ExlService Holdings, Inc.EXLS
ExlService Holdings, Inc. Goodwill & Intangibles Disclosure
Goodwill and Other Intangible Assets
Goodwill
The following table sets forth details of changes in goodwill by reportable segment of the Company:
| Insurance | Healthcare | Emerging Business | Analytics | Total | |||||||||||||||||||||||||
| Balance as of January 1, 2022 | $ | 50,428 | $ | 21,942 | $ | 49,020 | $ | 282,512 | $ | 403,902 | |||||||||||||||||||
| Acquisition | — | — | — | 1,992 | 1,992 | ||||||||||||||||||||||||
| Measurement period adjustments | — | — | — | 2,229 | 2,229 | ||||||||||||||||||||||||
| Currency translation adjustments | (499) | (67) | (1,919) | (1) | (2,486) | ||||||||||||||||||||||||
| Balance as of December, 2022 | 49,929 | 21,875 | 47,101 | 286,732 | 405,637 | ||||||||||||||||||||||||
| Currency translation adjustments | 106 | (3) | (100) | (1) | 2 | ||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | 50,035 | $ | 21,872 | $ | 47,001 | $ | 286,731 | $ | 405,639 | |||||||||||||||||||
During 2023 and 2022, the Company performed an assessment to determine whether events or circumstances exist that may lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on such assessment, the Company concluded that it is not more likely than not that the fair values of any of the Company’s reporting units are less than their carrying amounts.
The recoverability of goodwill is dependent upon the continued growth of cash flows from the Company’s business activities. This growth is based on business forecasts and improvement in profitability of its reporting units. The Company continues to maintain its focus on cultivating long-term client relationships as well as attracting new customers. The Company believes there are significant opportunities for adding new customers and additional growth and expansion within its existing customers by:
•Increasing the depth and breadth of the services, including adoption of new technology, for instance, generative AI, the Company provides across its customers’ value chains and geographies;
•Offering the full suite of the Company's services, which includes AI-powered digital operations and solutions and data and analytics; and
•Supporting the Company's customers’ geographic expansion leveraging its global footprint.
The Company also considers selective strategic relationships with industry leaders that add new long-term client relationships, enhance the depth and breadth of its services and solutions, and complement its business strategy. Through its various partnership programs, the Company expands its technology and innovation ecosystem with select partnerships, alliances or investments that the Company expects will enhance go-to-market opportunities and expand the scope and effectiveness of the Company’s services and solutions by adding digital assets and intellectual property, which will help the Company to win new customers or allowing it to enter new industry verticals and geographic markets.
There can be no assurances that goodwill will not be impaired in future periods. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. These estimates and judgements may not be within the control of the Company and accordingly it is reasonably possible that the judgments and estimates described above could change in future periods. The duration of market volatility is highly uncertain and, as such, the impact on cash flows, long-term debt-free net cash flow growth rate in the terminal year and discount rates are subject to significant judgments and may cause variability in the Company’s assessment of existence of any impairment. The Company continues to monitor significant changes in key assumptions that could result in future period impairment charges.
Other Intangible Assets
Information regarding the Company’s intangible assets is set forth below:
| As of December 31, 2023 | |||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||
| Finite-lived intangible assets: | |||||||||||||||||
| Customer relationships | $ | 99,050 | $ | (51,085) | $ | 47,965 | |||||||||||
| Developed technology | 3,552 | (2,522) | 1,030 | ||||||||||||||
| Trade names and trademarks | 1,400 | (1,286) | 114 | ||||||||||||||
| Non-compete agreements | 336 | (181) | 155 | ||||||||||||||
| 104,338 | (55,074) | 49,264 | |||||||||||||||
| Indefinite-lived intangible assets: | |||||||||||||||||
| Trade names and trademarks | 900 | — | 900 | ||||||||||||||
| Total intangible assets | $ | 105,238 | $ | (55,074) | $ | 50,164 | |||||||||||
| As of December 31, 2022 | |||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||
| Finite-lived intangible assets: | |||||||||||||||||
| Customer relationships | $ | 99,146 | $ | (39,848) | $ | 59,298 | |||||||||||
| Developed technology | 24,878 | (20,902) | 3,976 | ||||||||||||||
| Trade names and trademarks | 1,700 | (1,303) | 397 | ||||||||||||||
| Non-compete agreements | 336 | (88) | 248 | ||||||||||||||
| 126,060 | (62,141) | 63,919 | |||||||||||||||
| Indefinite-lived intangible assets: | |||||||||||||||||
| Trade names and trademarks | 900 | — | 900 | ||||||||||||||
| Total intangible assets | $ | 126,960 | $ | (62,141) | $ | 64,819 | |||||||||||
The amortization expense recognized in the consolidated statements of income was as follows:
| Year ended December 31, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Amortization expense | $ | 14,678 | $ | 17,109 | $ | 12,778 | |||||||||||
Estimated future amortization expense related to finite-lived intangible assets as of December 31, 2023 was as follows: | |||||
| 2024 | $ | 12,135 | |||
| 2025 | 10,699 | ||||
| 2026 | 10,362 | ||||
| 2027 | 9,364 | ||||
| 2028 | 6,704 | ||||
| Total | $ | 49,264 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Feb 29, 2024 | Showing above |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 15, 2017 | |
| 2015 | Feb 26, 2016 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.