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ExlService Holdings Inc (EXLS) Q2 2019 Earnings Call Transcript

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ExlService Holdings Inc (NASDAQ: EXLS)
Q2 2019 Earnings Call
Jul 30, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2019 EXLService Incorporated Earnings Conference Call.

At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference may be recorded.

I would now like to introduce your host for today's conference, Steve Barlow, Vice President, Investor Relations. Sir, please begin.

Steve Barlow -- Vice President

Thank you Noma [Phonetic]. Hello and thanks, everyone, for joining our call today, the second quarter, 2019 financial results. I'm Steve Barrow, EXL Vice President, Investor Relations. With me today in New York are Rohit Kapoor, our Vice Chairman and Chief Executive Officer and Vishal Chhibbar, our Chief Financial Officer.

We hope you've had an opportunity to review our second quarter earnings release we issued this morning. We've also updated our investor fact sheet in the investor relations section of EXL's website.

As you know, some of the matters we'll discuss in this call are forward-looking. Please keep in mind that these forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to general economic conditions. Those factors set forth in today's press release, discussed in the company's periodic reports and other documents filed with the Securities and Exchange Commission from time to time.

EXL's team has no obligation to update the information presented on this call. During the call today, we may reference certain non-GAAP financial measures which we believe provide useful information for investors.

Reconciliation of these measures to GAAP can be found in our press release as well as on the investor fact sheet.

I'll now turn the call up to Rohit Kapoor, EXL Chief Executive Officer. Rohit.

Rohit Kapoor -- CEO

Thank you, Steve. Good morning, everyone, and welcome to our second quarter 2019 earnings call. Our business performed very well in the second quarter on both our top line and bottom line. In the second quarter, we reported revenues of $243.5 million. which represents 15.9% increase year-on-year, slightly outpacing the 15.8% growth in Q1.

Adjusted EBITDA for the quarter was $0.74 cents. Excluding Health Integrated, we achieved an adjusted EPS of $0.80 cents. In the first half of this year, excluding Health Integrated, we achieved organic constant currency revenue growth of 9% and adjusted EPS of a $1.59 cents, which grew at 1%. This has been a great year so far and we are positioned well for a strong second half of the year.

In the second quarter, our Operations Management Business reported revenues of $155.6 million, up 3.4% year-on-year and 4.4% on an organic constant currency basis. Excluding Health Integrated, Operations Management grew by 4.9% on an organic constant currency basis. We had strong performance in insurance and finance and accounting, both of which grew by double-digits.

Analytics had another outstanding quarter. Revenues increased 47.4% year-on-year to $87.7 million.

Organically, analytics grew 16.4% year-on-year on a constant currency basis. We have previously talked about the fact that EXL is one of the few players in the market with a full stack of analytics capabilities coupled with domain expertise, and that combination remains central to our growths dynamic. They have the breadth and depth of service offerings to support large trans-major deals in the data and analytics space across industry verticals.

Our analytics solutions encompass of all verticals of insurance, healthcare and banking, but also includes significant issuer with media, utilities and retail companies. I am pleased that our analytics business has been able to consistently grow over 15% over the past several years without increasing revenue base. Separately, today, I would like to highlight two growth areas, the expansion of our strategic partnerships with large insurance clients and our focus on technology enabled solutions to accelerate our growth in healthcare. Our largest [Indecipherable] insurance continues to grow and develop very nicely. While we are seeing strength across multiple service lines and insurance, I want to highlight our operations management business, which has grown by more than 10% annually since 2017. We now work with over 250 clients across the US, UK, Europe and Australia, which includes many of the top tier insurers in the property, and casualty and life, disability and annuity sectors.

Our market leading positioning and our ability to deliver superior outcomes across the complete value chain allows us to win a variety of new clients globally as well as to deepen our strategic partnerships. We continue to see significant opportunities to penetrate new product lines and business functions within our existing insurance accounts. We currently provide three or more service offerings to 60% of our top 25 insurance clients.

One such example of how we are able to broaden and deepen our partnership is our long-standing relationship with a Fortune 50 insurer. Despite being a mature relationship, we have successfully increased our share of wallet across multiple business lines because of our strong understanding of the client's business. The credibility we have earned by delivering strategic business outcomes and by employing the EXL Digital Intelligence framework. We were recently named the chosen partner for the end-to-end servicing of this client's life insurance business.

We initiated this pursuit more than two years ago, when the client began looking for a partner to manage their life insurance operations. We were able to dislodge significant competition because of our domain expertise and the ability to align with the client's long-term transformational goals. The client recognize the benefit of consolidating multiple vendors to enable the transformation of their end-to-end life insurance operations with a trusted partner such as EXL.

This is a significant win for us, not just due to the size of the engagements, but also because of the significance of the long-term value; we will be able to generate for the client by managing their entire life-loss operations.

During the same period, we also penetrated another key buying center within this client. The CFO's office, we have recently been named their Finance and Accounting Services Transformation Partner for an engagement that includes some of the most complex insurance, finance and accounting work. in the market. Once again, we were able to unseat a large incumbent, based on the strength of our digital capabilities toolkit, and the client's confidence in our ability to deliver complex transformation in an optimal cost-effective manner.

This engagement also underscores the growth trajectory of our insurance F&A practice, and the majority of our service offerings. Moreover, we are currently pursuing multiple large deals across different buying centers within the same client. We are seeing similar traction across many of our large insurance clients, and we expect continued momentum from these accounts.

Overall, our ability to expand into new geographies, product lines and buying centers within existing clients, continues to be a significant source of growth for our insurance business.

The second area I would like to focus on today is our healthcare business. The appointment of Sam Meckey, as our new healthcare leader and the integration of CO health analytics within EXL has allowed us to focus on our growth strategy in healthcare.

The capabilities across clinical and back office operations, data and analytics, and technology platforms such as CareRadius, EXL has a unique value proposition in the healthcare market. Since the CO acquisition, we have now integrated our capabilities to develop technology-enabled solutions that align with key challenges across payers, providers, PBM and life sciences companies.

We are seeing evidence that this combination of our capabilities is resonating in the market through recent dealwins that leverage this targeted approach.

In one example, an emerging and disruptive health insurer was looking for an end-to-end utilization management support, and to establish a single integrated platform that supports all care management needs. EXL introduced a new delivery processes to support the client's overarching need, and delivered a single platform on CareRadius that supports their comprehensive care management workflow.

We were able to leverage successfully a hybrid delivery model of both offshore, non-clinical and clinical resources combined with onshore clinical functions to optimize utilization management costs and provide URAC accredited services. This solution will allow our clients to better. collaborate with their members and care partners to deliver a seamless and best-in-class healthcare experience.

In another example, EXL has been selected to provide advanced natural language processing solutions for a large healthcare provider focused on military and veteran communities. This is a great example of how we are integrating our deep domain expertise in the healthcare space with our advanced analytics capabilities and the robust technological infrastructure that SEAL offers to create a powerful technology-enabled healthcare solution. This engagement marks our first combined SEAL EXL win, leveraging our capabilities from our digital consulting group, our Corporation Health Solutions Team,our CareRadius platform, SEAL and our Advanced Analytics Products team. We won the seal because the client trusted EXL to deliver on a complex problem, and the creativity that we demonstrated in crafting a solution that integrated tightly within the overall business work flow.

This trust is a testament to the relationships we have developed and our ability to orchestrate the full suite of digital capabilities and domain experts to deliver superior outcomes. This win demonstrates the best of the one EXL approach to serve our clients with innovative, secure and scalable solutions.

Finally, in healthcare, the wind down of Health Integrated is proceeding according to plan, and will be substantially complete by the end of the year. We are exiting the business with professionalism and in a responsible manner. Our estimate for Health Intergrated remain unchanged from our previous guidance, and the rest of our core business continues to perform very well.

Looking ahead, our pipeline is robust and continues to evolve beyond traditional operations management and analytics deals. Increasingly, we are orchestrating our domain expertise and digital capabilities to deliver strategic business outcomes across multiple sea street fine [Phonetic] centers, product lines and geographies. We continue to see strong growth in insurance and an increasing share of wallet in existing clients, and we are winning new clients globally. With the transition of Health Integrated, we have been able to focus on our core healthcare strategy and are seeing good growth as a result of recent wins and the development of a strong pipeline.

Finally, analytics business continues to build on its market leadership and is growing nicely with the pipeline being a healthy mix of data management, data-enabled solutions and advanced analytics solutions across business verticals. Overall, we are positioned well for growth in the second half of the year and beyond.

With that, I will hand it over to Vishal .

Vishal Chhibbar -- cfo

Thank you, Rohit. And thanks, everyone, for joining us this morning. I would like to start by providing insight into our financial performance for the second quarter, the first half of 2019, followed by updated guidance. We had a strong quarter with revenues up to $243.5 million, up 16.8% year-over-year on a constant currency basis and delivered accepted decrease of $0.74 cents, up 10.4%, year-over-year. As you are aware, we are winding down the Health Integrated business substantially by December 31.

My discussions of the financial results encompassing revenues and expenses will be excluding the impact of Health Integrated in order to underscore the performance of the core business. I would discuss Health Integrated separately later in my remarks. All revenue growth numbers mentioned hereafter, all are on a content colorful business. We had a strong quarter with revenue of $240.6 million, up 17.3% year-over-year, sequentially, revenues grow 2.3%. For the quarter, revenues from our operations under business are defined by five reportable segments, excluding analytics or $152.7 million, up 4.9% year-over-year. This growth was primarily driven by clients from insurance, finance and accounting, healthcare segments.

Insurance continued double-digit revenue growth performance with 12.6% year-over-year growth. This growth was driven by expansion into existing client relationships and ramp-up of 2018 wins. Finance and accounting for the six consecutive quarters continued its double-digit growth momentum and grew 10.3% year-over-year. This growth was driven by ramp-ups of 2018 wins.

Healthcare showed signs of improved growth rates, with revenues up 4.9% year-over-year, compared to 1.7% in Q1, due to new client wins in 2018 and new business expansion in 2019. Analytics continues to perform strongly, with revenues of $87.9 million, up 47.9% year-over-year, including revenues of $18.8 million from SEAL health analytics.

On our organic basis, analytics grew 6.4% year-over-year. These broad-based organic growth rate were driven by new client wins and expansion in existing client relationships in healthcare, insurance and banking and finance verticals, sequentially, analytics grew 1.3%. Growth margin for the quarter declined 40 basis points year-over-year to 34.2% due to investments in new wins expansions. Adjusted operating margin for the quarter was 14.6%. Our adjusted EBITDA for the quarter was $42.2 million, compared to $38.7 million last year, up 9% year-over-year.

On GAAP tax rate for the quarter was 17.5%, but excluding the impact of discrete items, namely an excess tax benefits that recognized on stock compensation and revaluation of our default taxes. Our normalized tax rate for the quarter was 27.5%. We expect our normalized tax rate for the year to be in the range of 27% to 28%. We had $253 million of cash and short-term investments, and a borrowing of $252.3 million. Excluding Health Integrated, our registered diluted increase for the quarter was $0.80 cents, up 9.6% year-over-year.

Now, moving to our first half performance, excluding Health Integrated. In the first half, our revenues growth, 18.3% year-over-year, to $476.2 million, an increase 9% year-over-year on our organic basis. This growth was broadway, driven by expansion and existing clients relationships and ramp-up of 2018, 2019 wins.

Operation environment grew 5.4% and analytics 50.5% year-over-year. On an organic basis, analytics to 18% year-over-year. Our revenue per employee was $32,400, up 9% year-over-year. Gross margins for a period improved 40 basis points year-over-year to 34.8%, due to operating efficiencies. Adjusted operating margin for the period declined 40 basis points to 14.6%.

This decline was driven by increased investments and digital capabilities, solutions and investment in new deals and ramp-up of new deals. Our adjusted EBITDA for the period was $84.2 million, compared to $74.2 million last year, up 13% year-over-year. Adjusted EPS for the first six months was $1.59, up 12% year-over-year. We generated strong cash flow from operations of $47.7 million in the first half of 2019.

, compared to $13.8 million the same period last year. This increase was due to high EBITDA, better working capital, driven by DSO reduction, to 59 days from 61. During the first half of the year, we spent $22.3 million on capital expenditure and repurchased $438 [Indecipherable] shares for $26.1 million under the share repurchase program.

Now, I would like to discuss the Health Integrated business. Values for Health Integrated were $2.9 million in Q2, compared to $3.5 million in Q2 2018. Health Integrated added dilutive impact of 140 basis points times and adjusted operating margin, leading to in a adjusted EPS loss of $0.06 for the quarter. In addition, we recorded impairment and restructuring charges of $5.6 million for the quarter, which is excluded from our adjusted EPS. As a business files on, we expect revenues of $10 million to $14 million, which was our expectation in April, with $6.8 million of revenue generated in the first half of the year. In terms of adjusted EPS, there has been a 0.14 loss in the first half, and we remain on track to encore a loss of 0.23 to 0.27 from 2019. On July 16th, 8-K filing started that we expect to encore pre-tax impairment and restructure insiders in the range of $8.5 million to $10 million to wind down the Health Integrated business.

Of that amount, we took a charge of $1.2 million in the first quarter and $5.6 million in the second quarter [Indecipherable] to an amount of $6.8 million for the period. The balance charge a $1.7 million to $3.2 million will be taken in the second half of the year. As they exist quarter one time loss, they are excluded from adjusted EPS, and not part of our guidance. Cash expenditure in connection with the wind down, I'll estimate it will be in the range of $7 to $8 million.

Now, moving to our guidance for 2019. We are increasing a revenue guidance to $976 million to $996 million from $969 million to $906 million, based upon our forecast performance and our increased visibility for rest of the year. This includes $10 million to $14 millions of Health Integrated revenues I had mentioned earlier. This guidance represents a year-on-year growth of 11% to 13% on a constant currency basis and 8% to 10 % on our organic basis, excluding Health Integrated. Our adjusted EPS guidance has increased $2.86 to $2.98 from $2.83 to $2.98. Excluding Health Integrated, our adjusted EPS range has increased to $3.13 to $3.21.

As I already mentioned, the business is healthy in our larger segments of insurance, finance and accounting and analytics. In addition ,healthcare generated positive earning growth this year. We have achieved 9% organic revenue growth for the first half of the year, and have met the financial goals we set out to achieve at the beginning of the year.

Now, Rohit and I will be happy to take questions.

Operator -- cfo

Thank you. [Operator Instructions] Our first question comes from Maggie Nolan of William Blair. Your line is open.

Maggie Nolan -- cfo

Thank you. Can you give us an updated outlook for adjusted operating margin this year, but then also, how you're expecting that margin to trend in the medium term with Health Integrated behind you?

Vishal Chhibbar -- cfo

Hi, Maggie. Thanks. As I stated in my prepared remarks, the OPM for first half is 14.6%. In the second half, we expect that the operating margins will expand, and we expect that to be in the range of 15.4% to 15.6%. That's an improvement of maybe 200 basis points in the second half. That would be driven primarily by gross margin expansion due to more productive ramps for first half becoming more productive in our areas of insurance, healthcare and improving utilization in analytics and consulting, coupled with our operating leverage, which you'll get in the second half as our revenue expands.

In terms of long-term trends, we do -- I had said before that our expectation is that we will be for the year with this profile in the second half and up and between 15.1% to 15.2% adjusted operating margins. And we think in the long-term, the expansion of margin will continue, but we're not giving any specific ranges and amounts at this time.

Maggie Nolan -- cfo

Okay. Thanks. And then, so you've obviously had some strong growth within insurance and finance and accounting within ops management, but that has been offset by some weaker verticals. So can you talk through what's been going on maybe in travel and transportation, logistics and the other vertical and how you expect those to perform over time as well?

Vishal Chhibbar -- cfo

Yeah, sure, Maggie. The growth of business actually is pretty broad-based across the industry verticals. Obviously, we report out five different industries and analytics separately.

Rohit Kapoor -- CEO

And there will be periods of time when one particular industry may not grow in a particular order. I think the overall demand environment, as well as our ability to serve clients and grow our business with existing clients, as well as win new clients, remains quite healthy across industry verticals and across geographies. In a number of these industry verticals, we are creating very effective digital solutions that are helpful to the clients to solve some of their biggest and most complex problems. And therefore, the engagement takes a little bit of time. But our expectation is that the growth will be pretty broad-based. Certainly, in insurance and finance and accounting, we've been able to demonstrate that leadership. We're also seeing that traction build up in healthcare and in banking, and our expectation is that the same will be true for travel, transportation and logistics and the other industry verticals.

Maggie Nolan -- CEO

Thank you.

Questions and Answers:

Operator

Thank you. And our next question comes from Mike Camden with Nitim [Phonetic] & Company. Your line is open.

Mike Camden

Thank you. Good morning. Rohit, at a high-level, could you talk about the automation opportunity or a threat? How do you view that in terms of impacting your business over time? What percent of deals are automation today and maybe also the financial profile of these types of deals as you go about scaling them over time?

Rohit Kapoor -- CEO

Yeah, sure [Indecipherable]. So automation, for us, I think in the past couple of years, was certainly something that was a headwind to our growth rate. And we expect -- we saw a headwind of about 2% to 3% of the overall company's growth rate because of automation.

But today, automation is actually turning into a strong opportunity set for us. And what we're finding is with our demonstrated capability of being able to embed digital technologies and digital capabilities into our appliance operations and deliver the digital intelligence to them, we are being sought out by our clients and by our prospects to come in and do this work across different business units, across multiple buying centers and across geographies.

So if you take a look at our pipeline today, the activities and then the clients names and the prospects that are there in the pipeline, the complexion of that pipeline is heavily weighted toward a lot of automation, advanced analytics and digitization.

being part of the agenda. And I think we are in a very strong and fortunate position to have developed this competency and this capability, and we are a very attractive partner to these clients that are seeking these types of transformational changes to be made to their operations. So the way we see it is most of the clients are looking to digitize their existing legacy operations and invest in new digital capabilities to expand their market, and we can actually help them in both sides of that equation. And Mike, just to add that such deals are usually outcome-based or transaction-based and that creates a different margin and outcome profile for us.

Mike Camden

Great. That's helpful color. If I can just ask one quick one on attrition. I think that's probably the highest attrition we've seen in a long time. If you could just comment on what the drivers were, is it Health Integrated or is there something else systemic to the business that is impacting attrition this quarter?

Vishal Chhibbar -- cfo

Yes, Mike, you're right. The attrition number is high. But when we analyzed that attrition number, there are two fundamental reasons for the spike in attrition in Q2. Keep in mind that Q2 typically is a higher attrition quarter for us historically because we give salary increments on the 1st of April, and typically, there is higher attrition in this quarter.

But the two fundamental reasons are, as you rightly pointed out, number one is a reduction in workforce in Health Integrated which had an impact in the second quarter. And the second is some structural changes that we have made to our workforce, particularly as we engage with a lot more automation, digitization and using the right location for providing services to our clients. So a combination of this has basically resulted in a one-time structural change and that has led to the attrition rate going up in Q2.

Mike Camden

Great. Thank you for the answers. Thank you.

Operator

Thank you. And our next question comes from Joseph Foresi with Cantor Fitzgerald. Your line is open.

Joseph Foresi -- Cantor Fitzgerald

Hi. So I wanted to start by asking about Health Integrated and its impact on 2020. So I figured I would give it a shot. The numbers are going to obviously start to face better comps next year, and I just don't want to get ahead of what you think is realistic to build into the model on the top line margin and EPS side. So maybe if you could just give us a little bit of color on what you think that impact of Integrated, not being in the numbers next year would be.

Vishal Chhibbar -- cfo

Sure, Joe. So as we stated in our prepared remarks, we expect the wind down of Health Integrated to be substantially complete by December 31st of this year, and therefore, we really don't expect there to be any revenue that would kick in for the next year.

But please keep in mind that we are doing the wind down of Health Integrated in extremely professional and responsible manner. And we want to make sure that we transition for our clients of Health Integrated, they land in a safe and secure place. So, whatever we need to do to make sure that transition is as smooth as possible and whatever we need to do to make sure that we wind this down in a responsible manner, we're going to do that. But our expectation is that we would be substantially complete from a business standpoint by the end of December this year.

From a margin perspective, certainly, the headwind that we've been facing with Health Integrated would largely, again, get consummated in current year 2019.

There are some wind down costs, which we have clearly specified in our 8-K that we expect to incur. $7 million to $8 million of these wind down costs are cash costs and some of that costs will actually take place in 2020 because of those costs only being possible to be incurred once the business is completely shut down.

So, we don't really expect there to be any material impact in 2020 as well. However, there may be some cash expense that does get spillover from any 2019 to 2020.

Joseph Foresi -- Cantor Fitzgerald

Okay. And then I think you said in your prepared remarks that there is going to be multiple, where you're talking about multiple large deals. And I wonder if you could talk a little bit more about what those deals look like versus what the deals look like before. I know Mike asked about attrition, where you need to be hiring for those deals. Is there rebadging associated with them and how they flow through to numbers as we look at next year? Thanks.

Vishal Chhibbar -- cfo

Sure. So, first of all, we are seeing that our pipeline is increased in value and it's strong, and that's because we're seeing some larger deals that enter into the pipeline. As our clients gain confidence in EXL providing digitization to them, the size of the views is actually expanding and actually the work complexity is becoming a lot better where we can add a lot more value to these clients. So we're seeing that trend take place. We're also winning a number of deals, and in the past quarters, we've been able to successfully win a number of these deals. I just gave examples of two such deals that we won in healthcare and a couple of expansions that we saw in the insurance market in my prepared remarks. We're also seeing that same trend play out in some of the other verticals. We're also seeing larger sized deals in analytics, where that data play and the data management play is allowing us to start new client relationships on a much bigger size and scale than what we did previously.

So frankly, we think that the demand environment is healthy, our capability set is resonating very well in the marketplace. On the attrition question, yes, we had a spike in Q2, but you would notice that we've also added to our headcount quite significantly in Q2, and that's in response to some of the deals that we have won and to be able to manage the growth expectations from these new ideas that we won.

So all in all, we feel that we are in a very good place as far as growth of our business is concerned. And this trend is playing out very favorably for us.

Joseph Foresi -- Cantor Fitzgerald

Thank you.

Operator

Thank you. And our next question comes from Vincent Colicchio of Barrington Research. Your line is open. of sentiment.

Vincent A. Colicchio -- Barrington Research -- managing director

Yes, Rohit, I'm curious, are any of the clients added in the quarter -- do any of them have the potential to become top 10 clients?

Rohit Kapoor -- CEO

So Vincent, we've added a number of new clients in the past several quarters that have a potential to become a top 10 client. I think we will see and see how this thing develops. Certainly, some of the new clients want to test us out in delivering the digital capabilities to them. Our existing clients have already seen that, and therefore, they're a lot more confident about expanding their work with us in a much more accelerated manner.

So, I think we will see the opportunity set both from existing clients as well as from new clients. In this particular quarter, we've certainly seen a number of deals come through. I don't know if there's any that's going to be in the top 10 going forward, but I think certainly over the last two or three quarters, we've signed several deals where these clients. will have opportunities to be on top 10 client for us .

Vincent A. Colicchio -- Barrington Research -- managing director

And curious, the consulting business, which has been trending in a better direction, does that continue to perform well? And what's the outlook for the rest of the year?

Rohit Kapoor -- CEO

You, the consulting business, as you know, is always going to be based on discretionary spending and it's going to be something which is going to be volatile in terms of how that progresses. What we are seeing is because of new regulatory changes that are being brought about, particularly around the management of data. We saw that with GDPR, we see that with the CCPA in California and we're seeing that across multiple client situations.

So we're seeing a lot of opportunity in terms of helping our clients deal with some of these regulatory challenges. We're also seeing a lot of opportunity and consulting around robotics as well as digital. And that's something which is playing to our strength. And finally, we do see consulting engagements as a precursor to some of the large deals that we've got in the pipeline. And therefore, as we engage with clients on these large deal pursuits and we develop creative solutions for them to be able to solve some of their more complex challenges, that's playing out nicely for us. So all in all, I think there's adequate opportunity for us to be able to play out here and be able to leverage our skill sets.

Vincent A. Colicchio -- Barrington Research -- managing director

Thanks for answering my questions.

Operator

Thank you. And our next question comes from Bryan Bergin of Cowen. Your line is open.

Bryan C. Bergin -- Cowen and Company -- Analyst

Hi. Thank you. Wanted to ask on SEAL. Within the quarter to the $18.8 million revenue contribution, do that come in line with your expectations? And then just broader analytics growth outlook post this year integration on a low to overall base, how should we be thinking about that going forward?

Vishal Chhibbar -- cfo

Yeah. Hi, Bryan. The SEAL revenue for us at $18.8 million for the quarter was a bit soft. And you know. But keep in mind that the payment integrity revenue portion of the business within SEAL is usually lower in the first half of the year as compared to the second half of the year. And so, we think, also the SEAL revenue is outcome-based, so it can be a lot more variable. We think that for the full year the SEAL revenues are going to play out fine. And the place where we are most heartened with is the new deal that we just announced that we won, which was leveraging the capabilities of SEAL and combining that with the advanced analytics capabilities of EXL and bringing together a very creative solution and a very nice win for us in the healthcare space.

So I think overall, in summary, we are pleased with the SEAL's performance and the outlook for that business and the demand for future years continues to remain very good.

On your broader question on analytics, we've shared in the past that we would expect our analytics business to grow in the mid teens, and combined with SEA, our expectation is that the analytics business will grow at about 12% to 15% going forward. So that's something which is going to be a strong double-digit growth for us and is clearly going to be a differentiator as compared to many of our peers. And we think that this is going to be an advantage for us going forward.

Bryan C. Bergin -- Cowen and Company -- Analyst

Okay, thank you for that. And then on healthcare, so you have a new leader in place. It looks like the operations management business of EXL Health Integrated is starting to recover. Can you comment on what's being done differently going forward in that business and how you see normalized growth profile in that part of the business? Thanks.

Vishal Chhibbar -- cfo

Sure. So in healthcare, we're really delighted that Sam Meckey is leading all of our healthcare business today. And Sam has got a tremendous amount of experience and knowledge about the healthcare business and has operated a business at scale. Fundamentally, what we are doing out there is creating technology-enabled healthcare solutions for our clients, which is what is the need of our today.

And we've been able to expand our client footprint to payers, providers, PBM and life sciences companies. So that's given us a much larger footprint to plan. We've also chosen some very targeted and specific service offerings and solutions that we are bringing to market. And when you combine the data analytics capabilities that we have, the CareRadius technology platform that we've got, the strong onshore and offshore clinical expertise that we've got, these are very, very powerful and unique differentiated healthcare solutions that are there.

So that's something which was always our core thesis for building up our healthcare business, and now are the building blocks are in place. And we think that this is working very well. And some of the early client wins that we've had, certainly seems to validate that strategy.

Bryan C. Bergin -- Cowen and Company -- Analyst

Okay, thank you very much.

Operator

Thank you. And our next question comes from Tony Jane of JP Morgan. Your line is open.

Tony Jane -- J.P. Morgan

Yeah. Hey, thanks for taking my question. So it seems like based on your comments, healthcare without Health Integrated is doing well, but travel, transportation and logistics and other verticals continue to be weak. Can you talk about what's driving weakness there and what do you expect for those verticals going forward?

Vishal Chhibbar -- cfo

Hi, Tony. I would say that our business is not performing well throughout. There are areas and pockets of weakness, which is in utilities. The utilities business for u, as you know, is largely UK base. And in the UK, there's been a fair amount of activity in the utilities industry. And there we are driving a lot more automation and a lot more digitisation, and that's resulting in a lower headcount and a lower revenue stream associated with that business. So this is something which you're going to find that's going to happen from time to time. That's when we introduce greater amount of automation and we have a brilliant amount of digitization, we might be able to create a greater amount of efficiency, and therefore, there may be periods of time when work will actually shrink. And that's something which you're seeing it. But when you take a look at it on a broader time frame and you take a look at what that capability does with other clients in the same industry vertical, it basically attracts more new clients to come toward us because we can actually deliver a greater amount of benefits to them.

Tony Jane -- J.P. Morgan

Got it. Thank you. And what do you expect for Health Integrated impact on margins this year? I know you said Health Integrated.

Vishal Chhibbar -- cfo

Yeah. So we expect the Health Integrated to be a headwind of 140 basis points to 160 basis points. In the first half, that impact was about 140 basis points.

Tony Jane -- J.P. Morgan

Got it. Thank you.

Operator

Thank you. [Operator Instructions] And next question comes from Edward Caso of Wells Fargo. Your line is open.

Justin Donati -- Wells Fargo -- Analyst

Hi. This is Justin Donati on for Ed. Thank you for taking my question. As you talked about the analytics business continuing to grow faster, can you talk about how much that could incrementally add to the margins going forward?

Vishal Chhibbar -- cfo

Sure, Justin. So right now, we are focusing on growing that business as quickly as possible. The current margins of our analytics business are about the same as the corporate average for us. We do think that as we go in to more advanced analytics capabilities as well as we start to average our proprietary data sets and get into data management, that's going to give us an opportunity to be able to expand margins within analytics. So that's something which I think is a longer term trend that will play out. But for right now, I think we are focusing on growing this business as quickly as we can and establishing very, very strong relationships with our clients and developing new capabilities in the space. And Justin, as I mentioned that the margin for first time gross margins for analytics business was 34.6% in Q2, we do expect that to improve in the second half, and that's one of the drivers for European margin expansion as we get a better utilization and productivity in analytics business.

Justin Donati -- Wells Fargo -- Analyst

Great. Thank you.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Steve Barlow -- Vice President

Rohit Kapoor -- CEO

Vishal Chhibbar -- cfo

Maggie Nolan

Mike Camden

Joseph Foresi -- Cantor Fitzgerald

Vincent A. Colicchio -- Barrington Research -- managing director

Bryan C. Bergin -- Cowen and Company -- Analyst

Tony Jane -- J.P. Morgan

Justin Donati -- Wells Fargo -- Analyst


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