UPDATE: Oppenheimer Downgrades ExlService on Slashed Estimates as Biggest Customer Terminates Contract

In a report published Tuesday, Oppenheimer analyst Manish Hemrajani downgraded the rating on ExlService (NASDAQ: EXLS) from Outperform to Perform, and removed the $34.00 price target.

In the report, Oppenheimer noted, “In an 8K filing late yesterday (11/4), EXLS announced the termination of contract by its largest customer Travelers, which accounted for 10.1% of EXL's revenue in 2012 ($44.6M) and 9.6% in 3Q13, due to a confidentiality breach. EXL said that while there would be no material impact to 2013 results, 2014 top-line would be impacted by $14-28M with the customer transition taking up to 18 months. In addition to the revenue impact, utilization rates, and hence margins, and deal win rates could be adversely impacted along with some further elongation of sales cycles. We move to the sideline and downgrade to Perform and remove our $34 PT on this material event and resultant disruption and will reassess once the client transition is well under way.”

ExlService closed on Monday at $29.07.