<PAGE>   1

================================================================================


                                    FORM 10-Q

                                ----------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    FOR THE QUARTERLY PERIOD ENDED  MARCH 31, 2001
                                    --------------

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    FOR THE TRANSITION PERIOD FROM
                                    --------------------------------------------

    COMMISSION FILE NUMBER   0-30035
                           -----------


                                   EXULT, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


              DELAWARE                     8742                   33-0831076
(STATE OR OTHER JURISDICTION OF      (PRIMARY STANDARD        (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)         INDUSTRIAL           IDENTIFICATION NO.)
                                  CLASSIFICATION NUMBER)


                            4 PARK PLAZA, SUITE 1000
                            IRVINE, CALIFORNIA 92614
                                 (949) 250-8002
     (ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                  OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)


                                 NOT APPLICABLE
--------------------------------------------------------------------------------
              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                         IF CHANGED SINCE LAST REPORT)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

YES  X     NO
    ---        ---


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     INDICATE THE NUMBER OF SHARES OUTSTANDING AND EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

            CLASS                              OUTSTANDING AT APRIL 20, 2001
        ------------                           -----------------------------
        COMMON STOCK                                    91,665,779


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<PAGE>   2

                         PART I. FINANCIAL INFORMATION.

ITEM 1. FINANCIAL STATEMENTS.

                                   EXULT, INC.

                           CONSOLIDATED BALANCE SHEETS
                 (amounts in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                       DECEMBER 31,    MARCH 31,
                                                           2000          2001
                                                       ------------    ---------
                                                                      (unaudited)
                    ASSETS
<S>                                                     <C>            <C>
Current Assets:
  Cash and cash equivalents ........................    $  94,890      $  85,389
  Investments ......................................        5,000          2,148
  Accounts receivable ..............................       17,713         15,058
  Other receivables ................................        2,418          1,779
  Prepaid expenses and other current assets ........        5,764          6,317
                                                        ---------      ---------
         Total Current Assets ......................      125,785        110,691
Property and equipment, net ........................       24,945         27,602
Intangibles assets, net ............................       36,447         34,938
Other assets .......................................       17,004         16,440
                                                        ---------      ---------
         Total Assets ..............................    $ 204,181      $ 189,671
                                                        =========      =========

        LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable .................................    $   3,475      $   5,511
  Accrued liabilities ..............................       24,858         29,897
  Current portion of long-term obligations .........        4,419          4,388
                                                        ---------      ---------
         Total Current Liabilities .................       32,752         39,796
                                                        ---------      ---------

Commitments and Contingencies

Stockholders' Equity:
  Common stock, $0.0001 par value;
    Authorized -- 500,000 shares;
    Issued and outstanding -- 90,956 at
      December 31, 2000 and 91,606 at March 31, 2001            9              9
  Additional paid-in capital .......................      284,393        285,268
  Deferred compensation ............................       (2,757)        (2,471)
  Cumulative translation adjustments ...............           --           (408)
  Accumulated deficit ..............................     (110,216)      (132,523)
                                                        ---------      ---------
         Total Stockholders' Equity ................      171,429        149,875
                                                        ---------      ---------
         Total Liabilities and Stockholders' Equity     $ 204,181      $ 189,671
                                                        =========      =========
</TABLE>

              The accompanying notes are an integral part of these
                          consolidated balance sheets.

                                       1

<PAGE>   3

                                   EXULT, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (amounts in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED
                                                          -----------------------
                                                          MARCH 31,     MARCH 31,
                                                            2000          2001
                                                          --------      --------
                                                                (unaudited)
<S>                                                       <C>           <C>
Revenue .............................................     $  5,577      $ 43,464
Cost of revenue .....................................        5,750        54,855
                                                          --------      --------
Gross loss ..........................................         (173)      (11,391)
                                                          --------      --------
Expenses:
  Product development ...............................          804         2,169
  Selling, general and administrative ...............        9,030         6,262
  Depreciation and amortization .....................        1,687         3,562
                                                          --------      --------
     Total expenses .................................       11,521        11,993
                                                          --------      --------
Loss from operations ................................      (11,694)      (23,384)
  Interest income, net ..............................          792         1,077
                                                          --------      --------
Net loss ............................................     $(10,902)     $(22,307)
                                                          ========      ========

Net loss per common share:
  Basic and diluted .................................     $  (1.16)     $  (0.24)
                                                          ========      ========
Weighted average number of common shares outstanding:
    Basic and diluted ...............................        9,434        91,186
                                                          ========      ========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       2

<PAGE>   4

                                   EXULT, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (amounts in thousands)

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED
                                                      -----------------------
                                                      MARCH 31,     MARCH 31,
                                                        2000          2001
                                                      --------      --------
                                                            (unaudited)

<S>                                                   <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ......................................     $(10,902)     $(22,307)
  Adjustments to reconcile net loss to net cash
    used in operating activities --
      Depreciation and amortization .............        1,687         4,019
  Changes in operating assets and liabilities --
    Investments .................................       (5,000)        2,852
    Receivables .................................       (2,608)        3,294
    Prepaid expenses and other current assets ...         (860)         (553)
    Other assets ................................         (305)          564
    Accounts payable ............................          231         2,036
    Accrued liabilities .........................        6,574         5,039
                                                      --------      --------
        Net cash used in operating activities ...      (11,183)       (5,056)
                                                      --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment ............       (3,566)       (5,141)
                                                      --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of preferred stock .....       63,966            --
  Proceeds from issuance of common stock ........          299           875
  Payments on long-term obligations .............          (14)          (31)
                                                      --------      --------
        Net cash provided by financing activities       64,251           844
                                                      --------      --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH .........           --          (148)
                                                      --------      --------

Net increase in cash and cash equivalents .......       49,502        (9,501)
Cash and cash equivalents, beginning of period ..       39,199        94,890
                                                      --------      --------
Cash and cash equivalents, end of period ........     $ 88,701      $ 85,389
                                                      ========      ========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest ....................................     $      6      $      9
                                                      ========      ========
    Income taxes ................................     $     --      $    152
                                                      ========      ========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       3

<PAGE>   5

                                   EXULT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     The unaudited consolidated financial statements of Exult, Inc. and
subsidiaries ("Exult" or the "Company") have been prepared by Exult's management
and reflect all adjustments that, in the opinion of management, are necessary
for a fair presentation of the interim periods presented. The results of
operations for the three months ended March 31, 2001 are not necessarily
indicative of the results to be expected for any subsequent periods or for the
entire year ending December 31, 2001. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
under the Securities and Exchange Commission's rules and regulations. A
consolidated statement of comprehensive loss has not been presented because the
components of comprehensive loss are not material.

     These unaudited consolidated financial statements and notes included herein
should be read in conjunction with Exult's audited consolidated financial
statements and notes for the year ended December 31, 2000 which were included in
our Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Certain amounts in the 2000 financial statements have been
reclassifed to conform with the 2001 presentation.

Segment Information and Concentration of Revenue/Credit Risk

     Management has determined that the Company operates within a single
operating segment. For the three months ended March 31, 2000 and 2001, 91% and
72%, respectively, of the Company's revenue has been derived from within the
United States with the balance being derived primarily from within the United
Kingdom.

     During the three months ended March 31, 2000, two of the Company's process
management clients accounted for approximately 20% and 19% of the Company's
total revenue. Two different clients accounted for approximately 59% and 27%,
respectively, of the Company's total revenue during the three months ended March
31, 2001. No other client accounted for more than 10% of total revenue in the
2000 and 2001 periods. The Company believes that the resulting concentration of
credit risk in our receivables, with respect to our limited client base, is
substantially mitigated by our credit evaluation process. To date, our bad debt
write-offs have not been significant.

2. CAPITAL TRANSACTIONS

     In February 2000, the Company issued 6,885,480 shares of Series D
Convertible Preferred Stock in a private placement to institutional investors
for net consideration of approximately $59,970,000. In addition, BP
International Limited exercised preemptive rights to purchase 385,805 shares of
Series C Preferred Stock for net consideration of approximately $3,966,000.

     In April 2000, BP International Limited exercised certain warrants to
acquire 667,844 shares of Series C Convertible Preferred Stock and 3,339,220
shares of Common Stock for net consideration of approximately $7,192,000 and
$5,242,000, respectively.

     In June 2000, Exult completed its initial public offering of its Common
Stock issuing 6,000,000 shares. In July 2000, Exult issued an additional 300,000
shares of Common Stock in connection with the underwriters' exercise of their
over-allotment option. The Company received net consideration after the
underwriting discount and offering costs of approximately $56,669,000 for the
issuance of the 6,300,000 shares. Concurrent with the consummation of the
initial public offering, all of the outstanding shares of the Company's
Preferred Stock were converted into 65,484,785 shares of Common Stock.

     On October 12, 2000, Exult and Bank of America signed a non-binding
Memorandum of Understanding providing the framework for a broad business
relationship, including the provision of business process management services to
Bank of America by Exult. The business relationship and process management
services transaction were subject to ongoing negotiations and the Memorandum of
Understanding established a 60-day time period to reach a definitive agreement.
Upon executing the Memorandum of Understanding, Bank of America acquired
5,000,000 investment units, each unit consisting of one share of Exult Common
Stock and a warrant to buy one additional share of Exult Common Stock. Each
warrant is exercisable for three years at $11.00 per share. The purchase price
for the 5,000,000 units was $55,000,000, of which $11,000,000 was paid in cash
and the remainder in prepaid rent and intangible assets. The intangible assets
are being amortized as a reduction of revenue over the life of the outsourcing
agreement. In connection with the issuance of the warrants, the Company incurred
a charge of $29,900,000 during the fourth quarter of 2000.


                                       4

<PAGE>   6

                                   EXULT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)

3. INCOME TAXES

     The Company did not record a tax provision for either of the three-month
periods ended March 31, 2000 or 2001, as it had incurred only net operating
losses as of these dates. A full valuation allowance is provided against the tax
benefit generated by the net operating losses because of the uncertainty of
realizing the deferred tax assets associated therewith.

4. NET LOSS PER SHARE

     The net loss per share, basic and diluted, for the three-month periods
ended March 31, 2000 and 2001, was computed using the weighted average number of
shares of Common Stock outstanding during the respective periods. The impact of
all outstanding shares of Preferred Stock convertible into Common Stock, if any
during the respective periods, warrants to purchase Common Stock or Preferred
Stock convertible into Common Stock, and stock options to purchase Common Stock
were excluded from the respective computations as their impact is antidilutive.


                                       5

<PAGE>   7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

     This report contains forward-looking statements that are based on our
current expectations, assumptions, estimates and projections about our company
and our industry. When used in this report, the words "may," "will," "should,"
"predict," "continue," "plans," "expects," "anticipates," "estimates," "intends"
and similar expressions are intended to identify forward-looking statements.
These statements include, but are not limited to, statements under the captions
"Business Overview," "Risk Factors," "Results of Operations" and elsewhere in
this report concerning, among other things, our goals and strategies, the
anticipated scope and result of our business operations, and our ability to:

     o    complete development of our service delivery infrastructure;

     o    obtain new comprehensive process management contracts;

     o    successfully implement our comprehensive Exult eHRSM solutions for our
          existing clients and scale our service offering across a broad client
          base;

     o    establish new client service centers;

     o    increase revenue, control expenditures, recognize economies of scale
          and achieve profitability; and

     o    expand our sales and marketing capabilities and our technology and
          general operating infrastructure.

     These forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from those projected. Exult
has not yet proven its business model and must invest substantial resources to
build its service capabilities. It is not certain that the Exult eHR solution
will deliver the results anticipated. The market in which Exult operates is
competitive and other service providers may be more effective at selling or
delivering human resources process management services. These and other risks
and uncertainties are described in this report under the heading "Risk Factors"
and in other filings made from time to time by Exult with the Securities and
Exchange Commission. The cautionary statements made in this report should be
read as being applicable to all related forward-looking statements wherever they
appear in this report. These statements are only predictions. We cannot
guarantee future results, levels of activity, performance or achievements. We
assume no obligation to publicly update or revise these forward-looking
statements for any reason, or to update the reasons actual results could differ
materially from those anticipated in these forward-looking statements, even if
new information becomes available in the future.

                                BUSINESS OVERVIEW

OVERVIEW

     Our mission is to provide comprehensive business process management
solutions that enable Global 500 corporations to increase the productivity of
their human capital, convert HR spending to a variable cost basis and reduce the
overall cost of HR management and administration. We do this through multiple
delivery vehicles:

     o our Exult eHR solution including our myHRSM web-enabled applications;

     o shared client service centers; and

     o best practices expertise and expert process consulting capabilities.

     These vehicles enable us to provide scalable, web-based service delivery
capabilities across many HR business processes. myHR includes our web-based
functional applications and browser system through which our clients' personnel
can access their HR information systems and navigate through those systems to
find information and process transactions. Our shared client service centers
handle our clients' HR transaction and contact center requirements from a
leveragable multi-client platform, and our best practices and process consulting
expertise enables us to improve efficiency and effectiveness through process
improvement. We deploy these capabilities to handle the transactional and
administrative elements of our clients' HR processes, freeing our clients' HR
departments to add value through focus on strategy and policy matters that are
important to their businesses. In addition, we also manage certain finance and
administration processes, including disbursements and reconciliations, that have
historically been integrated with various client HR functions. These additional
services are intended to streamline clients' back office transaction processing.
As of March 31, 2001, we have five HR business process management clients, three
of which also receive certain finance and administration process management
services from us.

     We maintain three principal client service centers, in Glasgow, Charlotte,
and the Houston area, and we are operating a fourth center in the Los Angeles
area in connection with our contract with BP Amoco p.l.c. and related entities.
These centers house the personnel and systems we use to manage our clients'
transaction, production and contact center requirements, including customer


                                       6

<PAGE>   8

service representatives and production operations staff for functions such as
payroll processing, benefits administration, training administration, and IT
support and maintenance. All of these centers are designed to give us
efficiencies and economies of scale by leveraging the functionality, staff and
technology of centralized processes and services across many business units for
multiple clients.

     Our Exult eHR solution includes the services of third-party vendors in two
important ways. First, our process management contracts may include as "in
scope" certain services being provided to the client by third parties. At the
time we become responsible for a client's HR organization, we generally assume
responsibility for administration of these vendors, either by novation of their
contracts to us or through binding contractual obligations directly with the
client. Depending upon a number of factors, including the type of services
involved, terms of each vendor's contract, and client preferences, over time we
may retain the vendor as a service provider to the client within the scope of
our contract and under our management, replace the vendor with a new third-party
provider under our management, or take over provision of the services ourselves.
In addition to management of third-party vendors who had preexisting
relationships with our clients, we also utilize selected third parties to
complement our integrated service offering with specialized HR services that can
be more effectively and efficiently handled by third-party vendors and
subcontractors than by internal resources.

     We commenced operations in October 1998. From our inception through
November 1999, our activities primarily related to the pursuit of our initial
contracts and the development of the infrastructure to support comprehensive HR
business process management. In November 1999, we acquired the business of Gunn
Partners, Inc., a business process improvement consulting company with
operations in the United States and Europe. Gunn Partners has been consulting
with Global 500 corporations since 1991 on administrative staff functions such
as human resources and finance and accounting, as well as procurement,
information technology, and customer service. Gunn Partners generates revenue
through consulting activities, provides strategic assistance in structuring our
client relationships, assists in cross-marketing, and provides us with a service
offering for potential clients that are not yet ready for our full Exult eHR
solution.

     In December 1999, we entered into a seven-year Framework Agreement with BP
Amoco p.l.c. to create a comprehensive eHR services organization and provide a
broad range of human resources management services to bp and its affiliates. In
January 2000, we entered into a three-year agreement with Pactiv Corporation,
formerly known as Tenneco Packaging, under which we assumed management and
accountability for Pactiv's North American payroll and accounts payable
processes. In January 2000, we entered into a three-year agreement with Tenneco
Automotive under which we assumed management and accountability for Tenneco's
North American payroll and accounts payable processes. In August 2000, we
entered into a seven-year Master Services Agreement with Unisys Corporation to
provide human resources processes and vendor management services. In November
2000, the Unisys contract was expanded to include training administration
services. In November 2000, we entered into a ten-year Master Services Agreement
with Bank of America Corporation to provide human resources and accounts payable
services.

     Our primary source of revenue is fees we earn for providing our HR business
process management services under long-term contracts. We recognize revenue
under these contracts as the services are rendered. A minor source of additional
revenue is the consulting services performed by Gunn Partners. We recognize
revenue for these services over the period in which services are performed. As
part of our contracts to provide the Exult eHR solution, we are obligated to
manage our clients' relationships with third-party vendors. In most cases, we
expect to become responsible for the vendor contracts and we include in revenue
all charges for services that we are contractually obligated to provide to our
clients, whether we provide these services directly using our own personnel or
through third-party vendors. We will pay the costs of these services to the
third-party vendors, and such costs will be included in our cost of revenue.

     To date, we have typically generated leads for potential process management
clients through our management, existing consulting relationships, board of
directors, third-party consultants, contact with key executives at Global 500
companies or direct communication from such companies after reading articles,
press releases or visiting our web site. After initial discussions with and
qualification of the potential client, we typically enter into a letter of
intent with the client which establishes a framework for due diligence and
contract negotiations. Our letter of intent may provide for reimbursement of
some or all of our direct and indirect costs incurred during this process. To
the extent such costs are guaranteed by the letter of intent regardless of
whether a contract is ultimately signed, reimbursements of costs are included in
revenue as the costs are incurred. To the extent reimbursements are guaranteed
only if a contract is not signed, such amounts are included in revenue once
invoiced and collection is reasonably assured. All direct and indirect costs
arising from the due diligence and contract negotiation process are expensed as
incurred.

     We incurred a net loss in 1999 and 2000 and expect to incur a net loss in
2001 and potentially in future years. In the next two years, we anticipate
making large expenditures to build additional client service centers, to expand
our sales and marketing capabilities, and to fund the development and expansion
of our technology and general operating infrastructures. To the extent that
revenue does not increase at a rate commensurate with our increasing costs and
expenditures, our future operating results and liquidity could be materially and
adversely affected.


                                       7

<PAGE>   9

                                  RISK FACTORS

     The following risks affect our business and the prospects for investments
in our Common Stock. Additional risks and uncertainties not currently known to
us or that we currently believe are not important may also impair our business.
Any of the following risks could adversely affect our business, financial
condition or results of operations.

 WE HAVE A LIMITED OPERATING HISTORY AND UNPROVEN BUSINESS MODEL.

     We entered into our first process management contract in December 1999. We
have five clients under contract for our HR business process management
services, and we are still implementing the largest three of our process
management contracts. While we are ahead of our planned rate of client
acquisition and overall transition, our business model is unproven. Our success
depends on our ability to develop and implement a high quality, cost-effective
services offering that is scalable across a broad client base, operate it
profitably, produce satisfactory results for our clients and attract new
clients. While we have met our development objectives to date and our current
clients have perceived our services as beneficial, we have not been in operation
long enough to judge whether we can accomplish these objectives. Accordingly,
our revenue and income potential and future operating results are uncertain.

OUR SUCCESS DEPENDS LARGELY UPON OUR CONTRACTS WITH BANK OF AMERICA, BP, UNISYS
AND OTHER EARLY CONTRACTS, WHICH MAY NOT YIELD THE RESULTS WE EXPECT.

     Bank of America, bp and Unisys are the first clients for which we are
offering a comprehensive HR process management solution, and we anticipate
revenue from each of these contracts to represent a substantial portion of our
revenue through 2001 and possibly in future periods. These contracts are still
relatively new and our service offering is not yet fully implemented for these
clients. As such, we believe our ability to secure future clients and revenues
will be largely dependent upon our ability to perform and achieve the contracted
service levels and cost savings for these clients. Any of these contracts can be
terminated for material breach or significant and repeated performance failures,
or in certain instances for convenience upon required notice and payment of
specified early termination penalties that may not cover our termination costs
and are not intended to replace profits we might have earned. In addition, our
contracts generally permit our clients to impose financial penalties against us
for certain specified material performance failures. If any of these clients
were to substantially reduce or stop using our services, or if we experience
significant, repeated performance failures, our reputation and future revenues
would be seriously impaired. We expect to face similar risks with other
significant clients until our business model and service offering are more
firmly established.

     Although our arrangement with bp contemplates that we manage their HR
processes worldwide, and we have a first right to provide human resources
management services to bp in each country in which they have operations, our
current contract covers only the United Kingdom and the United States. bp is
requesting the expansion of our services into additional countries where they
operate, and we anticipate that selected processes and countries will be
included later in 2001 and 2002. However, this expansion of our performance
capabilities beyond the US and UK will require investment of additional
resources, will be executed in stages, and may be delayed.

OUR EXULT eHR SOLUTION IS EVOLVING AND REQUIRES ONGOING DEVELOPMENT.

     We are still developing our service delivery infrastructure, and our
ability to continue to deliver and expand our broad process management solution
depends upon continued success in assembling and managing our own systems and
capabilities and third-party vendors into an integrated and efficient delivery
platform. Our clients use disparate information systems and operating methods,
and transitioning their processes to our operating platforms requires
significant technology and process integration. We often must adapt or develop
new systems and processes to accommodate various clients. Clients' employees may
access and utilize our web-enabled Exult eHR solution and systems through
interfaces that require significant development and integration of many
independent programs and complex functions, as well as ongoing revision and
adaptation. If we fail to develop a client's service delivery infrastructure in
accordance with the specifications and delivery milestones agreed upon, or if we
are unable to complete development of scalable systems and achieve the
functionality we expect, our ability to deliver our services and achieve our
business objectives in general could be seriously impeded.


                                       8

<PAGE>   10

WE MUST ANTICIPATE AND CONFORM TO THE NEW AND EVOLVING MARKET IN WHICH WE
OPERATE.

     Our business model is based on integrated management of a variety of client
HR and finance processes. Based on client reaction to date, we believe there is
significant market demand for this service, but because the market is new, our
ability to satisfy that demand depends upon our ability to anticipate market
developments and maintain our market leadership position. If we are unable to
react quickly to changes in the market, if the market fails to develop in the
ways we expect, or if our services do not achieve additional market acceptance,
then we are unlikely to remain the market leader or become or remain profitable.

CAPACITY CONSTRAINTS AND THE LENGTH OF OUR NEW CLIENT SALES AND INTEGRATION
CYCLES WILL LIMIT OUR REVENUE GROWTH.

     We expect most of our future revenue growth in 2002 and beyond to come from
new client engagements. However, because we are a new company and are still
creating the components of our service offering, we plan to limit the number of
additional client engagements we accept over the near term. This strategy may
negatively affect our revenue growth until we have developed our solution to the
point that it can be extended more rapidly across a greater number of clients.

     Our client contracts involve significant commitments and cannot be made
without a lengthy, mutual due diligence process during which we identify the
potential client's service needs and costs, and our ability to meet those needs
and provide specified cost savings. We must devote significant management time
and other resources to each due diligence process over a period of four to six
months or more, and we can conduct at most only a few of these due diligence
undertakings at one time. This lengthy due diligence process limits our revenue
growth, and we have invested significant time in some potential client
relationships that have not resulted in contracts. It is possible that any
potential client due diligence process could result in a decision by us or the
potential client not to enter into a contract after we have made significant
investments of time and resources.

     After a new client contract is signed, we typically convert the client's HR
processes to our systems and infrastructure in stages. This transition period
can take from six months to over one year and may involve unanticipated
difficulties and delays. Our pricing model involves guaranteed reductions in the
client's controllable and direct HR costs upon transition completion, and we
cannot realize the full efficiencies of providing services to the client through
our infrastructure until this transition is complete. Therefore, any increase in
our earnings that could be expected from our agreements can be delayed for at
least several months after the contract is signed, and it could take a
significant amount of time for our agreements to contribute significantly to
profits or cash flow. The transition of HR processes under our existing
contracts with bp, Unisys, and Bank of America to our systems and infrastructure
is not scheduled to be complete until various times later in 2001, and could be
delayed. We attempt to negotiate long-term contracts in order to give us time to
complete the transition and earn a profit, but if implementation of our service
model is delayed, or if we do not meet our service commitments under any
particular contract and the client terminates our engagement early as a result,
we might experience no return on our substantial investment of time and
resources in that client.

WE EXPECT TO INCUR SIGNIFICANT NET OPERATING LOSSES AND WE MAY NEED TO RAISE
ADDITIONAL CAPITAL.

     Developing our company is expensive. In addition, acquiring new client
contracts and transitioning them until they are fully implemented and reach
their revenue potential requires significant capital investment. Since our
formation, we have not had a profitable quarter. We incurred a net loss of $64.9
million, exclusive of a non-cash warrant charge of $29.9 million, for the year
ended December 31, 2000, and a net loss of $22.3 million for the quarter ended
March 31, 2001. For the year ended December 31, 2000 and the three-month period
ended March 31, 2001, we used cash of $60.7 million and $5.1 million,
respectively, in operating activities and $23.8 million and $5.1 million,
respectively, in investing activities. We expect to continue to make significant
investments in the development of our eHR solution, client service centers, and
service delivery technologies, the expansion of our sales, transition and
service capabilities and the procurement of additional contracts, as well as the
acquisition of hardware, software, furniture and fixtures needed to support
these efforts. We invested approximately $24 million in these items in 2000 and
we expect to purchase as much as an additional $25 million in 2001. These
capitalized amounts are amortized generally over three to five years, resulting
in significant depreciation and amortization expense that will reduce future
profitability. Our capital investments and commensurate amortization will
increase if we are able to take advantage of market opportunities and grow the
Company faster than we anticipate. We may also need cash to make acquisitions
and develop new service offerings and technologies. As a result, we expect to
incur net losses in 2001, and we will need to generate significant revenues to
achieve profitability. While we do not enter "loss leader" contracts, and
although we estimate and model each of our client contracts to be individually
profitable, due to our rapid growth, the expense of creating our company, and
other factors described herein, we cannot be certain that we will ever operate
profitably, or that we can sustain or increase profitability on a quarterly or
annual basis in the future.


                                       9


<PAGE>   11

     Although we believe our cash balance at March 31, 2001 is adequate to
finance our current operations until our operating income covers our cash needs,
we anticipate rapid growth and we may need to raise additional funds through
public or private debt or equity financings in order to address unanticipated
operating issues, finance acquisitions, new client contracts with capital
investment requirements, and other strategic opportunities, and maintain
adequate cash balances to satisify the expectations of prospective clients. We
cannot be certain that we will be able to raise additional funds on favorable
terms, or at all. If we are unable to obtain additional funds, we may be unable
to fund our operations or strategic initiatives.

WE MAY NOT BE ABLE TO ACHIEVE THE COST SAVINGS WE HAVE PROMISED OUR CLIENTS.

     We provide our services for fixed fees that are generally equal to or less
than our clients' historical costs to provide for themselves the services we
contract to deliver. As a result, our profitability will depend on our ability
to provide services cost-effectively. Achieving the efficiency we need depends
upon our ability to develop our process operations and our Exult eHR solution
into a standardized management system that can be operated from our client
service centers and extended to multiple clients with limited client-specific
adaptation and modification. The actual cost reductions we are able to achieve
will vary by client for a variety of reasons, including the scope of services we
agree to provide, the existing state of our clients' HR departments and
processes, and our ability to standardize, centralize, and simplify their
processes, notwithstanding the complexity of their existing systems and
potential resistance by some parts of the client organization to change. If we
miscalculate the resources or time we need to perform under any of our
contracts, the costs of providing our services could exceed the fees we receive
from our clients, and we would lose money. We also have certain minimum service
level or cost savings requirements that we must meet for "controllable" costs.
If we are not able to meet these requirements, we may be obligated to issue
credits to our clients against future payments to us. If we breach a contract in
a material way or repeatedly fail to perform, our client can terminate the
contract. In addition, with notice and payment, our clients are generally
permitted to terminate their contracts with us for convenience before the end of
the scheduled term. The termination payments required are substantially less
than our revenue under the contracts, and may not cover our termination costs or
replace profits we may have earned.

TO SUCCEED WE MUST HIRE, ASSIMILATE AND RETAIN KEY MANAGEMENT PERSONNEL AND
LARGE NUMBERS OF NEW EMPLOYEES, OPEN NEW CLIENT SERVICE CENTERS, ASSIMILATE OUR
CLIENTS' PERSONNEL AND SYSTEMS, AND EXPAND OUR OWN SYSTEMS AND CONTROLS.

     To achieve sustainable profitability, we must extend our service model
across many client organizations and gain critical mass in the size and breadth
of our operations. Our ability to achieve rapid growth depends upon the
following essential elements:

     o    Current markets for skilled employees are competitive, and we must be
          able to hire, train and retain key management personnel and large
          numbers of human resources specialists, web and Internet technologists
          and programmers, business development and process management
          specialists and technical and customer support personnel.

     o    We currently operate three large-scale client service centers, in
          Charlotte, Glasgow, and the Houston area. We also manage more limited
          service center operations in the Los Angeles area. These centers are
          designed to handle our existing client demands, but we must open new
          client service centers in new geographic locations to handle
          significant additional growth in our business. We must devote
          substantial financial and management resources to launch and operate
          these centers successfully, and we may not select appropriate
          locations for these centers, open them in time to meet our client
          service commitments, or manage them profitably.

     o    As we assume responsibility for the existing HR departments of our
          clients, we must be able to assimilate HR personnel from these clients
          and integrate disparate systems, procedures, controls and
          infrastructures.

     o    We will need to improve our financial and management controls,
          reporting systems and operating systems to accommodate growth. If we
          do not manage growth effectively, our ability to perform our existing
          contracts successfully may be jeopardized, our ability to handle new
          clients and contracts will be limited, and our reputation may be
          harmed.

OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE VOLATILE AND MAY CAUSE OUR
STOCK PRICE TO FLUCTUATE.

     Our quarterly operating results have varied in the past and are likely to
vary significantly in the future. It is possible that in some future quarter or
quarters our operating results will be below the expectations of public market
analysts or investors. If so, the market price of our Common Stock may decline
significantly. Factors that may cause our results to fluctuate include:

     o    the growth of the market for our HR services and our ability to obtain
          new client contracts;

     o    our ability to continue to execute successfully on client contracts;


                                       10

<PAGE>   12

     o    the length of the sales and integration cycle for our new clients;

     o    cancellations or reductions in the scope of our contracts;

     o    delays in transitioning various client processes to our
          infrastructure;

     o    our ability to develop and implement additional service offerings and
          technologies;

     o    the introduction of comprehensive HR services by new and emerging
          competitors;

     o    changes in our pricing policies or those of our competitors;

     o    our ability to manage costs, including personnel costs and support
          services costs; and

     o    the timing and cost of anticipated openings or expansions of client
          service centers.

WE COULD EXPERIENCE DAMAGES, SERVICE INTERRUPTIONS OR FAILURES AT OUR CLIENT
SERVICE CENTERS OR IN OUR COMPUTER AND TELECOMMUNICATIONS SYSTEMS.

     Our business could be interrupted by damage to or disruption of our client
service centers, computer and telecommunications equipment and software systems
from fire, power loss, hardware or software malfunctions, penetration by
computer hackers, computer viruses, natural disasters and other causes,
including "Year 2000" problems that could arise if our systems or third-party
systems we rely upon fail to distinguish properly between 21st century dates and
20th century dates. Our clients' businesses may be harmed by any system or
equipment failure we experience. As a result of any of the foregoing, our
relationship with our clients may be adversely affected, we may lose clients,
our ability to attract new clients may be adversely affected and we could be
exposed to liability. We cannot be certain that we will be able to route calls
and other operations from an affected center to another in the event service is
disrupted. In addition, in the event of widespread damage or failures at our
facilities, we cannot guarantee that the disaster recovery plans we have in
place will protect our business.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS.

     Our business strategy requires us to expand internationally as we broaden
the geographic scope of services we deliver to our clients from US and UK
operations to foreign operations and as we take on additional large,
multinational clients. We will face risks in doing business abroad that include
the following:

     o    changing regulatory requirements;

     o    legal uncertainty regarding foreign laws, tariffs and other trade
          barriers;

     o    political instability;

     o    international currency issues, including fluctuations in currency
          exchange rates;

     o    cultural differences;

     o    designing and operating web sites and other service delivery
          components in foreign languages; and

     o    differing technology standards and Internet regulations that may
          affect access to and operation of our web sites and our clients' web
          sites.

THE MARKET FOR OUR SERVICES AND OUR REVENUE GROWTH DEPENDS ON OUR ABILITY TO USE
THE INTERNET AS A MEANS OF DELIVERING HUMAN RESOURCES SERVICES.

     We rely on the Internet as a key mechanism for delivering our services to
our clients and achieving efficiencies in our service model, and this reliance
exposes us to various risks.

     o    We use public networks to transmit and store extremely confidential
          information about our clients and their employees, such as
          compensation, medical information and social security numbers. We may
          be required to expend significant capital and other resources to
          address security breaches. We cannot be certain that our security
          measures will be adequate and security breaches could disrupt our
          operations, damage our reputation and expose us to litigation and
          possible liability.

     o    Our target clients may not be receptive to human resources services
          delivered over the Internet because of concerns over transaction
          security, user privacy, the reliability and quality of Internet
          service and other reasons. In addition, growth in Internet traffic may
          cause performance and reliability to decline. Interruptions in
          Internet service and infrastructure delays could interfere with our
          ability to use the Internet to support our Exult eHR service, which
          would impair our revenue growth and results of operations.

                                       11
<PAGE>   13

     o    Laws and regulations may be adopted relating to Internet user privacy,
          pricing, usage fees and taxes, content, distribution, and
          characteristics and quality of products and services. This could
          decrease the popularity or impede the expansion of the Internet and
          decrease demand for our services. Moreover, the applicability of
          existing laws to the Internet is uncertain with regard to many
          important issues, including property ownership, intellectual property,
          export of encryption technology, libel and personal privacy. The
          application of laws and regulations from jurisdictions whose laws do
          not currently apply to our business, or the application of existing
          laws and regulations to the Internet and other online services, could
          also harm our business.

WE MUST KEEP OUR COMPUTING AND COMMUNICATIONS INFRASTRUCTURE ON PACE WITH
CHANGING TECHNOLOGIES.

     Our success depends on our sophisticated computer, Internet and
telecommunications systems. We have invested significantly in our technological
infrastructure and anticipate that it will be necessary to continue to do so in
the future to remain competitive. These technologies are evolving rapidly and
are characterized by short product life cycles, which require us to anticipate
technological changes and developments. Our success in delivering services
cost-effectively and creating processes that are consistent with HR best
practices for our clients depends, in part, upon our ability to adapt our
processes to incorporate new and improved software applications, communications
systems and other technologies and devices. If we fail to adapt to technological
developments, our clients may experience service implementation delays or our
services may become non-competitive or obsolete.

WE RELY ON THIRD-PARTY VENDORS FOR SOFTWARE AND SPECIALIZED FUNCTIONS, AND MUST
FIND WAYS OF MAKING THEIR SERVICES MORE COST-EFFECTIVE.

     Our service delivery capability incorporates and relies on software owned
by third parties that we license directly or use through existing license
arrangements between our clients and the vendor. If these vendors change or
cancel a product we are using or if these agreements are terminated or not
renewed, we might have to delay or discontinue services until equivalent
technology can be found, licensed and installed.

     A significant part of our revenue is attributable to services we provide to
our clients by utilizing third-party vendors to provide a number of specialized
services for our clients, such as benefits administration and relocation
services. We select some of these vendors and assume others from relationships
established by our clients before contracting with us. These vendors may act as
subcontractors to us or provide services directly to our clients under our
management; in either case we have responsibilities under our client contracts
for their costs and services. In many cases our cost of paying these vendors is
as high as our revenue attributable to their services, and the profitability of
our client contracts therefore depends in part upon our ability to reduce these
vendor costs through improved efficiencies and/or more favorable pricing. We
plan to achieve these efficiencies and cost reductions through vendor management
and consolidation, but this may involve delay as existing contracts run their
course and we attempt to renegotiate with or replace these vendors. In addition,
if any third-party vendors are not willing to provide their services to us at
competitive rates and we are unable to provide these services ourselves or find
suitable substitute providers when necessary, our operating results could be
seriously harmed because we may not be able to adjust our fixed-fee contracts
with our clients to offset an increase in the cost of these specialized
services. If our clients are not satisfied with the services provided by these
third parties, our clients may be entitled to recover penalties or to terminate
their agreements with us, which could seriously harm our business.

THE MARKETS WE SERVE ARE HIGHLY COMPETITIVE AND OUR COMPETITORS MAY HAVE MUCH
GREATER RESOURCES TO COMMIT TO GROWTH, NEW TECHNOLOGY AND MARKETING.

     Our current and potential competitors include in-house HR departments of
large multinational corporations, as well as other third parties that provide
discrete or combined HR and IT functions, including consulting divisions of Big
Five accounting firms and other consulting firms, information technology
outsourcers, and transaction processors such as benefits administrators. In
addition, we expect that the predicted growth of the HR outsourcing market will
attract other consulting firms, transaction providers, and outsourcers and
motivate competitors to assume responsibility for broad integration of HR
processes.

     Several of our competitors have substantially greater financial, technical
and marketing resources, larger customer bases, greater name recognition and
more established relationships with their customers and key product and service
suppliers than we do. Our competitors may be able to:

     o    develop and expand their delivery infrastructure and service offerings
          more quickly;

     o    adapt better to new or emerging technologies and changing client
          needs;

     o    take advantage of acquisitions and other opportunities more readily;


                                       12

<PAGE>   14

     o    devote greater resources to the marketing and sale of their services;
          and

     o    adopt more aggressive pricing policies.

     Some of our competitors may also be able or willing to provide clients with
additional benefits at lower overall costs. In addition, we believe there will
be future consolidation in our market, which could increase competition in ways
that may be adverse to us.

WE OPERATE IN A COMPLEX REGULATORY ENVIRONMENT, AND FAILURE TO COMPLY WITH
APPLICABLE LAWS AND REGULATIONS COULD ADVERSELY AFFECT OUR BUSINESS.

     Corporate human resources operations are subject to a number of laws and
regulations, including those applicable to payroll practices, benefits
administration, employment practices, and data privacy. Because our clients have
employees in states across the US and in various countries around the world, we
must perform our services in compliance with the legal and regulatory
requirements of multiple jurisdictions. Some of these laws and regulations may
be difficult to ascertain or interpret, may change, and may be inconsistent with
our business practices. Violation of laws and regulations could subject us to
fines and penalties, damage our reputation, constitute breach of our client
contracts, and impair our ability to do business in various jurisdictions or
according to our established processes.

     The European Commission's Directive on Data Privacy limits transfer of
personal data outside the EU. In order to receive personal data about our
clients' European employees and fulfill our service commitments, we have elected
to comply with the Safe Harbor Principles established by the US Department of
Commerce, in collaboration with the European Commission, to provide "adequate
protection" for personal data about EU residents. Because we process HR data, we
are required by the Safe Harbor Principles to submit to the jurisdiction of the
European Union Data Protection Authorities (DPAs). Specifically, we must
cooperate with the DPAs in the investigation and resolution of complaints
brought under the Safe Harbor Principles by European citizens and comply with
any corrective advice and remedial or compensatory measures they dictate. In
addition, operation under the Safe Harbor Principles subjects us to the
jurisdiction of the Federal Trade Commission. If we fail to process personal
data in accordance with these principles, we could be subject to legal penalties
under the Federal Trade Commission Act and foreign privacy laws. We could also
lose our ability to move personal data from the EU to the United States, which
would significantly impair our ability to fulfill our contractual commitments to
our clients. We expect to have to comply with similar laws of other foreign
jurisdictions in which we do business in the future.

WE MAY UNDERTAKE ACQUISITIONS WHICH MAY LIMIT OUR ABILITY TO MANAGE AND MAINTAIN
OUR BUSINESS, MAY RESULT IN ADVERSE ACCOUNTING TREATMENT AND MAY BE DIFFICULT TO
INTEGRATE INTO OUR BUSINESS.

     We expect to pursue acquisitions under appropriate circumstances. We cannot
provide any assurance that we will be able to complete any acquisitions, or that
any acquisitions we may complete will enhance our business. Any acquisition we
do complete could subject us to a number of risks, including:

     o    diversion of our management's attention;

     o    amortization of substantial goodwill and other intangible assets,
          adversely affecting our reported results of operations;

     o    inability to integrate the acquired company and its employees into our
          organization effectively, and to retain key personnel of the acquired
          business;

     o    inability to retain the acquired company's customers; and

     o    exposure to legal claims for activities of the acquired business prior
          to acquisition.

Client satisfaction or performance problems with an acquired business also could
affect our reputation as a whole. In addition, any acquired business could
significantly underperform relative to our expectations.

WE MUST PROTECT OUR INTELLECTUAL PROPERTY AND AVOID INFRINGING INTELLECTUAL
PROPERTY OF OTHERS.

     We may not be able to detect or deter unauthorized use of our intellectual
property. If third parties infringe or misappropriate our trade secrets,
copyrights, trademarks, service marks, trade names or proprietary information,
our business could be seriously harmed. In addition, although we believe that
our proprietary rights do not infringe the intellectual property rights of
others, other parties may assert that we have violated their intellectual
property rights. These claims, even if not true, could result in significant
legal and other costs and may be a distraction to management. In addition,
protection of intellectual property in many foreign countries is weaker and less
reliable than in the United States, so if our business expands into foreign
countries, risks associated with protecting our intellectual property will
increase.


                                       13


<PAGE>   15

OUR EXECUTIVE OFFICERS, DIRECTORS AND THEIR AFFILIATES CONTROL THE COMPANY.

     Our executive officers, directors and their respective affiliates
beneficially own approximately three-quarters of our outstanding Common Stock.
As a result, these stockholders, acting together, have the ability to control
matters requiring stockholder approval, including the election of directors and
mergers, consolidations and sales of all or substantially all of our assets.
These stockholders may have interests that differ from other investors and they
may approve actions that other investors vote against or reject actions that
other investors have voted to approve. In addition, this concentration of
ownership may also have the effect of preventing or discouraging or deferring a
change in control of Exult, which, in turn, could depress the market price of
our Common Stock.

OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE, AND WE COULD BE A TARGET OF
SECURITIES CLASS ACTION LITIGATION.

     The price at which our Common Stock trades has fluctuated significantly and
is likely to continue to be highly volatile. We are a relatively new company
with no record of profits, and we utilize the Internet and a technology
infrastructure to deliver our services. The market prices for other companies
with similar characteristics have at times increased to levels that bore no
relationship to their operating performance, and at other times have declined
dramatically, even without apparent changes in their business. In addition, the
stock market in general has from time to time experienced significant price and
volume fluctuations that have affected the market prices for companies like
ours. In the past, this kind of market price volatility has often resulted in
securities class action litigation against companies comparable to ours.
Securities litigation could result in substantial costs and divert our
management's attention and resources.

SUBSTANTIAL SALES OF OUR COMMON STOCK BY OUR EXISTING INVESTORS COULD CAUSE OUR
STOCK PRICE TO DECLINE.

     Of our outstanding shares, only 6.3 million have been sold publicly by the
Company, and only small numbers of privately issued shares have subsequently
been sold in the public markets. The vast majority of our outstanding shares are
in the hands of their original purchasers. These investors may seek to sell
their shares, and sales of large numbers of shares in the same time period could
cause the market price for our Common Stock to decline significantly. These
sales also might make it more difficult for us to sell securities in the future
at a time and price that we deem appropriate.

OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD DETER A TAKEOVER EFFORT.

     Provisions of our certificate of incorporation and bylaws, including those
that provide for a classified board of directors, authorized but unissued shares
of Common and Preferred Stock and notice requirements for stockholder meetings,
and Delaware law regarding the ability to conduct specific types of mergers
within specified time periods, could make it more difficult for a third party to
acquire us, even if doing so would provide our stockholders with a premium to
the market price of their Common Stock. A classified board of directors may
inhibit acquisitions in general, and a tender offer not endorsed by our board in
particular, since only one-third of our directors are reelected annually,
thereby requiring two annual meetings before a majority of our directors could
be replaced. The authorization of undesignated preferred stock gives our board
the ability to issue Preferred Stock with voting or other rights or preferences
that could impede the success of any attempt to change control of the Company.
If a change in control or change in management is delayed or prevented, the
market price of our Common Stock could decline.


                                       14

<PAGE>   16

                              RESULTS OF OPERATIONS

     In view of the rapidly evolving nature of our business and our limited
operating history, we believe that prior periods to current period comparisons
of our operating results, including our revenue, gross profit (loss) and
expenses as a percentage of revenue, should not be relied upon as an indication
of our future performance. In our discussion below, we have also included
information about the three months ended December 31, 2000, the immediate prior
period, where such comparisons to this immediately preceding period may be a
useful supplement to the prior year period-to-period comparison. The following
table sets forth statement of operations data expressed as a percentage of
revenue for the periods indicated:

<TABLE>
<CAPTION>
                                           THREE MONTHS   THREE MONTHS    THREE MONTHS
                                               ENDED          ENDED           ENDED
                                             MARCH 31,     DECEMBER 31,     MARCH 31,
                                               2000           2000            2001
                                           ------------   -------------   ------------
<S>                                        <C>            <C>             <C>
Revenue .............................          100.0%         100.0%         100.0%
Cost of revenue .....................          103.1          140.3          126.2
                                               -----          -----          -----
Gross loss ..........................           (3.1)         (40.3)         (26.2)
                                               -----          -----          -----
Expenses:
  Product development ...............           14.4            7.5            5.0
  Selling, general and administrative          161.9           18.5           14.4
  Depreciation and amortization .....           30.3            9.1            8.2
                                               -----          -----          -----
     Total expenses .................          206.6           35.1           27.6
                                               -----          -----          -----
Loss from operations ................         (209.7)         (75.4)         (53.8)
Interest income, net ................           14.2            4.9            2.5
                                               -----          -----          -----
Net loss ............................         (195.5)%        (70.5)%        (51.3)%
                                               =====          =====          =====
</TABLE>

The information for the three-month period ended December 31, 2000, excludes a
$29.9 million warrant charge which represented 93.3% of that period's revenue.
No similar charge was incurred in either of the March 2000 or March 2001
periods.

THREE MONTHS ENDED MARCH 31, 2000 AND 2001 AND DECEMBER 31, 2000

REVENUE

     Revenue for the three months ended March 31, 2001 was $43.5 million, an
increase of 36% over the $32.0 million and 677% over the $5.6 million recorded
in the three-month periods ended December 31, 2000 and March 31, 2000,
respectively. The increase in the 2001 first quarter revenue in comparison to
the immediate prior period and the same period in 2000 was primarily from
process management clients. In the quarter ended March 31, 2001, revenue from
five process management clients was $40.2 million, or 92% of total revenue, as
compared to four process management clients generating $28.6 million, or 89% of
total revenue, in the immediate prior quarter, and three processing clients
generating $2.5 million, or 46% of total revenue, in the same quarter in 2000.
One process management client accounted for 59%, 80% and 7% of total revenue in
the three months ended March 31, 2001 and December 31, 2000 and March 31, 2000,
respectively. Another process management client accounted for 27% of total
revenue in the 2001 quarter and none in the prior quarters. The balance of total
revenue was derived primarily from consulting clients. Because of the
anticipated high growth rate of our process management business, we expect the
relative contribution of revenue derived from consulting clients as a percentage
of total revenue will continue to decrease for the foreseeable future

COST OF REVENUE

     Our cost of revenue for the three months ended March 31, 2001, December 31,
2000 and March 31, 2000, was $54.9 million or 126% of total revenue, $44.9
million, or 140% of total revenue, and $5.8 million, or 103% of total revenue,
respectively. Cost of revenue consists primarily of expenses associated with
third-party vendors providing services for our clients within the scope of our
contracts, compensation and benefits of employees directly involved in providing
our services, computer and communications equipment costs and services, and
facilities. We have been incurring, and may continue to incur, negative gross
margins because of the significant expenditures we make in transferring and
transforming our clients and the need to build capability before we provide
service. Under our business model, we expect our gross margin to improve
significantly over time as we substitute more cost effective processing
platforms in place of our clients' existing platforms.


                                       15

<PAGE>   17

PRODUCT DEVELOPMENT EXPENSE

     Product development expense for the three months ended March 31, 2001 was
$2.2 million, or 5% of total revenue, compared to $2.4 million, or 8% of total
revenue, and $0.8 million, or 14% of total revenue, in the three months ended
December 31, 2000 and March 31, 2000, respectively. Product development expense
consists primarily of third-party costs, salaries, bonuses and benefits of
employees directly associated with the development of our product features and
Internet software and capabilities, and the performance of research and
benchmarking of HR best practices that are not part of a specific engagement. We
have not capitalized any material amounts in any period. During 2000, we
increased our spending for product development resulting in an increase of $1.4
million for the three months ended March 31, 2001 over the same period in 2000.
Our current spending level is indicative of expected spending levels, and
therefore the 10% decrease between the 2001 quarter and the immediate prior
quarter is not considered to be either significant or a trend.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

     Selling, general and administrative expense was $6.3 million, or 14% of
total revenue, for the three months ended March 31, 2001, an increase of 6% over
the $5.9 million spent in the immediate prior three-month period and a decrease
of 31%, or $2.8 million, spent in the comparable three-month period in 2000.
Selling, general and administrative expense generally consist of salaries,
bonuses and benefits for employees engaged in marketing, promoting and selling
our services, and for management and administrative personnel. Selling, general
and administrative expense also includes third-party consulting and marketing
expenditures, as well as facilities and office costs, and legal, accounting and
recruiting fees and expenses. The reduction in expense in the 2001-quarter from
the same quarter in 2000 was a result of lower recruitment and associated fees
and the deployment of personnel to client activities. Under our business model,
we plan to limit increases in selling, general and administrative increases over
time.

DEPRECIATION AND AMORTIZATION EXPENSE

     For the three months ended March 31, 2001, depreciation and amortization
expense was $3.6 million, or 8% of total revenue, an increase of $636,000 and
$1.9 million from the three-month periods ended December 31, 2000 and March 31,
2000, respectively. Included in the 2001 quarter and the immediate prior and
comparable quarters of 2000 was intangible asset amortization of $1.0 million,
$1.0 million and $1.1 million, respectively, pertaining to the 1999 acquisition
of certain assets of Gunn Partners, Inc. Also included in the 2001 quarter, the
immediate prior quarter and the comparable quarter of 2000 was $285,000,
$285,000 and $275,000, respectively, of deferred compensation amortization. The
balance of depreciation and amortization expense for each period arose from
property and equipment depreciation and amortization.

INTEREST INCOME, NET

     Interest income, net consisted of interest income of $1.3 million, $1.9
million, and $1.0 million partially offset by interest expense of $185,000,
$280,000 and $204,000, for the three-month periods ended March 31, 2001 and
December 31, 2000 and March 31, 2000, respectively. Interest income is generated
primarily from short-term investing of cash in excess of current requirements.
Interest expense is associated with the debt incurred to purchase the Gunn
Partners, Inc. assets in November 1999 and certain capitalized leases.

INCOME TAXES

     We incurred losses since the Company was founded in 1998 resulting in
federal and state net operating loss carryforwards which expire beginning in
2020 and 2008, respectively. A full valuation allowance has been provided
against the tax benefit generated by the net operating losses because of the
uncertainty of realizing the deferred tax assets.

NET LOSS

     The foregoing resulted in a net loss for the three-month periods ended
March 31, 2001, and December 31, 2000 and March 31, 2000, of $22.3 million, or
$0.24 per basic and diluted share, $52.5 million, or $0.60 per basic and diluted
share, inclusive of the warrant charge and $22.6 million, or $0.26 per basic and
diluted share, exclusive of the warrant charge, and $10.9 million, or $1.16 per
basic and diluted share, respectively. For the three months ended March 31,
2000, the loss per basic and diluted share, assuming the conversion of all of
the then outstanding shares of Preferred Stock would have been $0.14. We expect
to continue to incur losses for at least the year 2001.


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<PAGE>   18

LIQUIDITY AND CAPITAL RESOURCES

     Since our inception in October 1998, we have financed our operations
primarily with equity contributions including private placement sales of our
capital stock for consideration of approximately $1.0 million in 1998, $55.1
million in 1999, and $161.3 million in 2000; the net proceeds from our initial
public offering of $56.7 million in June 2000; and, to a lesser extent, by cash
generated from our business and the exercise of stock options and warrants. The
2000 amount of $161.3 million included $29.9 million from warrants issued in
connection with the sale of Common Stock and $44.0 million of indebtedness
incurred by the purchaser of the investment units that was subsequently
satisfied by the investor through prepaid rent and an intangible asset in
connection with one of our business process management contracts. The intangible
asset is being amortized as a reduction of revenue over the life of the
contract.

     Net cash used in operating activities was $11.2 million for the three
months ended March 31, 2000 and $5.1 million for the three months ended March
31, 2001. We obtained our first three process management contracts in December
1999 and January 2000 and began generating revenue therefrom during the first
quarter of 2000. We obtained two more process management contracts during the
second half of 2000 and were generating revenue from both of these agreements by
the first quarter of 2001. During the three-month periods ended March 31, 2000
and 2001, we continued using operating cash in support of our pursuit of
business and the development of corporate infrastructure and also expended
operating cash in support of revenue generated by the process management
contracts and to fund the transfer and transformation costs associated with
these process management contracts. Cash used in investing activities was $3.6
million in the 2000 period and $5.1 million in the 2001 period and was used to
construct and expand our client service centers and our internal systems. We
generated $64.3 million in cash from financing activities during the 2000 period
primarily from private placements of our stock. During the 2001 period, we
generated $844,000 in cash primarily from the exercise of stock options and
purchases of Common Stock under our employee stock purchase plan.

     Although our business model is designed to produce significantly improved
margins over time, we expect to generate negative operating cash flow for at
least the remainder of 2001 as we continue to incur losses from operations. We
expect to increase our investments in property and equipment to support the
expansion and renovation of our facilities, including our existing client
service centers, and to purchase related computer and other equipment necessary
to support our client contracts and growth. We expect to spend at least $25
million in 2001 on capital expenditures, which will be amortized over three to
five years, and at least $6 million to $8 million in 2001 for product
development. In addition, from time to time in the ordinary course of business,
we evaluate potential acquisitions of related businesses, assets, services and
technologies. Such acquisitions, if completed, may require significant cash
expenditures.

     We believe that our cash on hand will be sufficient to satisfy our working
capital requirements for at least the next 12 months. We are unable to predict
whether our cash on hand will be adequate to satisfy our working capital
requirements beyond 12 months because our capital needs will vary depending upon
future market conditions, business opportunities and potential acquisitions,
among other factors. Although we believe our cash balance at March 31, 2001 is
adequate to finance our current operations until our operating income covers our
cash needs, we anticipate rapid growth and we may need to raise additional funds
through public or private debt or equity financings in order to address
unanticipated operating issues, finance acquisitions, new client contracts with
capital investment requirements, and other strategic opportunities, and maintain
adequate cash balances to satisfy the expectations of prospective clients. We
cannot be certain that we will be able to raise additional funds on favorable
terms, or at all. If we are unable to obtain additional funds, we may be unable
to fund our operations or strategic initiatives.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSRUES ABOUT MARKET RISK.

     Not applicable.



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<PAGE>   19

                           PART II. OTHER INFORMATION.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

(c)  During the period from January 1, 2001 through March 31, 2001, we issued an
     aggregate of 618,499 shares of Common Stock to thirty-four employees for an
     aggregate purchase price of $623,909 upon the exercise of stock options.

     The above transactions did not involve any public offering and were exempt
     from registration under the Securities Act by virtue of Rule 701 thereunder
     because the stock options exercised were issued pursuant to Rule 701 before
     our initial public offering.

(d)  In June 2000, the Company completed its initial public offering of 6.0
     million shares of its Common Stock at $10.00 per share. On July 6, 2000,
     the underwriters exercised their overallotment option to purchase 300,000
     additional shares at $10.00 per share. The net proceeds to the Company from
     the sale of the 6.3 million shares after all underwriting discounts and
     commissions and other expenses were $56,669,465. From June 1, 2000 to March
     31, 2001, the Company used net offering proceeds as follows: $10,758,000
     for construction of plant, building facilities and internal systems;
     $3,063,000 for purchase and installation of equipment and certain software;
     and, $42,848,465 for working capital expenditures. None of these payments
     were made to directors, officers, or owners of 10% or more of any class of
     the Company's equity securities or other affiliates of the Company.



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<PAGE>   20

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits.

     The following Exhibits are incorporated herein by reference.

     EXHIBIT
     NUMBER                                 Description
     -------                                -----------
      2.1*     Asset Purchase Agreement by and among Exult, Inc., Gunn Partners,
               Inc., the shareholders of Gunn Partners, Inc. and Michael Gibson
               dated as of November 22, 1999.

      3.1*     Fourth Amended and Restated Certificate of Incorporation of
               Exult, Inc.

      3.2*     Amended and Restated Bylaws of Exult, Inc.

----------
 *   Previously filed with the Company's Registration Statement on Form S-1
     Registration No. 333-31754, and incorporated herein by reference.

(b)  Reports on Form 8-K.

     None.



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<PAGE>   21

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1934, as amended, the
undersigned has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 30th day of April, 2001.


                                               EXULT, INC.

                                               By: /s/ JAMES C. MADDEN, V
                                                   -----------------------------
                                                   Chief Executive Officer,
                                                   President, and Chairman of
                                                   the Board
                                                   (principal executive officer)


                                               By: /s/ MICHAEL F. HENN
                                                   -----------------------------
                                                   Executive Vice President,
                                                   Treasurer and Chief Financial
                                                   Officer
                                                   (principal financial officer)



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