task-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

_______________________

(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, 2024


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

For the transition period from_____________to______________

Commission File Number: 001-40482

_______________________

TaskUs, Inc.

(Exact name of registrant as specified in its charter)

_______________________


Delaware			83-1586636
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1650 Independence Drive, Suite 100 New Braunfels, Texas			78132
(Address of principal executive offices)			(Zip Code)

(888) 400-8275

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

_______________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

TASK

The Nasdaq Stock Market LLC

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. x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

As of May 2, 2024, the number of shares outstanding of the registrant’s common stock was as follows: Class A common stock, par value $0.01 per share: 18,033,657; Class B common stock, par value $0.01 per share: 70,032,694.

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TASKUS, INC.

Quarterly Report on Form 10-Q

For Quarterly Period Ended March 31, 2024

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		Page No.

	CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	1

	WEBSITE AND SOCIAL MEDIA DISCLOSURE	2

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets	3

	Unaudited Condensed Consolidated Statements of Income	4

	Unaudited Condensed Consolidated Statements of Comprehensive Income	5

	Unaudited Condensed Consolidated Statements of Shareholders’ Equity	6

	Unaudited Condensed Consolidated Statements of Cash Flows	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	27

PART II.	OTHER INFORMATION	28

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults Upon Senior Securities	28

Item 4.	Mine Safety Disclosures	28

Item 5.	Other Information	29

Item 6.	Exhibits	30

	Signatures	31

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Quarterly Report") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements may also be contained in our other reports filed under Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which involve certain known and unknown risks and uncertainties. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "predicts," "intends," "trends," "plans," "estimates," "anticipates," "position us," or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Our actual results may differ significantly from any results expressed or implied by any forward-looking statements. A summary of the principal risk factors that might cause our actual results to differ from our forward-looking statements is set forth below. The following is only a summary of the principal risks that may materially adversely affect our business, financial condition and results of operations. This summary should be read in conjunction with the more complete discussion of the risk factors we face, which are set forth under Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023 (our "Annual Report") as filed with the Securities and Exchange Commission (the "SEC"), as such risk factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Such risks and uncertainties include, but are not limited to, the following:

•Our business is dependent on key clients, and the loss of a key client could have an adverse effect on our business and results of operations.

•Our clients may terminate contracts before completion or choose not to renew contracts and a loss of business or non-payment from clients could materially affect our results of operations.

•We may fail to cost-effectively acquire and retain new clients, which would adversely affect our business, financial condition and results of operations.

•If we provide inadequate service or cause disruptions in our clients’ businesses or fail to comply with the quality standards required by our clients under our agreements, it could result in significant costs to us, the loss of our clients and damage to our corporate reputation.

•Utilization of artificial intelligence by our clients or our failure to incorporate artificial intelligence into our operations could adversely affect our business, reputation, or financial results.

•Our business prospects will suffer if we are unable to continue to anticipate our clients’ needs by adapting to market and technology trends, investing in technology as it develops, and adapting our services and solutions to changes in technology and client expectations.

•Unauthorized or improper disclosure of personal or other sensitive information, or security breaches and incidents, whether inadvertent or purposeful, including as the result of a cyber-attack, could result in liability and harm our reputation, each of which could adversely affect our business, financial condition, results of operations and prospects.

•Trust and Safety, including content monitoring and moderation services, is a large portion of our business. The long term impacts on the mental health and well-being of our employees doing this work are unknown. This work may lead to stress disorders and may create liabilities for us. This work is also subject to significant press and regulatory scrutiny. As a result, we may be subject to negative publicity or liability, or face difficulties recruiting and retaining employees, any of which could have an adverse effect on our reputation, business, financial condition and results of operations.

•Our failure to detect and deter criminal or fraudulent activities or other misconduct by our employees, or third parties such as contractors and consultants that may have access to our data, could result in loss of trust from our clients and negative publicity, which would have an adverse effect on our business and results of operations.

•Global economic and political conditions, especially in the social media and meal delivery and transport industries from which we generate significant revenue, could adversely affect our business, results of operations, financial condition and prospects.

•Our business is heavily dependent upon our international operations, particularly in the Philippines and India, and any disruption to those operations would adversely affect us.

•Our business is subject to a variety of U.S. federal and state, as well as international laws and regulations, including those regarding data privacy and security, and we or our clients may be subject to regulations related to the processing of certain types of sensitive and confidential information. Any failure to comply with applicable data privacy and security laws and regulations could harm our business, results of operations and financial condition.

•Fluctuations against the U.S. dollar in the local currencies in the countries in which we operate could have a material effect on our results of operations.

•Our business depends on a strong brand and corporate reputation, and if we are not able to maintain and enhance our brand, our ability to expand our client base will be impaired and our business and operating results will be adversely affected.

•Pricing pressure may reduce our revenue or gross profits and adversely affect our financial results.

•Our results of operations have been, and could in the future be, adversely affected by volatile, unfavorable or uncertain economic and political conditions, particularly in the markets in which our clients and operations are concentrated, and the effects of these conditions on our clients’ businesses.

•The success of our business depends on our senior management and key employees.

•Increases in employee expenses as well as changes to labor laws could reduce our profit margin.

•We may fail to attract, hire, train and retain sufficient numbers of skilled employees in a timely fashion at our sites to support our operations, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

•We may face difficulties as we expand our operations into countries or industries in which we have no prior operating experience and in which we may be subject to increased business, economic and regulatory risks that could impact our results of operations.

•Our business relies heavily on owned and third-party technology and computer systems, which subjects us to various uncertainties.

•Our profitability will suffer if we are not able to maintain asset utilization levels, price appropriately and control our costs.

•Our Sponsor and our Co-Founders control us and their interests may conflict with ours or yours in the future.

•The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our common stock prior to the completion of our June 2021 initial public offering (“IPO”), and it may depress the trading price of our Class A common stock.

•The market price of shares of our Class A common stock has been, and may continue to be, volatile and may decline regardless of our operating performance, which could cause the value of your investment to decline.

We urge you to carefully consider the foregoing summary together with the risks discussed under "Risk Factors" in the Annual Report, and in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report.

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WEBSITE AND SOCIAL MEDIA DISCLOSURE

We use our website (www.taskus.com) and our social media outlets, such as Facebook, Instagram, LinkedIn, TikTok, YouTube, X (formerly known as Twitter) and Threads as channels of distribution of Company information. The information we post through these channels may be deemed material. Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s website at ir.taskus.com, its Facebook page at facebook.com/TaskUs/, its Instagram page at instagram.com/taskus/, its LinkedIn page at linkedin.com/company/taskus/, its YouTube account at youtube.com/c/Taskus/ and its X account at twitter.com/taskus. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” section of our investor relations website at ir.taskus.com. The contents of our website and social media channels are not, however, a part of this Quarterly Report.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TASKUS, INC.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share data)


	March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	165,350	$	125,776
Accounts receivable, net of allowance for credit losses of $1,658 and $1,978, respectively	165,494		176,812
Income tax receivable	1,042		2,021
Prepaid expenses and other current assets	24,170		23,909
Total current assets	356,056		328,518
Noncurrent assets:
Property and equipment, net	61,777		68,893
Operating lease right-of-use assets	39,144		44,326
Deferred tax assets	5,915		4,857
Intangibles	187,771		192,958
Goodwill	217,613		218,108
Other noncurrent assets	6,235		6,542
Total noncurrent assets	518,455		535,684
Total assets	$	874,511	$	864,202
Liabilities and Shareholders’ Equity
Liabilities:
Current liabilities:
Accounts payable and accrued liabilities	$	24,684	$	26,054
Accrued payroll and employee-related liabilities	40,346		40,291
Current portion of debt	9,747		8,059
Current portion of operating lease liabilities	15,107		15,872
Current portion of income tax payable	12,035		7,451
Deferred revenue	4,120		4,077
Total current liabilities	106,039		101,804
Noncurrent liabilities:
Income tax payable	4,620		4,621
Long-term debt	252,885		256,166
Operating lease liabilities	26,605		31,475
Accrued payroll and employee-related liabilities	4,354		3,978
Deferred tax liabilities	25,184		25,214
Other noncurrent liabilities	230		233
Total noncurrent liabilities	313,878		321,687
Total liabilities	419,917		423,491
Commitments and Contingencies (See Note 10)
Shareholders’ equity:
Class A common stock, $0.01 par value. Authorized 2,500,000,000; 31,020,925 issued and 18,938,691 outstanding and 30,522,570 issued and 18,725,947 outstanding, respectively	310		305
Class B convertible common stock, $0.01 par value. Authorized 250,000,000; 70,032,694 and 70,032,694 shares issued and outstanding, respectively	700		700
Additional paid-in capital	691,968		683,117
Accumulated deficit	(78,270)		(89,984)
Accumulated other comprehensive loss	(12,859)		(9,551)
Treasury stock, at cost. 12,082,234 and 11,796,623 shares, respectively	(147,255)		(143,876)
Total shareholders’ equity	454,594		440,711
Total liabilities and shareholders’ equity	$	874,511	$	864,202

See accompanying notes to unaudited condensed consolidated financial statements.

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TASKUS, INC.

Unaudited Condensed Consolidated Statements of Income

(in thousands, except share and per share data)


	Three months ended March 31,
		2024		2023
Service revenue		$	227,470	$	235,306
Operating expenses:
Cost of services		135,411		137,762
Selling, general, and administrative expense		52,904		64,294
Depreciation		10,789		9,661
Amortization of intangible assets		4,985		5,124
Loss (gain) on disposal of assets		(177)		65

Total operating expenses		203,912		216,906
Operating income		23,558		18,400
Other income, net		(202)		(2,177)
Financing expenses		5,538		5,099
Income before income taxes		18,222		15,478
Provision for income taxes		6,508		5,969
Net income		$	11,714	$	9,509
Net income per common share:
Basic		$	0.13	$	0.10
Diluted		$	0.13	$	0.09
Weighted-average number of common shares outstanding:
Basic		88,795,211		97,561,650
Diluted		91,849,886		100,952,573

See accompanying notes to unaudited condensed consolidated financial statements.

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TASKUS, INC.

Unaudited Condensed Consolidated Statements of Comprehensive Income

(in thousands)


	Three months ended March 31,
		2024		2023
Net income		$	11,714	$	9,509
Retirement benefit reserves		5		8
Foreign currency translation adjustments		(3,313)		3,583
Comprehensive income		$	8,406	$	13,100

See accompanying notes to unaudited condensed consolidated financial statements.

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TASKUS, INC.

Unaudited Condensed Consolidated Statements of Shareholders’ Equity

(in thousands, except share data)


	Capital stock and additional paid-in capital								Accumulated deficit		Accumulated other comprehensive loss					Total shareholders’ equity
	Class A common stock			Class B convertible common stock			Additional paid-in capital						Treasury stock
	Shares	Amount		Shares	Amount								Shares	Amount
Balance as of December 31, 2022	29,257,651	$	293	70,032,694	$	700	$	631,908	$	(135,674)	$	(10,647)	1,649,931	$	(30,967)	$	455,613
Issuance of common stock for settlement of equity awards	246,537	2		—	—		207		—		—		—	—		209
Shares withheld related to net share settlement	(14,293)	—		—	—		(257)		—		—		—	—		(257)
Repurchase of common stock	—	—		—	—		—		—		—		389,801	(6,374)		(6,374)
Stock-based compensation expense	—	—		—	—		13,464		—		—		—	—		13,464
Net income	—	—		—	—		—		9,509		—		—	—		9,509
Other comprehensive income	—	—		—	—		—		—		3,591		—	—		3,591
Balance as of March 31, 2023	29,489,895	$	295	70,032,694	$	700	$	645,322	$	(126,165)	$	(7,056)	2,039,732	$	(37,341)	$	475,755


	Capital stock and additional paid-in capital								Accumulated deficit		Accumulated other comprehensive loss					Total shareholders’ equity
	Class A common stock			Class B convertible common stock			Additional paid-in capital						Treasury stock
	Shares	Amount		Shares	Amount								Shares	Amount
Balance as of December 31, 2023	30,522,570	$	305	70,032,694	$	700	$	683,117	$	(89,984)	$	(9,551)	11,796,623	$	(143,876)	$	440,711
Issuance of common stock for settlement of equity awards	620,835	6		—	—		189		—		—		—	—		195
Shares withheld related to net share settlement	(122,480)	(1)		—	—		(1,573)		—		—		—	—		(1,574)
Repurchase of common stock	—	—		—	—		—		—		—		285,611	(3,379)		(3,379)
Stock-based compensation expense	—	—		—	—		10,235		—		—		—	—		10,235
Net income	—	—		—	—		—		11,714		—		—	—		11,714
Other comprehensive loss	—	—		—	—		—		—		(3,308)		—	—		(3,308)
Balance as of March 31, 2024	31,020,925	$	310	70,032,694	$	700	$	691,968	$	(78,270)	$	(12,859)	12,082,234	$	(147,255)	$	454,594

See accompanying notes to unaudited condensed consolidated financial statements.

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TASKUS, INC.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Three months ended March 31,
	2024		2023
Cash flows from operating activities:
Net income	$	11,714	$	9,509
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	10,789		9,661
Amortization of intangibles	4,985		5,124
Amortization of debt financing fees	149		149
Loss (gain) on disposal of assets	(177)		65
Benefit from credit losses	(258)		—
Unrealized foreign exchange losses (gains) on forward contracts	1,497		(6,336)
Deferred taxes	(1,094)		(90)
Stock-based compensation expense	10,235		13,464
Changes in operating assets and liabilities:
Accounts receivable	11,296		8,070
Prepaid expenses and other current assets	(331)		(16)
Operating lease right-of-use assets	3,941		3,825
Other noncurrent assets	207		34
Accounts payable and accrued liabilities	(3,866)		(5,356)
Accrued payroll and employee-related liabilities	805		3,520
Operating lease liabilities	(4,374)		(3,310)
Income tax payable	5,614		5,789
Deferred revenue	47		(417)
Other noncurrent liabilities	(2)		(2)
Net cash provided by operating activities	51,177		43,683
Cash flows from investing activities:
Purchase of property and equipment	(3,572)		(5,244)

Investment in loan receivable	—		(1,000)
Net cash used in investing activities	(3,572)		(6,244)
Cash flows from financing activities:



Payments on long-term debt	(1,688)		(675)


Proceeds from employee stock plans	195		209

Payments for taxes related to net share settlement	(1,574)		(257)
Payments for stock repurchases	(2,597)		(6,374)

Net cash used in financing activities	(5,664)		(7,097)
Increase in cash and cash equivalents	41,941		30,342
Effect of exchange rate changes on cash	(2,367)		2,677
Cash and cash equivalents at beginning of period	125,776		133,992
Cash and cash equivalents at end of period	$	165,350	$	167,011

See accompanying notes to unaudited condensed consolidated financial statements.

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TASKUS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business and Organization

TaskUs, Inc. ("TaskUs," together with its subsidiaries, the "Company," "we," "us" or "our") was formed by investment funds affiliated with Blackstone Inc. (“Blackstone”) as a vehicle for the acquisition of TaskUs Holdings, Inc. ("TaskUs Holdings") on October 1, 2018 (the "Blackstone Acquisition"). Prior to the Blackstone Acquisition, TaskUs had no operations and TaskUs Holdings operated as a standalone entity. TaskUs, Inc. was incorporated in Delaware in July 2018, and is headquartered in New Braunfels, Texas.

The Company is a provider of outsourced digital services and next-generation customer experience to the world’s most innovative companies, helping its clients represent, protect and grow their brands. The Company’s global, omni-channel delivery model is focused on providing its clients three key services - Digital Customer Experience, Trust and Safety and Artificial Intelligence ("AI") Services. The Company has designed its platform to enable it to rapidly scale and benefit from its clients’ growth. Through its agile and responsive operational model, the Company delivers services from multiple delivery sites that span globally from the United States, the Philippines, India and other parts of the world.

The Company’s major service offerings are described in more detail below:

•Digital Customer Experience: Principally consists of omni-channel customer care services, primarily delivered through digital (non-voice) channels.

•Trust and Safety: Principally consists of review and disposition of user and advertiser generated visual, text and audio content for purposes which include removal or labeling of policy violating, offensive or misleading content. Also included in this area are our offerings for risk management, compliance, identity management and fraud.

•AI Services: Principally consists of high-quality data labeling services, annotation, context relevance and transcription services performed for the purpose of training and tuning machine learning algorithms, enabling them to develop cutting-edge AI systems.

2. Summary of Significant Accounting Policies

(a) Basis of Presentation

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). Our Annual Report on Form 10-K for the year ended December 31, 2023 (the "Annual Report"), as filed with the Securities and Exchange Commission (the "SEC"), includes a discussion of the significant accounting policies used in the preparation of our consolidated financial statements. There have been no changes to the Company’s significant accounting policies described in the Annual Report that have had a material impact on the Company’s condensed consolidated financial statements and related notes.

These unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with US GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Annual Report. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of March 31, 2024 and its results of operations, comprehensive income, shareholders’ equity and cash flows for the three months ended March 31, 2024 and 2023. The condensed consolidated balance sheet as of December 31, 2023, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.

(b) Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the determination of useful lives and impairment of fixed assets; allowances for credit losses; the valuation of deferred tax assets; the measurement of lease liabilities and right-of-use assets; valuation of forward contracts; valuation of stock-based compensation; valuation of acquired intangible assets and goodwill, as well as related impairment assessments; and reserves for income tax uncertainties and other contingencies.

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The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company has no variable interest entities in its corporate structure.

(d) Concentration Risk

Most of the Company’s customers are located in the United States. Clients outside of the United States are concentrated in Europe.

For the three months ended March 31, 2024 and 2023, the following client represented greater than 10% of the Company’s service revenue:

Client

SEC Form 10-Q filed by TaskUs Inc.