ExlService fall on 1Q sales miss, weak profit guidance

Shares dropped $3.52, or 14 percent, to $21.27 in Wednesday afternoon trading. Shares have traded between $15.49 and $28.96 in the past 12 months.

For the three months ended March 31, ExlService reported income of $6.8 million, or 23 cents per share, compared with $5.4 million, or 19 cents per share, in the year-ago period.

Analysts polled by Thomson Financial, on average, estimated earnings of 23 cents per share on sales of $51.5 million.

Revenue rose 28 percent to $50.9 million from $39.9 million in the first quarter of last year.

Outsourcing revenue grew 27 percent to $41.7 million in the quarter, while research and analytics revenue grew 17 percent to $5 million. Advisory services revenue was $4.3 million, a 49 percent increase over the 2007 quarter.

Susquehanna Financial Group analyst Samuel Saunders expressed concern about the company's expansion in the Philippines, which contributed $700,000 to operating expenses in the quarter.

"While existing ExlService customers are already expressing interest in contracting services delivered from this geography and management believes the broader footprint will allow the company to compete for incremental business, we are concerned that attention has been distracted from core Indian operations," Saunders wrote in a note to investors.

Total operating expenses rose 30 percent to $13.5 million in the quarter.

ExlService reiterated 2008 profit guidance mostly below Wall Street's expectations. The company forecasts earnings between 80 cents and 85 cents per share on sales of $205 million to $210 million.