ExlService Holdings, Inc.EXLS
ExlService Holdings, Inc. Stock Compensation Disclosure
Stock-Based Compensation
On June 17, 2025, the Company’s stockholders approved 2025 Omnibus Incentive Plan (the "2025 Plan"), which among other things, reserves 6,800,000 shares (as adjusted under the terms thereof) of the Company’s common stock for grants of awards under the 2025 Plan, at which time new awards under the 2018 Omnibus Incentive Plan (the "2018 Plan") were not permitted to be made, but outstanding awards under the 2018 Plan will continued to be governed by the terms thereof. As of December 31, 2025, the Company had 5,919,466 shares available for future grants under the 2025 Plan.
Under the 2025 Plan, the Compensation and Talent Management Committee (the “Committee”) may grant awards of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based compensation awards (including revenue target based and market condition based awards), stock bonuses and cash bonus awards, or any combination or variation of the foregoing.
The Committee determines which employees are eligible to receive the equity awards, the number of equity awards to be granted, the exercise price, the vesting period and the exercise period. The vesting period for the equity award issued is determined on the date of the grant and is non-transferable during the life of the equity award. Stock options have a contractual period of ten years from the date of grant and vest ratably over four years. Restricted stock units generally vest proportionally over a period of four years from the date of grant, unless specified otherwise.
Stock-based compensation expense by function, as below, are included in the consolidated statements of income:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Cost of revenues | $ | 13,189 | $ | 15,762 | $ | 14,686 | |||||||||||
| General and administrative expenses | 31,980 | 28,612 | 21,574 | ||||||||||||||
| Selling and marketing expenses | 34,300 | 28,284 | 22,177 | ||||||||||||||
| Total | $ | 79,469 | $ | 72,658 | $ | 58,437 | |||||||||||
Income tax benefit related to stock-based compensation (1) | $ | 24,997 | $ | 17,576 | $ | 17,333 | |||||||||||
(1) Includes $15,930, $9,714 and $15,055 during the years ended December 31, 2025, 2024 and 2023, respectively, related to discrete benefits recognized in income tax expense in accordance with ASU No. 2016-09, Compensation - Stock Compensation.
Stock Options
Stock option activity under the Company’s stock-based compensation plans is shown below:
| Number of Options | Weighted Average Exercise Price | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | ||||||||||||||||||||
| Outstanding as of December 31, 2024 | 1,768,305 | $ | 30.14 | $ | 25,187 | 8.5 | |||||||||||||||||
| Granted | — | — | — | — | |||||||||||||||||||
| Exercised | — | — | — | — | |||||||||||||||||||
| Forfeited | (33,585) | 30.15 | — | — | |||||||||||||||||||
| Outstanding as of December 31, 2025 | 1,734,720 | $ | 30.14 | $ | 21,344 | 7.5 | |||||||||||||||||
| Vested and exercisable at December 31, 2025 | 861,740 | $ | 30.14 | $ | 10,603 | 7.5 | |||||||||||||||||
| Weighted average grant date fair value of per unit of stock option granted during the period | $ | — | |||||||||||||||||||||
Stock options were granted under the 2018 Omnibus Incentive Plan during the year ended December 31, 2023 which have a contractual period of ten years and vest ratably over four years.
The fair value of each stock option granted to employees is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
| Year ended December 31, 2023 | |||||
| Dividend yield | — | ||||
| Expected life (years) | 6.25 | ||||
| Risk free interest rate for expected life | 3.8 | % | |||
| Volatility for expected life | 32.4 | % | |||
The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation model.
As of December 31, 2025, unrecognized compensation cost of $7,744 is expected to be expensed over a weighted average period of 1.5 years.
The grant date fair value of stock options exercised and cash received from stock options exercised was as follows:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Grant date fair value | $ | — | $ | 269 | $ | 30 | |||||||||||
| Cash received | $ | — | $ | 675 | $ | 85 | |||||||||||
Share Matching Program
Under the Company’s 2018 Plan, the Company established a share matching program (“SMP”) for executive officers and other specified employees. Under the SMP, the Company agreed to issue a number of restricted stock units equal to the number of newly acquired shares of the Company's common stock. For purposes of the match, “newly acquired shares” includes the employee’s first quarter 2022 open market purchase of the common stock, and crediting of equity awards vesting under any existing stock award plan of the Company as having been purchased by such employees, in an amount between $100 to $500 per such employee.
The matching restricted stock units granted under the SMP will vest in two installments, with one-third to vest on the second anniversary of the grant date and the remaining two-thirds to vest on the third anniversary of the grant date; the newly acquired shares for which the matching restricted stock units were granted must also be held by the employee until such vesting dates. The Company’s underlying common stock issued pursuant to the vesting of the matching restricted stock units will not be marketable or transferable for a period of two years following the vesting date. Certain forfeiture and other conditions apply.
Restricted stock unit activity under the SMP is shown below:
| Restricted Stock Units (SMP) | ||||||||||||||
| Number | Weighted Average Fair Value | |||||||||||||
Outstanding as of December 31, 2024 (1) | 144,845 | $ | 24.95 | |||||||||||
| Granted | — | — | ||||||||||||
| Vested | (144,845) | 24.95 | ||||||||||||
| Forfeited | — | — | ||||||||||||
| Outstanding as of December 31, 2025 | — | $ | — | |||||||||||
(1) As of December 31, 2025 and 2024 restricted stock units vested for which the underlying common stock is yet to be issued are 31,662 and 72,385, respectively. Due to administrative processes, the restricted stock units issued during the year ended December 31, 2025, were reduced based on applicable U.S. tax rules and regulations.
Restricted Stock Units
The Committee is authorized to award restricted stock units to participants. The Committee establishes the terms, conditions and restrictions applicable to each award of restricted stock units, including the time or times at which restricted stock units will be granted or vested and the number of units to be covered by each award. The terms and conditions of each restricted stock award will be reflected in a restricted stock unit agreement.
Any cash or in-kind dividends paid with respect to unvested shares of restricted stock units are withheld by the Company and paid to the holder of such shares of restricted stock, without interest, only if and when such shares of restricted stock units vest. Any unvested shares of restricted stock units are immediately forfeited without consideration upon the termination of holder’s employment with the Company or its affiliates. Accordingly, the Company’s unvested restricted stock units do not include non-forfeitable rights to dividends or dividend equivalents and are therefore not considered as participating securities for purposes of earnings per share calculations pursuant to the two-class method.
Restricted stock unit activity under the Company’s stock-based compensation plans is shown below:
| Restricted Stock Units | ||||||||||||||
| Number | Weighted Average Fair Value | |||||||||||||
Outstanding as of December 31, 2024 (1) | 3,240,200 | $ | 28.82 | |||||||||||
| Granted | 1,072,380 | 50.43 | ||||||||||||
Vested (1) | (1,347,614) | 26.69 | ||||||||||||
| Forfeited | (175,365) | 36.92 | ||||||||||||
Outstanding as of December 31, 2025 (1) | 2,789,601 | $ | 37.65 | |||||||||||
(1) As of December 31, 2025 and 2024, restricted stock units vested for which the underlying common stock is yet to be issued are 348,636 and 289,547, respectively.
The fair value of restricted stock units is generally the market price of the Company’s shares on the date of grant. As of December 31, 2025, unrecognized compensation cost of $69,303 is expected to be expensed over a weighted average period of 2.5 years.
The weighted average fair value of restricted stock units granted and the grant date fair value of restricted stock units vested was as follows:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Weighted average fair value of restricted stock units granted | $ | 50.43 | $ | 30.23 | $ | 33.99 | |||||||||||
| Grant date fair value of restricted stock units vested | $ | 39,582 | $ | 42,279 | $ | 33,058 | |||||||||||
Performance-Based Stock Awards
Under the Company’s equity incentive plans, the Company grants performance-based restricted stock units (“PRSUs”) to executive officers and other specified employees. The Company generally grants 40% of each award recipient’s equity grants in the form of PRSUs that cliff vest at the end of a three-year period based on an aggregated revenue target for a three-year period (“PU”). The remaining 60% of each award recipient’s equity grants are PRSUs that are based on market conditions, contingent on the Company’s meeting a total shareholder return relative to a group of peer companies specified under PRSU agreements, and are measured over a three-year performance period (“MU”).
The fair value of each PU is determined based on the market price of one common share on a day prior to the date of grant, and the associated stock compensation expense is calculated on the basis that performance targets at 100% are probable of being achieved. The stock compensation expense for the PUs is recognized on a straight-line basis over the service period, which is through the end of the third year. Over this period, the number of shares that will be issued are adjusted upward or downward based upon the probability of achievement of the performance targets. The final number of shares issued and the related compensation cost recognized as an expense is based on a comparison of the final performance metrics to the specified targets.
The grant date fair value for each MU is determined using a Monte Carlo simulation model and the related stock compensation expense is expensed on a straight-line basis over the vesting period. The stock compensation expense related to the MUs is recognized once the requisite performance period is fulfilled regardless of the extent of the market condition achieved.
The Monte Carlo simulation model simulates a range of possible future stock prices and estimates the probabilities of the potential payouts. This model also incorporates the following ranges of assumptions:
•The historical volatilities are used over the most recent three-year period for the components of the peer group.
•The risk-free interest rate is based on the U.S. Treasury rate assumption commensurate with the three-year performance period.
•Since the plan stipulates that the awards are based upon the TSR of the Company and the components of the peer group, it is assumed that the dividends get reinvested in the issuing entity on a continuous basis.
•The correlation coefficients are used to model the way in which each entity tends to move in relation to each other are based upon the price data used to calculate the historical volatilities.
The fair value of each MU granted to employees is estimated on the date of grant using the following weighted average assumptions:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Dividend yield | — | — | — | ||||||||||||||
| Expected life (years) | 2.54 - 2.86 | 2.87 | 2.87 | ||||||||||||||
| Risk free interest rate for expected life | 3.9% - 4.3% | 4.5% | 4.3% | ||||||||||||||
| Volatility for expected life | 27.3% - 29.8% | 29.9% | 32.9% | ||||||||||||||
PRSU activity under the Company’s stock plans is shown below:
| Revenue-Based PRSUs | Market Condition-Based PRSUs | ||||||||||||||||||||||
| Number | Weighted Average Fair Value | Number | Weighted Average Fair Value | ||||||||||||||||||||
| Outstanding as of December 31, 2024 | 537,944 | $ | 31.02 | 806,519 | $ | 43.06 | |||||||||||||||||
| Granted | 379,685 | 48.31 | 366,915 | 76.08 | |||||||||||||||||||
Adjustment upon final determination of level of performance goal achievement (1) | 31,877 | 34.56 | 139,523 | 44.72 | |||||||||||||||||||
Vested (2) | (229,250) | 34.56 | (435,303) | 44.72 | |||||||||||||||||||
| Forfeited | (23,817) | 38.06 | (35,688) | 56.11 | |||||||||||||||||||
| Outstanding as of December 31, 2025 | 696,439 | $ | 39.20 | 841,966 | $ | 56.31 | |||||||||||||||||
(1) Represents adjustment of shares vested in respect of PUs and MUs granted in 2023 upon achievement of the performance targets for such awards.
(2) Represents PUs and MUs vested for which the underlying common stock was issued subsequent to December 31, 2025.
As of December 31, 2025, unrecognized compensation cost of $41,939 is expected to be expensed over a weighted average period of 1.8 years.
Employee Stock Purchase Plan
On June 21, 2022, at the annual meeting of stockholders of the Company, the Company’s stockholders approved the ExlService Holdings, Inc. 2022 Employee Stock Purchase Plan (the “2022 ESPP”).
The 2022 ESPP allows eligible employees to purchase the Company’s shares of common stock through payroll deductions at a pre-specified discount to the lower of closing price of the Company’s common shares on the date of offering or the last business day of each purchase interval. The dollar amount of shares of common stock that can be purchased under the 2022 ESPP must not exceed 15% of the participating employee’s compensation during the offering period, subject to a cap of $25 per employee per calendar year. The Company has reserved 4,000,000 shares of common stock for issuance under the 2022 ESPP.
The seventh offering period under the 2022 ESPP commenced on July 1, 2025 with a term of six months.
Activity under the Company’s 2022 ESPP is shown below:
Employee Stock Purchase Plan Unit’s | ||||||||||||||
| Number | Total Proceeds Received | |||||||||||||
| Shares available for issuance as of December 31, 2024 | 3,672,744 | |||||||||||||
| Issuance of common stock related to the: | ||||||||||||||
| Fifth offering period | 64,939 | $ | 1,823 | |||||||||||
| Sixth offering period | 97,536 | $ | 3,844 | |||||||||||
| Shares available for issuance as of December 31, 2025 | 3,510,269 | |||||||||||||
| Issuance of common stock related to the seventh offering period made subsequent to December 31, 2025 | 60,139 | $ | 2,297 | |||||||||||
The ESPP is compensatory and results in compensation expense. The fair value of common stock to be issued under the ESPP was determined using the Black-Scholes option pricing model with the following assumptions:
| Seventh offering period of July 1, 2025 to December 31, 2025 | Sixth offering period of January 1, 2025 to June 30, 2025 | Fifth offering period of July 1, 2024 to December 31, 2024 | |||||||||||||||
| Dividend yield | — | — | — | ||||||||||||||
| Expected life (years) | 0.5 | 0.5 | 0.5 | ||||||||||||||
| Risk free interest rate for expected life | 4.2 | % | 4.2 | % | 5.3 | % | |||||||||||
| Volatility for expected life | 31.8 | % | 24.6 | % | 25.5 | % | |||||||||||
| Discount for illiquidity | 7.8 | % | 6.8 | % | 7.4 | % | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.