ExlServices at Citi’s 2025 Conference: AI Drives Growth

On Wednesday, 03 September 2025, ExlService Holdings Inc (NASDAQ:EXLS) took center stage at Citi’s 2025 Global Technology, Media and Telecommunications Conference, showcasing its strategic prowess in the IT services industry. The company highlighted its robust integration of AI and data analytics, which has fueled double-digit revenue growth amid industry challenges. While this strategic focus has been a boon for EXL, the company also faces competition from established IT firms and emerging startups.

Key Takeaways

• EXL’s AI and data analytics integration is driving double-digit revenue growth.
• The company is transitioning to outcome-based pricing to boost revenue and margins.
• EXL maintains high revenue visibility with 75% of revenue contracted for one year or more.
• EXL anticipates a 12-13% organic growth rate for the year.
• EXL projects over $200 million in free cash flow, focusing on M&A and stock repurchases.

Financial Results

• Revenue Growth: EXL continues to exhibit strong double-digit revenue growth, distinguishing itself from competitors in the IT services sector.
• Data and AI Revenue: Accounting for 54% of overall revenue, data and AI segments are expanding faster than the rest of the business.
• Revenue Visibility: With 75% of its revenue contracted for one year or more, EXL enjoys over 95% visibility for the current year and 80-85% at the start of each year.
• Organic Growth: The company projects a 12-13% organic growth rate for the year.
• Free Cash Flow: EXL is generating over $200 million in free cash flow, with plans to allocate capital towards mergers and acquisitions (M&A) and stock repurchases.

Operational Updates

• AI Integration: EXL’s strong demand for AI is driving momentum across its business lines, integrating AI into training, data engineering, and predictive modeling.
• Commercial Model: A shift to outcome-based pricing is expected to enhance revenue and gross margins.
• Headcount and AI Impact: While headcount grew by 10%, revenue increased by 13%, attributed to AI integration, resulting in a 3-5% annual increase in revenue per headcount.
• LLMs Development: EXL has developed seven domain-specific large language models (LLMs), including one for insurance that surpasses GPT 4.0 in specific tasks.

Future Outlook

• Strategic Focus: EXL will continue integrating AI across its operations to deliver customer outcomes.
• Commercial Strategy: The company aims to drive more revenue from outcome-based pricing models.
• M&A and Capital Allocation: EXL plans to pursue M&A opportunities to enhance capabilities in data and AI, particularly in healthcare and life sciences, and expand internationally.
• Balanced Growth: EXL seeks to maintain a balance between cost-focused and growth-focused business environments.

Q&A Highlights

• Competition: EXL differentiates itself through domain expertise and robust data and AI capabilities, despite facing competition from IT firms and startups.
• Client Priorities: Varying by industry, insurance clients focus on capability investment, while healthcare clients emphasize cost reduction.
• Macro Factors: EXL reports minimal impact from government activities such as tariffs, with limited Medicaid exposure.

For a more detailed understanding, readers are encouraged to refer to the full transcript provided below.

Full transcript - Citi’s 2025 Global Technology, Media and Telecommunications Conference:

Brian Keene, Analyst, Citi: Conference. I’m Brian Keene. I cover IT services here at Citi, and we’re excited to have EXL service with us. We have Maurizio Nicolelli, who’s the EVP and CFO, and Vivek Jetley, who’s the president and head of insurance, health care, and life sciences. So welcome, gentlemen.

Thanks for coming.

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: Thank you. Thank you.

Brian Keene, Analyst, Citi: You know, when I think high level about EXL, I always think about the consistency and the growth rates, double digit revenue growth, and others in IT services have struggled. So I was hoping maybe you could help us understand what makes EXL different than a lot of your peers.

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: Sure. Well, first of all, thank you for coming here today, everyone, and it’s been been a great day just in terms of the interactions for us. But this is the one question that I think is something where we’d want to get the message out in terms of what we are seeing. I think the biggest difference for us today is that there’s a very, very strong demand from enterprises that are adopting AI and shifting to AI. And for EXL, AI and the adoption of AI is a very, very strong tailwind.

It’s a bigger it’s a a bigger bigger tailwind. It’s a growth driver for us, and it’s a growth driver across all lines of business for us. And I think that’s the single biggest differentiation between us and what you would kind of take a look at the the overall comparison set. Now the reasons why it’s such a strong tailwind for us is a little bit based on how strong we were in data and analytics to begin with. So we’ve been disclosing this publicly, but data and analytics until last year before we reorganized was 43% of our overall revenue, a large portion of our of our overall base in terms of what we did, a large portion of our clients.

So the shift for those clients to kinda move towards using EXL for their AI needs was a shorter distance and a shorter jump. And then the second part of it is as clients have been trying to move towards adopting AI in the workflow for their operations needs and making their operations AI led, That’s where EXL’s really become the the premier partner for them because there’s the ability from us to bring the data, the domain expertise, and the AI skill sets together and stitch it all together in a meaningful offering for them. We’re seeing we’re seeing a very strong demand for it from that side. So I think just to summarize, it’s the combination of a very strong AI demand and that AI demand translating in business momentum for EXL across all lines of business.

Brian Keene, Analyst, Citi: Now what what do others in the industry, when you look at their business models, what is it that they’re lacking, or why is it it become almost deflationary to many?

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: So I I can’t speak to others’ business models in detail, but I can tell you what about our business model has been has been very, very strong. So there’s a couple of different portions for it. One is you need to have the the combination of of the data, which is either access to proprietary data or the ability to help a client with with using their unstructured data in the right way. You need to understand the domain, which is to say, what is the problem that’s getting solved for? What’s the outcome that a customer is looking to solve for?

And then making sure that you understand how where that fits into the workflow. And the third portion is the AI capability, which is both leveraging your own proprietary AI or working with third party partners to bring the AI in. So the combination and it needs to be a combination. If you’re just unipolar on one, it doesn’t work. You need to have all three of them together.

That and I think the ability that or the advantage that EXL had was we never had these large pieces of business that were getting cannibalized by the AI. So we have a very low concentration on low value call centers. We were very low on some of the IT development, IT maintenance work. So we’re we’re not not seeing that cannibalization impact, and we’re benefiting from the pull through from here.

Brian Keene, Analyst, Citi: So when AI, GenAI, first became real hot in the headlines, everybody pointed to BPO services as the place that it was going to cannibalize. Obviously, that’s not quite happened that way. What what maybe did did people misread originally when they thought it was gonna be BPO was gonna be hit the hardest?

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: I think they’ve I mean, from my estimation, they really underestimated the time and the amount of work that it takes to pivot away. And, you know, in the early days, the buzz about AI was all about I’m running these 50 different POCs. I’m running a 100 different POCs. Those proof of concepts never really had meaningful impact behind them. So most of them haven’t gotten implemented, not seen light of day.

And that’s I think it’s a combination of those two things that’s delayed the, you know, the AI impact. I must call out the fact that what we are seeing today, though, is very different. Today, the conversation with a client is, what can I do to use AI to help me solve for this meaningful outcome, or how can AI drive a significant amount of change for me in my workflow? And that conversation is very different. So it’s not 50 different ideas.

It’s two or three ideas. And it’s ideas that are enterprise based and ideas that are trying to drive to a meaningful outcome. And we feel that that’s a space that we fit in perfectly with.

Brian Keene, Analyst, Citi: So when you do the the GenAI solutions in your delivery, how prevalent is it in in all the delivery mix with client engagements? And then how do you has pricing and contract terms changed at all with the push into GenAI?

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: I’ll answer the first part, and I’ll let Mauricio take the second. I think on the first part, there’s a very strong focus across the company on making sure that we in we bring in AI into pretty much everything that we do. Just this morning, we were looking at enterprise AI applications, which we are using right now to train up people better to kind of accelerate the curve that it takes for someone to get trained to work on a client process. And AI is doing that for us. AI is becoming the trainer for someone that’s coming in.

We have we have we’ve introduced AI into how we are doing data engineering work for our clients. We’ve introduced AI coders into how we’re doing analytics predictive modeling. So there’s a huge body of work that we’ve done in terms of how we are adopting AI within the company to start driving meaningful outcomes for our customers. And that’s that’s been, you know, a pretty big driver of giving back benefits to clients, which we think in in the in the long run drives a pretty big business impact. I’ll let Mauricio talk about the commercial model because that’s been the second big change that we’ve made.

Maurizio Nicolelli, EVP and CFO, EXL service: Yeah. So when you start to look at how we’ve pivoted in AI, you start to see us really focusing on and clients focusing on the overall outcome that Vivek talked about. Before, it was it was more about reducing cost and reducing the number of employees. But now it’s all it it’s much more a conversation around outcomes. How can I get better outcomes in terms of claims to to be processed better or faster?

How can I how can I get collections done much in a much more efficient way and collect more? We, in that process, want to get paid more on an outcome transaction basis going forward. So when you look at the GenAI solutions that we’ve put in place, you look at AgenTek AI in a number of just the general AI use cases, we are pushing much more outcome transaction based pricing, and that changes the commercial model. Now does every client wanna go down that path? Some do not.

Some want more cost certainty, so we have to work with those clients. But that is that is a commercial model change for us going forward that we wanna drive a higher portion of our revenue in that direction. And what that does, it increases the the benefit or the opportunity for us going forward also. The client does better, and we participate more in that. And that also drives a higher gross margin for us going forward in the long run.

And so that is how we’re pivoting that commercial model now going forward.

Brian Keene, Analyst, Citi: Yeah. I think people understand that the margin and some of the the abilities of the synergies that you’d be able to get. I guess, you know, if you said you had a project, you were doing claims processing for $10, I think the market assumed that you would do the same project and have to do it at 8 or 7, and then have to give 2 to 3 of those dollars back to the to the client. How is that is that have you been able to gain extra additional revenue to offset some of that that lower pricing?

Maurizio Nicolelli, EVP and CFO, EXL service: Yep. And and that’s where and that’s where exactly we benefit from from doing that activity, from that doing that work. And that, yes, we may end up pricing it slightly lower, but the volume and the additional opportunity for us going forward into additional workflows is the outcome that that is really gonna help us continue to drive revenue. If you look at our investor deck, there’s a page in there that shows how deeper we’ve gotten into our client set, how many more clients that we have, a much higher dollar amount, and a much higher amount of workflows that we manage going forward. And that’s how we’ve actually grown the company over the years in that we we end up doing well in a certain process, and then it’s more of a land and expand.

We end up getting more workflows from the client. But in this in that in that example, you’re doing exactly that with more of a outcome transaction type commercial model. Got it.

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: Or to stay with the same example, to add to what Mauricio said, you talked about claims processing, 10 going to eight. We absolutely will go to eight. But I think in in that same conversation, we are gonna say, well, what about the unstructured data that you need to bring in into the claim, the intelligence? What about, you know, the the analytics on saying how does that claim exposure impact what you’re doing in a feedback loop to underwriting. And we are gonna start asking the client for those pieces along with the processing work.

So when you start making it more end to end, what you’re getting after is a bigger market size. And even though one component of it is probably becoming more cost effective for the client, net net, because the scope of work that EXL gets is bigger, we grow.

Brian Keene, Analyst, Citi: Got it. Got it. Wanna step back and just think about the overall IT services demand, how you guys saw it in ’24 and then so far through, you know, year to date in ’25. Maybe you can just talk about macro factors and other, you know, things you’re seeing in the market that that could be changing the the demand for IT service.

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: So there’s some portions of the IT services demand that have gone gone down or that have gotten cannibalized. I think we don’t get exposed to it much, but we we kind of see what’s going on in IT custom IT development or custom IT maintenance. But the portion that impacts us is some of the dashboarding work or the business intelligence work that we were looking at as part of our data and analytics practice. Some of that is the demand for that is much lower. But what we are seeing is probably a bigger input into the demand for things where you’re starting to bring AI models, where you’re starting to do AI engineering to be able to kind of bring data into the into the AI algorithms and push it back into the workflow.

And in certain cases, just doing things like data annotation, which is building out the data management engine to support that. So the demand has shifted. And depending on where you are and how receptive you are to the new demand that’s coming in, That would determine what your overall demand size and your pipeline is. Now we’ve been very fortunate. We’ve been made the right investments.

We’ve been in the right spaces. So for us, our pipeline continues to go up. And I think demand continues to go up as well. And you’re seeing some of that reflected in the forecast that we put out.

Brian Keene, Analyst, Citi: And then how are clients thinking about the difference between cost takeout versus growth priorities, you know, for short term to long term? And are you seeing any more discretionary spend come back?

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: So I think this is something that varies by by almost industry to industry. So I’m responsible directly for insurance and for health care, two of our largest businesses. I can tell you right now in insurance, it’s a question of investing in capability because the last couple of years, insurance has really been focused on cost takeout. So this year was the year on saying there’s a lot of new risks that are coming in. How do we invest in capability to prepare for that risk?

That has been the story on the P and C side. On the life and annuity side, it’s been more about modernization. Now the story is completely different for healthcare, where if you’re a large payer right now, you are focused on cost takeout. So I think the priorities change depending on which industry you’re in and what’s going on with the overall picture. But I should add that the way EXL is constructed, and we’ve we’ve talked about this in our Investor Day as well, we have a very good balance between parts of the business that do very well in a cost takeout environment and parts of the business that are doing well in an invest and a grow environment.

So there’s a very nice balance to the business which makes us actually, in certain cases, you know, continue to grow irrespective of what the market environment is. Do you see,

Brian Keene, Analyst, Citi: you know, external factors or economic factors like the tariffs, you know, change decision making or or pipeline conversion?

Maurizio Nicolelli, EVP and CFO, EXL service: So we we have not seen a a significant impact from the government, you know, activity, specifically the tariffs, to be quite honest. You know, we’ve gone through a lot of of of the literature and also some of the communication coming out of from the federal government. We we just have not seen that. We haven’t seen that in insurance nor we have seen any effect on us within health care either. So we really have not been affected at all.

And we haven’t seen a direct effect on our clients either, to be quite honest.

Brian Keene, Analyst, Citi: And then can you talk a little bit about the the revenue contribution from recurring and nonrecurring? And and, you know, what kind of visibility do you have even on that nonrecurring piece if economic conditions worsen, that kind of thing?

Maurizio Nicolelli, EVP and CFO, EXL service: So when you look at our revenue base, 75% of our revenue is contracted for one year or more. So embedded in our revenue base is a very nice annuity stream of revenue, which makes us a little bit different than some of the more volatile IT services kind of companies that that are that are out there right now. When you look at visibility, because of that, you know, when you look at visibility, particularly right now, we’re we’re just at the September. What’s the what’s our visibility for the rest of the year? It’s 95% plus.

That’s that gives us a very high level of confidence that we’re gonna grow 12 to 13% for the year overall on an organic basis. When you get to January 1, traditionally, we have visibility into 80 to 85% of our revenue overall. So, you know, because we have these long extended contracts, we’re able to have very high level of visibility into a period of time, regardless of that period of time overall. And so we’ll start the year with 80% plus visibility into that revenue stream. And a large majority of that is contracted already.

Brian Keene, Analyst, Citi: Can you talk a little bit about the competition? Who are you guys seeing now the most in the marketplace? And how rational are some of those competitors you hear sometimes, some folks pricing aggressively just to win business?

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: So I I think in in the marketplace that we are in, which is right now working with these insurance, health care companies, banks, and so on, and helping them drive outcomes through AI, That marketplace has a number of different entrants within it. You’ve got the the IT companies that were traditionally working with the CIO that are working there. You’ve got the consulting companies that have built out their arms. You’ve got, in certain cases, the hyperscalers. And in others, you’ve got, you know, startups that are trying to compete for the same place.

So it’s a it it is a competitive marketplace. I think what we keep going back to is when you start looking at companies that have that combination of the domain expertise, the data and AI capabilities and that huge strength and the ability to both create AI and implement that AI. You start looking for companies that have all three of those in the combination, then it starts becoming a much smaller set. And that’s the set that we think is the probably the most heads on competition for us as opposed to, you know, the large number of entrants that are there.

Brian Keene, Analyst, Citi: Yeah. I wanna ask about the data and AI revenue component. How do you guys categorize that? And, you know, as as you embed AI into all digital operations, you reclassify all that revenue? Just make sure we understand the data and AI.

Sure. So at the end of

Maurizio Nicolelli, EVP and CFO, EXL service: the second quarter, our total revenue in data and AI was 54% of our overall revenue. And that you’re starting to see inch higher every quarter going forward because data and AI revenue is growing faster than the than the overall business now. Why is that? Couple reasons. One is every new opportunity that comes our way, we we introduce a component of either data and or AI or both overall.

So that means, you know, when we look at our pipeline, such a large portion of our pipeline are opportunities that contain data and AI. So, you know, when when you look at the two different pieces of the business, that should drive a higher growth rate in data and AI. We also are looking at our traditional digital operations business and those contracts that do not have an element of data and AI, and also introducing data and AI to our clients in those contracts, to a certain extent cannibalizing that revenue. Because at some point, someone will come to that to our client and look to introduce an AI solution or some component of that in that operation. So that will also we will transform that operation, but that will become data and AI revenue going forward.

So so when you look at the the data and AI revenue of our of our business, that should be growing faster than the overall portion of or the overall company average for revenue. That should be the case now for the next two to three years. Got it. The popular question then to add to ask on that is the mode around data and AI,

Brian Keene, Analyst, Citi: and you have OpenAI and Google and other AI models moving rapidly. Could they take a portion of that revenue?

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: I’m I’m sure they’ll want to market more to the enterprise. But so far, what we’ve seen is that they’re more I mean, Google in particular, it’s more a partner as opposed to a competitor. So we are going to market. We’ve got certain joint clients, customers that we are doing some transformation work for them together, Google and our teams. So I think there’s a element of that going on.

I think where there is a direct competition would be in terms of how do you wanna build out certain enterprise AI algorithms or workflow solutions. And that’s where I think the the differentiation that we have is we have the the domain knowledge and understanding the client’s workflow, and in a lot of places, the data associated with that workflow. So you need to have those two elements in order to build an AI solution that’s effectively solving for that for a problem, let’s say, the claims problem. And that’s somewhere that’s something which we think that some of these larger players don’t have. In fact, that’s where they’re partnering with us to bring that capability in.

Think of them as a very, very strong horizontal capability and think of EXL as that vertical capability on top that is then helping to solve for an industry problem.

Brian Keene, Analyst, Citi: Okay, great. I wanted to ask about to date, I think EXL has created seven domain specific LLMs. Can you walk us through what is needed to create a successful model and where it has been most promising so far?

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: Sure. So I’ll I’ll talk about our first one, which is the insurance LLM. The way we did it is we had we have a platform. It’s called MedConnect. And what that platform was doing was taking a look at these claims forms, which had injury reports onto them and then extracting out the medical procedures which would then be fed into the workflow.

Now what you have within that process is you have a ton of data coming in, unstructured data. And you had a very, very trained and a skilled operator extracting that going through each page, coming up with the outcome, and a and a doctor then going through the outcome and saying, okay. This is what it is. So we got the client’s permission to do this, and what we ended up building was our LLM, which now has the capability of going through these unstructured injury report forms and coming out with the precise information that is needed for the insurance claims form, three bullet points. And those three bullets have actually been trained on the data that we’ve been running for a very long period of time.

So it’s the golden data. Now when you do it that way and you train your algorithm that way, we found out that we are outperforming the rest of the industry. So we are outperforming, in that case, GPT four point o because four point o was trained to create a paragraph and a description around the accident report, but not the three bullet points that the claims form needed. And therein lies the differentiation. It’s the ability to say, I’ve got the data.

I know the workflow. I know what the workflow needs in terms of the output, And I have the ability of kind of training my algorithm with the data that I have to get that workflow output. And that’s I think that’s the edge.

Brian Keene, Analyst, Citi: How do we think about headcount growth and the talent you guys need to you know, for data and AI to to keep moving forward on that? Is it gonna be less than the traditional models of of years past?

Maurizio Nicolelli, EVP and CFO, EXL service: So as we as we drive more data and AI revenue, what you’ll find is a little bit of a different type of headcount growth and type of person we’re looking for now going forward. We’re gonna need more technology, kind of data engineering type employees now going forward. So the you’re you’re you’re changing a little bit of the mix. You’re going to a higher paid employee to a certain extent, you know, going forward. It also will start to reduce the growth rate of headcount.

Now if you look at the second quarter, we grew revenue at 13% on a year over year basis, but headcount only grew 10%. Right? And that you’re starting to see now revenue per headcount start to grow off of that. Right? And that’s us built embedding more AI into our client workflows, driving more price and revenue with a lower amount of employees now going forward.

So you’ll see a little bit of the shift. You we’re still gonna we’re still gonna be growing headcount because we still have that operations piece to our business that has AI embedded in the operation. That’s the human in the in the workflow component to to our overall operations. But you should start to see headcount growth be lower than overall revenue growth, and you should start to see revenue per headcount grow on a consistent basis. Now going forward, as we move our data and AI revenue higher from 54% from where it is today.

Brian Keene, Analyst, Citi: Is there a percentage, like, three to 5% on annual basis is kinda where maybe revenue per head count could grow?

Maurizio Nicolelli, EVP and CFO, EXL service: So we so when we do our modeling, in general, we look to grow that somewhere between three to 5%, I would say. Yeah. I think that’s pretty I think it’s pretty reasonable, to be quite honest

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: Yeah.

Maurizio Nicolelli, EVP and CFO, EXL service: For on an annualized growth rate going forward. And that’ll move with that data and AI revenue percentage.

Brian Keene, Analyst, Citi: Vivek, I wanted to ask you about there’s been obviously the big bill passing through in DC for the healthcare impacts and then also just regulatory pressure? What are the impacts since you’re in charge of both insurance health care and life sciences? What are the impacts you’re seeing from some of these financial and regulatory pressures?

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: Sure. So on the impact is more on the government programs, but specifically, there’s a very large outsized impact on Medicaid as opposed to Medicare. So we went back and took a look at our portfolio and took a look for where do our clients have government program exposures and where do they specifically have Medicaid exposures. We are very comfortable with the fact that our exposure to Medicaid through those government programs that our clients run is very small. So I think as far as our exposure to that, it’s very limited.

But the bigger thing that’s happening within health care is the increase in the medical costs that, you know, all of the large payers have experienced. I mean, you saw United’s numbers of 90.5% in terms of the medical cost ratio. That’s a really, really high number. It’s unsustainable. Now that’s created a huge amount of pressure on all of these payers to start reducing, in certain cases, the unprofitable members.

And in other cases, it’s just taking cost out from the overall base in order to kind of make sure that the profitability comes back. So we are seeing the impact of that. But in certain cases, cost takeout is a positive for us.

Brian Keene, Analyst, Citi: Mauricio, I wanted to ask about the margins. I think you’re guiding to 10 to 20 basis points of improvement. Can you just talk about some levers? What are some of the upside and downside factors in the margin ranges?

Maurizio Nicolelli, EVP and CFO, EXL service: So when you when we we’ve done a lot on margins over the years. If you look at our our margin trajectory from 2020 to 2025, we went from about 14%, 15% margins to now, you know, we’re we’re projecting 10 to 20 basis points higher than last year, and last year was at 19.4%. As we look and and if you look at the first half of the year, we’re actually higher than that. But when we project out the year, we do think of 10 to 20 basis points. And what are really the levers?

The first lever is us driving a higher gross margin. And as we, you know, as we talked about, as we drive more data and AI revenue as a percentage of our overall business, that should drive a higher gross margin. And we do believe that that’ll be that’s we will see that not only this year, but also going forward. And so as you see that higher gross margin, that should be that should be driven in our overall P and L. The offset to that is investments.

We need to we need to invest more, and we have been. If you look at our level of investment over the last three to four year, it has more than doubled significantly over that time period. And so what is that? What that really what that is, is us investing more in building out AI solutions and doing more R and D work. And some of that R and D work is also proof of concepts that we’re entering into more and more going forward with our clients.

And so as we get deeper into building out AI solutions for our clients, we’re going to have to spend more on R and D. So you’re going to have a higher gross margin offset by a higher level investment and the net of that is an incrementally higher margin overall. And what does

Brian Keene, Analyst, Citi: that mean for free cash flow conversion?

Maurizio Nicolelli, EVP and CFO, EXL service: So when you look at our cash flow, we are now, you know, driving, you know, north of about 200,000,000 in free cash flow now going forward. So that is starting to become significant for us. And capital allocation is going to be much more important for us. And when we allocate capital, that’s really going to be between looking at assets in the M and A market and also repurchasing our stock, especially when we think it’s undervalued. And if you noticed, when we released our second quarter earnings, we entered into another ASR with Citi actually to to buy back a significant amount of our stock at at this lower level that we’re sitting at at a 43, $44 range.

But that’ll that’ll flow through that free cash flow line. And and what would be some of

Brian Keene, Analyst, Citi: the m a m and a type targets you guys would look at? Is it Is it, you know, service expansion? Or what what would you be looking at?

Vivek Jetley, President and Head of Insurance, Health Care, and Life Sciences, EXL service: So we’ve we’ve got a couple of different m and a thesis going on. All of them are for capability, not for scale. And they include going deeper in terms of building out our data and AI skill sets, so very specific capability related. It’s also further expansion within certain areas, like within health care and life sciences, and finally, internationally, where we wanna kind of increase our presence in certain key markets.

Brian Keene, Analyst, Citi: Okay. With that, gentlemen, I think we’re about out of time. Thank you very much for being here.

Maurizio Nicolelli, EVP and CFO, EXL service: Thank you, everyone. Thank you. Thank you, Brian.

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