
This has caused, and may in the future cause, clients to delay or stop using some of our existing services as they evaluate and pivot to newer technologies, including our own data and AI-led solutions.
Such technological developments and spending delays can negatively impact our results of operations, if we are unable to introduce new pricing or commercial models that reflect the value of these technological developments or if the pace and level of spending on new technologies, and integration of the new technologies into our services, are not sufficient to make up for any shortfall, or if our existing services are otherwise displaced by such technologies.
Developments in the industries we serve, which may be rapid, also could shift demand to new services and solutions.
AI technologies are complex and are rapidly evolving, and we face significant competition, including from our own clients, who may potentially develop their own internal AI technology, or acquire such technology from third parties, which in each case, can lead to reduced demand for our services and solutions.
Our growing use of AI, including generative AI and ML, in our offerings presents additional risks.
The development, adoption, and use of AI technologies are still in their early stages.
Compliance with new or changing laws, regulations, industry standards or ethical requirements and expectations relating to AI may impose significant operational costs.
Our use of, and/or reliance on, AI could give rise to legal or regulatory action or increased scrutiny or liability and may damage our reputation or otherwise materially harm our business.
Consistent with industry practice, most of our client contracts may be terminated by our clients without cause and do not commit our clients to provide us with a specific volume of business.
The terms of our project-based engagements generally do not exceed one year and may not produce ongoing or recurring business for us once the project is completed, and these contracts typically permit a client to terminate the agreement with shorter term notice.
The majority of our digital operations and solutions contracts have longer terms, typically ranging from three to five years, and generally require a longer notice period for termination and may include an early termination fee to be paid to us, but this might not be sufficient to cover our costs or make up for the loss of revenues and profit upon termination of the contract.
Our clients and future clients may not be willing or able to invest the time and resources necessary to implement our services, and we may fail to close sales with potential clients to which we have devoted significant time and resources.
Our success depends heavily on attracting, hiring, and retaining employees skilled in emerging areas, particularly artificial intelligence (AI), machine learning, data science, and digital transformation.
The shortage of AI and data experts in the global market further exacerbates this issue, impacting our ability to deliver on client commitments and innovate effectively.
Additionally, retaining employees with leadership capabilities who can guide strategic AI and data initiatives is critical for achieving long-term organizational goals.
Failing to secure such talent would create risks of revenue losses, reduced market competitiveness, and missed opportunities in key geographies.
If we are unable to invest in reskilling and upskilling our employees in the areas and skills that strategically important to our business, our ability to effectively lead our current projects and develop new business could be jeopardized, and our business, results of operations and financial condition could be adversely affected.
Specifically, the loss of the services of our Chairman and Chief Executive Officer could seriously impair our ability to continue to manage and expand our business.
We currently do not maintain “key person” insurance covering any member of our management team.
Our asset utilization levels are affected by a number of factors, including our ability to transition employees from completed projects to new assignments, attract, train and retain employees, forecast demand for our services (including potential client terminations or reductions in required resources) and maintain an appropriate headcount in each of our locations, as well as our need to dedicate resources for employee training and development, other typically non-chargeable activities and optimizing our operational infrastructure.
In many of our digital operations and solutions contracts we commit to long-term and other pricing structures (such as full-time equivalent-based pricing, fixed-price arrangements, transaction-based and outcome-based pricing) with our clients and therefore may bear the risk of cost overruns, completion delays, resource requirements, wage inflation and adverse movements in exchange rates in connection with these contracts.
Industry pricing models are evolving, and clients increasingly request alternative pricing models , rather than annual or hourly billing rates.
In addition, there are privacy regulations in other jurisdictions, such as the General Data Protection Regulation in the European Union, the International Data Transfer Agreement in the United Kingdom and the Digital Personal Data Protection Act, 2023 in India.
Other countries have enacted or are considering enacting data localization laws that require certain data to stay within their borders.
As a result, we are subject to various data protection and privacy laws in the countries where we operate, and the failure to comply with such laws could result in significant fines and penalties.
Although we devote substantial resources to protect our information assets and our clients’ confidential information, any network infrastructure is to some extent vulnerable due to rapidly evolving cyberattacks, employee error, malfeasance, or a combination of the foregoing.
Outside parties may attempt to fraudulently induce employees, clients to disclose sensitive information in order to gain access to our data or our clients’ data.
Security breaches expose us to a risk of loss of sensitive information, lawsuits from our employees, clients or their customers for breaching contractual confidentiality provisions or privacy laws, or investigations and penalties from regulators or criminal prosecution, remediation costs, increased costs for security measures, loss of revenue, damage to our reputation, and potential liability.
Further, growth in state-sponsored cyber activity, and the risk that these cyberattacks could spread globally, showcases the increasing sophistication of cyber threats and could dramatically expand the global threat landscape.
The services we provide are often critical to our clients’ businesses, and any failure to provide those services could result in a reduction in revenues or a claim for substantial damages against us, regardless of whether we are responsible for that failure.
We depend on certain significant vendors and partners for software, technology and data communications, related equipment and its maintenance, and third party components that we use to deliver our services, including cloud services.
Any performance failure on the part of our vendors or partners, or the discontinuance by such vendors or partners of services that we rely on them to perform, could delay our performance, or require us to engage alternative third parties to perform the services at our cost or to perform the services ourselves, any of which could result in a negative impact on our reputation, a loss of revenue or adversely impact our cash flows and profitability.
If we are unsuccessful in negotiating for such third-party data use rights, or if we are found to have used such data in a manner inconsistent with our rights and limitations, we may need to stop providing certain of our solutions or services, we may be unable to compete with our peers, or we might incur other financial, legal and/or reputational consequences.
We also may need to increase the levels of employee compensation more rapidly than in the past to remain competitive in attracting and retaining the quality and number of employees that our business requires.
Wages are generally higher for employees performing AI, analytics and digital transformation services than for employees performing digital operations and solutions.
To the extent that we are not able to control such costs by our efforts to add capacity in lower wage costs countries or share wage increases with our clients, wage increases may reduce our margins and cash flows.

and 84 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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