Q3 2021 Taskus Inc Earnings Call

[music].

Hello, and welcome to the third quarter, 20th 21 Investor Conference call. My name is not being that will be a conference.

And what date are today.

This time, all participants have been placed on mute to avoid any background noise.

The speaker's remarks, there'll be a question and answer session period.

To ask the question, you'll need to press star one.

Remove yourself from the queue. Please press the pound key I would now like to introduce.

Alan Katz, Vice President of Investor Relations, Alan you may begin.

Good afternoon, and thank you for joining the task of third quarter of 2021 or any of the call.

Joining me on the call today are <unk> are cool founder and Chief Executive Officer anthology Sarkar, Our Chief Financial Officer.

Full details of a result in additional amendment commentary are available in our earnings release, which can be found on the Investor Relations section of the website at <unk> Dot task that's dot com.

Please note that this call is simultaneously being webcast on the Investor Relations section of the company's corporate web site.

Before we start I would like to remind you that the following discussion contains forward looking statements within the meaning of the federal Securities law, including but not limited to statements regarding task us as future financial results and management expectations and plans for the business.

These statements are another promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here.

You should not place undue reliance on any forward looking statements.

Factors that could cause the actual results to differ materially from forward looking statements can be found in our updated prospectus filed with the SEC on October 22nd 2021, which is accessible on the website at Www Dot said Dot Gov and it's also available on our website at <unk> Dot task Dot com.

And maybe supplemented with subsequent periodic reports, we filed with the SEC.

Any forward looking statements made in this conference call, including responses. The questions are based on current expectations as of today and task us It seems no obligation to update or revise them whether out as a result, new development or otherwise except as required by law.

The following discussion contains non-GAAP financial measures.

For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric. Please see our earnings press release, which is available in your iron section of our web site at <unk> Dot <unk> Dot com.

Now I will turn the call over to the right amount of co founder and Chief Executive Officer of Pasco.

Right.

Thank you Alan good afternoon, everyone and thank you for joining US we delivered another strong quarter of growth in Q3 and came in well above the high end of our guidance.

Before we get into the numbers I want to provide an update on the health and safety of our teammates.

As I mentioned on the last call in queue to Weaver began providing vaccines to our teammates and their families in India.

In the third quarter I'm proud to report we were able to do the same in the Philippines.

To date over 27000 task as teammates approximately 75% of our global population have been vaccinated against COVID-19.

And over 90% of our teammates working for him in the office are vaccinated.

Task US provided many of these vaccines to our teammates.

I'll also note that we completed a successful follow on offering in mid October and look forward to engaging with new shareholders as well as those who've been with us since our IP.

In terms of financials in Q3, we delivered another quarter of strong top and bottom line growth.

Revenue grew organically by 64.2% year on year to $201.1 million above the top end of our guidance range of $186 million ajar.

Adjusted EBITDA grew 60% year on year to $48 $1 million for an adjusted EBITDA margin of 23.9% also above the top end of our guidance of 23.5%.

R. Q3 performance was the result of continued progress executing on our five growth levers last quarter I discuss these five letters, which position us for continued above market growth over the long term.

We made progress on all these fronts in this quarter and I'd like to dig a bit deeper into the specifics.

First we continued to expand with our current clients were growing extremely fast themselves and accelerating they're outsourcing spend is their business as mature and embraced increasingly distributed workplace.

Both from existing clients accounts for over two thirds of our signings in Q3 as our base business has grown we've seen expansion with existing clients driving increasing percentage of our total growth.

Given our focus on early stage high growth startups, we are often the first service provider Ah client works with and as they grow we grow with them.

In digital customer experience, we expanded with several food delivery clients and saw increasing demand in the ridesharing space as people began to travel again.

In this space, we took significant share at one of our top 10 clients. We're launching three new locations with that client, taking on health and safety lines as well as premium user support and payments work.

We also saw continued expansion of service offering for Fintech clients, where we're moving up the value chain and taking on more complex interactions.

We expanded our content security service offering with several clients in the social media and retail in e-commerce sparkles in the quarter.

As we entered the holiday season, we expect continued strong performance from this offering an e-commerce space.

Finally, our AI operation service line continued to grow in Q3, we increased revenue from an operations and an astounding 145% year on year.

This was driven by expansion with clients in the social media and travel and transportation spaces.

From our second growth lever, we saw the addition of new clients across verticals.

The name just a few we started working with too rapidly growing spin tech brands one in the buy now pay later space and another that's just rubbing the credit card business.

We sided multiple new clients in the media and entertainment vertical as well, including in the event ticketing space, where in person activity has begun to Mount a strong come back.

We also saw lots of momentum and health Tech, where we brought on several new clients and upsize some recent signings into space and.

In one case, an existing client proactively reached out to a health tech executive to suggest that they speak with us.

We went through a brief evaluation and have now partnered with a fast growing app that delivers lab tests on demand.

Providing them with digital customer experience via chat email voice and video where our experts are able to remotely support some lab tests.

Health Tech has become a high growth vertical for us given the complex and regulated environment. These clients operate within exactly the type of work where we succeed.

Following our third level of growth we expanded our service offerings are constant security team has responded to the rise of nonrefundable tokens or N S. Ts by Rolling out a service focused on securing the market places are games, where these digital assets are bought installed.

This leverages, our existing capabilities and brings in adjacent offering to the market.

Additionally, we've begun building a platform to expand the reach of our AI operations work.

We see the need for a system that can supplement the work we do for our large scale operations engagements and deliver rapid results by leveraging a combination of task us employees and globally distributed freelance experts.

Developing the service offerings are great examples of the team being hyper focus on where the puck is going or go to market team has this in their DNA, we closely watch trends in the startup in venture capital space working with boundaries and investors to develop custom service offerings.

This approach has earned us the opportunity to support the fastest growing companies in history, well before anyone else.

Fourth we finalized plans to expand our global delivery footprint and drive more sales by offering new locations and languages to our clients.

I took my first international business trip over 18 months at the start of September I went to London and had the chance to meet with our teams from Ireland, and Greece, and with a number of our clients.

We added multiple new European based clients in the quarter, including a fast growing automotive E Commerce brand.

It's great to see fast returns on the sales and marketing investments that we've made in the region.

We plan to further expand our European delivery footprint in 2022 to develop additional language capabilities.

We'll use that capital White, hub-and-spoke model, and which teammates work from the office part of the time and from home part of the time.

This will give teammates the flexibility inconvenience I'm working from home, while still maintaining the face to face connectivity needed to support team building coaching and culture.

We believe will see significant growth in Europe in the years to come.

We also announced additional office expansions in six locations this past quarter, including new locations in the U S, India, the Philippines and Columbia.

We entered India in October of 2019 as of September of 2021, just two years. After launching we had nearly 5000 teammates in the region, making India the fastest growing region in task Us history.

In terms of M&A, our fifth growth lever.

We're taking a very disciplined approach here since we started task us our growth has been entirely organic as we begin to review acquisition opportunities. We're looking for ways to offer our clients new specialized services or additional geographic delivery capabilities. We're looking for businesses that are as similar to us as possible.

<unk> in terms of growth rate and margin profile and most importantly that are aligned with our culture.

I'm proud of the progress our team has made on our five growth leverage this quarter.

Our success on all of these levers is ultimately the result of the hard work of our teammates.

Last quarter I talked about our culture is a core part of our competitive strategy.

This quarter I Wanna go a bit deeper into what makes our culture unique and why we invest so heavily in our task as teammates.

Since we started task us we've been able to attract incredible talent to our company. We've also built an environment a task that allows an individual to begin their career on the front lines and customer service or content security and grow into a leadership role fairly quickly we helped to foster this talent by investing in education and training.

As well as mentoring new managers.

And two three we took this a step further and launched the task US Academy, a formalized program to provide training and guidance to frontline teammates looking to move into leadership roles. We saw over 800 employees to enroll in the first month of the program.

The Academy will help us retain the great teammates that we have today and provide task us with an internal talent development resource.

Retain great talent is more important than Apple can this environment across the globe, we see increasing competition for talent, which makes me very proud to report that in Q3 are attrition remains well below 2019 levels.

Our ability to attract and retain talent continues to be key to our stellar performance. The investments that we've made over the years and the employee experienced are paying up to date more than ever.

We added approximately 4100 net new task as teammates in Q3 and achieved in on time hiring SLA a 99%.

As of September 30th or Glasgow, or score was four seven stars and approximately 90% of task as teammates around the globe continue to work safely from home.

As we look towards 2022, we expect to begin to gradually returned some teammates to our offices, but we will continue delivering some of our services from home for the foreseeable future.

One of the biggest areas of focus for me personally this year has been adding more world class leaders to our team.

We recently hired Claudio Walsh as our new General Counsel and Kelly to Minnelli, Chief Financial Officer of trying that was recently appointed to a board of directors.

Earlier in the year rushing eastern Huh, Chief people Officer, and Stefan Dough, Chief Operating Officer also joined our executive leadership team.

All of these individuals are experienced and passionate leaders, who bring a wealth of knowledge to task us I'm, so excited to be working with them.

Before I wrap up I didn't want to acknowledge the tremendous performance from the team and a tough operating environment. We had another strong sales quarter deliberate operationally for our clients and continue to attract amazing talent to accompany.

With that I'll hate it over to biology to go through the financials and a bit more detail and provide our outlook for the remainder of the year.

Thanks, Bye and good afternoon, everyone.

I'm Gonna discuss what were financials with those for the third quarter of 2021.

Please note that some of these items on non-GAAP measures under the 11th Recompletions attached to the press release B showed up yesterday.

In the third quarter beyond total revenues of $201.1 million, an increase of 64.2 person or the prior year.

We felt grouped in each of the three specialized service offerings.

In the third quarter over distilled customer experience offering generator, Harlan $35.2 million photo you'd over your growth rate of 64.3%.

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E Commerce on demand transportation funds.

Contents that could be business route 34 three person.

232020, 13, and $45 $4 million of revenue and our air operations business grew Harlem 45, two person yoga or your throat revenues of $34 million.

In Q3, we also for continued revenue growth from our top line. However that grew up with exceeded by the ongoing expansion of our entire client base.

As a result.

But revenue concentration with all of them not just mine was just below 27% approximately flat compared with cute too, but less than 2% offer basically do revenues.

I have a second largest client was 11% off of our revenue don't from credit person.

Q.

Of a tall thin and thoughts 20 clients accounted for 61 and 76% of revenue this activity in the partner.

Maybe a cost efficient continues to improve.

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Yo to where you're and quite a work water.

Our cost of service as a percentage of revenue and as of the third of our marching profile is primarily driven by the geography location from it services provider rather than the specifics service line.

In the third quarter regenerated, 52% of our data from the Philippines, 33% of revenues in the United States on 50% of our revenue from the rest of the board, mainly driven by our operations in India and Mexico.

Oh also service as I put some big over to your new 155.91st thing in the third quarter.

Compared to 53.4 person in the prior year.

These people, primarily driven by additional charges, but being good in 232021 as they continued to liberate a virtual operating model. So let the expensive cough <unk>.

Bad to return to the office next year.

I have been more grateful for some data for would be made it back to the office in 2022.

C R. A cost of service as a percentage of revenues increased slightly.

I haven't thought that'd be it also seemed very special globally. This person is most significant in the U S.

This dynamic where she climbs to move more quickly to end all received delivery model.

Political wrap quickly and attract stabbing you said differentiate us let us here.

Net net we think that the environment do make me be a benefit for us given the higher margin profile off overseas operations and our ability to meet those client needs.

In the third quarter is Jimmy expenses $63 million or 30% of revenues.

I said this just on the last call in two three B and go to a fourth quarter of stock compensation expense of $19.2 million relating to <unk>, including new grants awarded in the third quarter.

Confronted with the biggest part of five $8 million, we test costs only from the IPO B on June 11th.

But not a grueling any stock competition expenses and <unk> then if you had not the public company.

Given the third quarter, we also need good food Carter public company related expenses I felt that sometimes auction related expenses for the secondary offerings.

It's J a Q T for deeply D.

$52.2 million or 26.3% of revenues bitchy.

Include the $3.6 million of this termination that's evidenced cough.

In the third quarter of 2021.

Just the big dollars $48.1 million under 23.9% margin.

The $30.1 billion and $24, 6% margin owned in the third quarter off pretty quickly.

The reduction them adjusted EBITDA margin must primarily but the one by public companies costs and investments in digital initiatives.

Ah just a nickname come for the quarter.

$2.8 million and I.

Just a a need for sure plus 30 cents.

By comparison the year ago.

<unk> <unk> just been net income of $52.2 million, just yourself 24 cents.

No moving onto the balance sheet cash and cash equivalents with $61.3 million as of September 30th 2021, compared with the June 30th abundance of Harlem $95.9 million.

We call that the cash balance at the end of Q2 included I feel proceeds of Harlem $27 million received in June of 2021.

The use these IPO proceeds in the third quarter the system the Phantom sure Ah non-recurring deviate ifill bonuses.

Only two of 153 $7 million.

Cash flow motivation both of US all one O $9.1 million for the third quarter as compared to cast generation of $23 million into Q3 of 2020.

The reminder, this got those cash flow from operations included Harlin's, but $237 million in backed off the ideal related bonus and find some stock expense that I just discussed.

<unk>.

Disgusting Cleveland haunted available after the salt off of a strong revenue growth.

The fact of strong revenue growth on receivables a gaming 230 at AIG increased by $29.7 million from two two of 2021.

We are implementing a new author cause cash process at the onboard new clients and expect to review that would be a fool in 2020.

I'll, let the capital expenditure.

In the third quarter to $15.2 million compared to $3.1 million in two three of 2020.

They do those but I believe the one by the purchases of computer equipment.

Due to increased headstone under facility expansion as part of this month.

At this point of adult Plano, a financial or for the remainder of the year.

V anticipate 20, 2021 total revenues to be in the range of $747 million to $751 million.

You'd or your growth of 56, seven person I had somebody point.

We expect to earn a full year 2021, or just get it with a margin of 24th person to $24 2%.

I will note that on the yodel year basis in queue for just a big dumb margins, which continued to be impacted by public company expenses as well as expenses associated with the returning a portion of over three minutes for the office.

Also we continue to ramp up Albany investments in digital innovation sales and development of new service offerings, which are dry over a book market growth in the long term.

Finally, do you typically have slightly higher seasonal operating costs due to the number of holidays in deep water.

We expect to have an order of small banks benefit this year.

This was driven by the gap net loss, we incurred in the first half of the year due to the one time expenses related to find some chairs and non-recurring female ico bonus.

Two two of this year.

Any closing.

<unk> 2021, nearly doubling our growth rate from thinking maybe as we head into 2022 vehicles to deliver sustainable revenue growth and bold class margins, but <unk>, giving a farmer look look for the next year, okay, either reaffirm that we remain confident.

<unk> ability to grow at all about 25% in the medium though.

Thank you and I'm going to 100 back to bright before we take care of <unk>.

Thank you biology, before we get to Q&A I Wanna share another task us to make story.

Our teammates or the key to everything we do here at task us and our commitment goes well beyond the four walls of our offices.

We care deeply about the health of our co workers and their family members.

In September Chris one of our team leaders based on the Philippines discovered that his father was very ill and rushed him to the hospital for immediate medical attention.

This was in the middle of a serious COVID-19 spike in the country and then Unfortunately, the hospital was unable to provide Christmas father with a bed.

Over the next few hours Christmas father's situation deteriorated rapidly.

He was struggling to bleed.

Chris Texted as fellow teammates for help he knew that in response to Covid task US had stockpiled supplies of oxygen for our team. Our team responded immediately and brought Chris the supplemental oxygen his father desperately needed.

This spot Chris and his father, the time required to transport him to a hospital further away.

I'm happy to say that Christmas father is back home recovering today. Thanks in part to the tasks S team.

I am so proud of our team for acting quickly to support Christmas father, I'm also incredibly proud of the task US family Health insurance program, which ensured that Chris and his family were able to afford the quality of care is father needed without facing insurmountable debt.

Stories like these remind us finding the best thing and people not only the best business strategy, but the right thing to do.

With that I'll ask the operator to open the line for a question and answer session operator.

Thank you as a reminder to ask a question you'll need to first start wondering your telephone trying a question. Please press the pound cake. So you stand by while we can have two and a last name.

At first question comes from Matt <unk> P. T I G in the line or something.

Hey, guys. Thanks for taking my question really nice job on the quarter and congrats.

Congratulations on continuing that run just two quarters and so I guess, what the first question you mentioned that two thirds of your signings came from existing logos.

Maybe a couple of part question here. So one <unk> what has been the trend there over the last several quarters in terms of the overall mix is that higher or is that sort of in line with where we've been and then secondarily are you finding that.

Your customers potentially net new customers investing in task us and your capabilities earlier on in their life cycles.

To where you are sort of landing smaller, but the long term opportunity is much greater thanks.

Yeah, Matt Thanks, so much for the question.

So as far as new versus existing sales, we've definitely seen a trend towards more of our sales coming from existing customers and that's exactly what we would expect to see as the setup customers Millworking continues to expand.

A few years ago, I know that about 60% of our sales came from new logos and 40% came from existing clients. We saw that basically can hurt in the first half of this year with 60% of our sales coming from existing clients and 40% of our sales coming for new logos.

And obviously, we've seen that trend continue into Q3 with over two thirds of our sales coming from existing clients.

As far as the second question goes we definitely are seeing a trend towards a broad based embrace of outsourcing I think this is being driven by the rise a rapid rise of digital Disruptors and also the Covid pandemic, which has forced us all to embrace new ways of working.

That are increasingly remote so at task us we're focused on identifying the next generation of digital Disruptors and delivering the specialized services that they were gonna need in order to scale.

The one challenge of getting larger I will say is that.

It does it does become more difficult to deal with companies in the very very early stages, we have a product called launch by task us, which enables us to work with companies who need as few as five full time resources that sort of perfectly built for companies in the series a stage and we've had a lot of success with that product.

Great and then in a tremendous success in D. A I ops group of business there.

Are you finding yourself in a larger variety of potential engagements there, whereas it really just embracing some of the specialties that you've already developed.

And you're proven ability to train models so effectively.

We're finding demand is really expanding because the applications of artificial intelligence themselves are growing we've gone from.

Beginning doing a lot of work in the autonomous vehicle space, where we continue to focus to working with clients across the social media space and other verticals, we're looking to train their own models in various situations. So certainly the as the applications of artificial intelligence continue to expand the demand for training.

Data for those services will continue to expand as well.

Alright, great. Thank you for taking my question.

Thank you.

Thank you. My next question comes from Me Jane J P. Morgan Your line is open.

Hey, Thanks for taking my question, what's a great Cortes Uhm.

Can you comment on the outlook you see for content <unk> business given specific given the largest client has been in the news. So much arrest last few months, what does all that mean for near term outlook of content audition for Ya.

Yeah pretty thanks for the question. So obviously, we can't comment on specifics of any individual customer, but let me talk about the social media space in general.

Clearly social media is facing increasing scrutiny or scrutiny and regulatory pressure here in the United States.

And today, the most advanced regulatory regime.

Probably exist in Europe, there, we've seen increased regulations lead to increased demand for essential services like constant security in AI operations from European service providers. So our belief is that as our clients in the social media space.

The scrutiny they are likely to continue to expand their investments any services given our reputation as the best in class provider of content security services, we stand to benefit from this growth.

I'll also say that we're finding more and more clients are touring us turning to us for content security services. So today essentially anywhere content is being generated.

And shared content security services are needed we provide the services to job lifting sites dating apps e-commerce and travel marketplaces, but by far the largest purchasers of the services today are the social media companies themselves and in particular, the three largest social networks in the world.

Got you no that's good to know.

Thanks for that and then second uhm with the expectations of 25% or higher growth next year and very strong exit Street did this edit that aren't supposed to persist us how should we think about seizing of grilled today to cross the four quarters next year.

Oh this guy's like any seasonality that we should expect like different than usual <unk> next year in terms of grilled chairs.

Let me take on the growth question and then I'll have biology talk about seasonality clearly we've had an amazing 2021 and when we look at the year Q1 is the corner in which we had the strongest sales quarter in our company's history Q2, and Q3 will also incredibly strong quarters.

Basically on par with one another but well.

Bob the sales targets that we set for ourselves and.

And so so I think that kind of sets the stage for the growth that we've seen in 2021.

In 2022, we're expecting to see sustainable revenue growth and world class margins and clearly we're not in the stage to give a formal outlook but.

I will say, we're very confident in our ability to grow at or above 25% into the medium term so well beyond next year and.

And then Bolshie, maybe you want to touch on seasonality.

Yeah. Thanks Bye.

Q forward you have currently forecasting sequential quarterly growth of seven percentage points and.

Your group of 55 person date might not see huge so you'd know squeezing of our business.

It does have some seasonal payments if.

Thank you for you seen major growth from E Commerce, I'm too Elisa degree some food dilutive times.

It is also important to note that this tends to work against dosing Q1 E.

E Commerce and food delivery demand is generally I think since August.

Two and half the additional challenge of having two fewer working days when compared to Q floor. Unlike Bryce mentioned, we will do provide additional b.

On Q1, and if white 52 o'clock in our queue for a call.

Gotcha. Thank you.

Thank you.

Our next question comes from Maggie No one with William Blair. Your line is that then.

Thank you.

Congrats Bryce you commented a little bit on here. So I'm wondering how large you help Europe can be or or how fast you help Europe can grow in the next couple of years here and then giving you the confidence that you can grow internationally with your clients that are either already global or.

Becoming increasingly global.

Thanks, Maggie Yeah, we've seen this incredible explosion of international expansion amongst our client base.

And for that reason, we're really confident that we're going to see huge growth in Europe over the next few years as I said I got the chance to travel to London and sit down with a lot of our clients like a few of these folks that I was able to meet with we just signed deals with in Q3 theirs.

There's just a tremendous amount of innovation, that's happening in London, and Amsterdam and across the continent, and so we're really excited to watch her third site in Europe in 2022.

We're not gonna be able to provide specific numbers and guidance, but I think that Europe could be as big for us as a delivery geography as the United States is today.

Alright, good and then on the delivery points and he put in the press really at the Indian off around substantially fastest growing county in Catholic history. Uhm can you talk a little bit about the cross prospect or head counting India versus Philippine and why.

Do you want that next to land kind of medium term and abolishing it there any margin implications from any next check that we should consider our longer term models.

Yeah, Let me, let me start I think that India has the potential to be as large for us as the Philippines over the medium term.

It is incredible what our team there has built we've got an incredible country leader in soft and the bomb Bonnie and the culture that we created in India reminds me a lot of what we created in the Philippines over a decade ago. So I'm incredibly bullish on the region for Protaspis I'll, let biology answer the question on margin impact.

Yeah, and then I get geography key drivers of margin photos, and India margin <unk> comparable to the philippi, hence <unk> going to be margin of creative from a mix specifically.

Alright, Thank you about.

Thank you.

And our next question comes from Jason covered with Bank of America. Your line of seven.

Hey, guys. This is Kathy I'm, sorry, Jason I guess, just following up uhm on the high end questions. Immediately you know what are your expectations in terms of hiring transferred the remainder of the year is the seasonality that we should be aware of and and kind of <unk>.

Yeah attrition expectations as well you know in conjunction with that thanks.

Thanks, Kathy Yeah, we expect to continue to hire roughly at the same rate that we have in the first three quarters of the year.

I'm really proud of the team for their focus on attrition, which year, we've seen our attrition rates considerably lower than the rates that we had in 2019, obviously attrition rates in 2020 were artificially.

Lower as a result of the Covid environment.

But given the the more challenging labor market that we're facing globally to be at an attrition rate that is significantly lower than what we saw in 2019 is a remarkable accomplishment. So we're seeing the investments that we've made in our employee value proposition since day, one begin to pay off now more than they ever have in two three we added.

4100, net new teammates we did that with an on time hiring SLA at 99%. Despite the fact that our clients have some very aggressive hiring timeline. So I'm I'm very proud of what our team has been able to accomplish in this environment I will say the market in the U S is a bit more challenging and we expect to see wage pressure.

Here at a higher level than we have historically.

However, if we take a step back we're not the only company facing that wage pressure our clients themselves are facing a lot of that same pressure for an internal hires and so we believe that is our customers look to hire the talent.

In the best spot in the world that increasingly embraced near shore and offshore models that we're we're very well positioned to deliver.

And where are gross margins will actually be higher than the onshore.

Alright, that's been really helpful. Thank then I guess, if I could add a lot.

Uhm I know you mentioned in your prepared remarks that you know you're very disciplined on M&A. You know just wanted to get an update on your appetite our willingness to engage in that when do you use it just sort of a salary somebody to grow the topics you need your seeing whether that international or an additional vertical outside of your car kind of eight or so thanks.

Yeah. Great question. So we are very serious about M&A, we've hired an S V. P to lead our efforts here named <unk> thrash who's absolutely fantastic and and our focus really is on getting additional specialized services that we can sell too too.

Our customers or additional geographic delivery locations, where we can we can add additional customers and we're really.

Focusing on trying to find companies that are similar to task us as possible in terms of growth and margin profile in one place, where we absolutely will not compromise that they need to be culturally accretive to task us so that limits the universe with which we can do within which we can do transactions were very focused.

I'm, finding very high quality assets and will be ready to pay a market price.

When we do.

Alright very helpful guys. Thanks.

Thank you.

The next question comes from basic Honey, let's <unk> your line of seven.

Yeah. Thanks, guys good job and I guess, maybe first of all kind of piggybacking on the on the last question will get gross margins really good in Q3, despite what seems like in an environment of a ton of wage inflation I guess, how are you managing that and as we look in the future you. It sounds like margins are expected to go up.

Gross margins.

Is it a balance of wage inflation is a little negative, but the mix of India and Philippines. The growth in those kind of offsets in net benefits you is that the best way to think about it.

Yes, I would take the person so hey, thanks, Steve somewhat from a Guzman do perspective, yes.

Definitely important finding in terms of the VEBA mixes shifting that is helping us from a gross margin perspective in terms of predicting into the future and have one more thing is like the majority of our clients on fries have annual Cola provisions that are low price increases based on beige inflation up to a cap.

Despite increases enforce annually and in some cases.

You've been upgraded Christmas for additional volume, but you love the headline that on days increases yeah, having an easier time you could easily today this year than any other time that I can remember so that is that is one one leave it on the third I'd probably get the 30 people from from a <unk> perspective is why is the Filipino people.

Had appreciated last year and stayed Relatedly flat.

So you're starting to see that depreciated Q3, I do you kind of see that trend going forward. So that is also going to be helpful somewhat gross margin or sector.

Gotcha, that's really helpful and I guess operationally I mean, it seems like you guys are just doing like everything right in.

How hard is it like it seems like you've done something different you create platforms that seems really hard for clients to either move away from you or move to other kind.

Kind of split split volumes or anything maybe explain a little bit about that just about your ability to kind of retain and not have to like split volumes with other vendors and how that's all working.

Yeah. Thanks for the question. It is really about identifying the b b area of most need for our customers and generally that's a specialized service that brings a degree of sophistication.

That is difficult to deliberate and so we want to go on a journey with our clients want to start with whatever their initially comfortable outsourcing and very often that can be fairly basic work, but as as they get more comfortable outsourcing more sophisticated functions task us once.

To be the provider, who who moves up the market with with our clients needs and so there are many many cases that I can point to where we've been successful in doing that.

So I think it's a combination of that also it's worth mentioning the technical investments that we've made.

We've got an incredible team of technologists and our focus isn't on building huge enterprise systems are sheer I'm systems. Instead, we're building lightweight browser based extension that actually sit on top of our clients systems and suggest next best actions to our teammates or automate large portion.

Of our teammates manual work flow using this approach we built chatbots work flow automation tools and a suite of tools that improve the experience of our teammates on the front lines of content security.

So so I think it's a combination of sophistication of service level of technology technical enablement that that really makes the difference when it comes to test us.

Gotcha, Thanks, great job.

Thank you and next question comes from James Ah City with Morgan Stanley a line of seven.

Thank you very much and I guess, you know one of the things that you're obviously, having a lot of success doing right. Now is is hiring and if you can trust that with a lot of your customers like me definitely out.

An advantage from that perspective, and you're being rewarded but I'm wondering if.

That is leading to Bam approaching route.

To take on additional work and.

How that fits into both your hiring and planning process, especially when you're like in one of our most recent surveys I think 85% Chief information officer surveyed said that they had shortage of in their attitude Department scandal, and so I'm just wondering how that.

Factoring into your thinking about areas and capabilities you wanted to be added to the task us catalog.

Offering.

Yeah, James as it could be very great question, we've seen our clients approach us with opportunities to re badge some of their employees and locations.

In fact, we we've done a number of these engagements in the United States now I'm very successfully and so I think it speaks to the employee value proposition that we've been able to develop in our success in both attracting and retaining talent I think that'll be a big growth level for us in the years to come.

[noise] and then [noise] you.

You know obviously.

Is great, but I'm wondering if you can give us a little bit of being excited to what the the driver's Rx plus different.

Different business segments, and I guess, what I'm really trying to understand is how sustainable is the demand and growth trajectory that you're seeing right now and and what are the key things.

Things that you're you're trying to watch.

Whether it's continuing to that trajectory can continue can accelerate or perhaps and celebrate.

Yeah, It's it's something I think a lot about we.

We're ultimately a.

Away too.

Play the high growth Internet space, and if if that space is growing we should be growing too.

We do that by delivering the three specialized services that we deliver today and moving up the value chain is our customers sourcing needs become more sophisticated we also do that by identifying the next generation of services that our customers are gonna be demanding so.

<unk> is a vertical that I've talked about in the past.

Randomly exciting space for us, where we've been adding lots of new customers and lots of new lines of service with existing customers. We've moved into the area of financial crimes any money laundering know your customer work and.

And then we're also looking at existing service lines like content security and saying can we introduce an offering that gets ahead of some of what are what are some of our crypto currency clients are doing can be non fungible token space are NFC space.

So I think to answer the question our growth is gonna be work shall be based on our six deaths continuing to deliver specialized services that our customers need effectively and then staying a step ahead identifying the next generation of specialized services customers are gonna be demanding in developing an offering for them.

[noise], Thanks price I appreciate it.

Thank you and I'm currently showing no further questions at this time I'd like to hand, the conference Echo Mister Vice Manic co founder and Chief Executive Officer of task Us for closing remarks.

Thank you so much.

I want to take another moment to thank our teammates our clients and our shareholders for joining us on this journey. It is very humbling to have our second earnings call now in the books and we look forward to seeing you all on our annual earnings call early next year.

This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.

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Hello, and welcome to the task of third quarter 2021 Investor Conference call. My name is Norman and I will be your conference.

Today at this time, all participants have been placed on mute to avoid any background noise. After the.

The Speakers' remarks, there'll be a question and answer session.

Got to ask a question you will need to press star one.

Is it mostly yourself from the queue. Please press the pound key I would now like to introduce Alan Katz, Vice President of Investor Relations Ellen you may begin.

Good afternoon, and thank you for joining the task of third quarter of 2021 earnings call.

Joining me on the call today are Brian <unk>, our co founder and Chief Executive Officer, and <unk> Zucker, our Chief Financial Officer.

Full details of our results and additional management commentary are available in our earnings release, which can be found on the Investor Relations section of the web site at IR Dot task Dot com.

Please note that this call is simultaneously being webcast on the Investor Relations section of the Companys corporate web site.

Before we start I would like to remind you that the following discussion contains forward looking statements within the meaning of the federal securities laws, including but not limited to statements regarding <unk> future financial results and management's expectations and plans for the business.

These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here.

You should not place undue reliance on any forward looking statements.

Factors that could cause actual results to differ materially from forward looking statements can be found in our updated prospectus filed with the SEC on October 22021, which is accessible on the SEC's website at Www SEC Gov and is also available on our website at IR Dot task Dot com.

And maybe supplemented with subsequent periodic reports, we file with the SEC.

Any forward looking statements made in this conference call, including responses to questions are based on current expectations as of today and tasked us assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.

The following discussion contains non-GAAP financial measures.

A reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric. Please see our earnings press release, which is available in the IR section of our website at IR Dot <unk> Dot com.

Now I will turn the call over to <unk> co founder and Chief Executive Officer of Heska right.

Thank you Alan good afternoon, everyone and thank you for joining us.

We delivered another strong quarter of growth in Q3 and came in well above the high end of our guidance.

Before we get into the numbers I want to provide an update on the health and safety of our teammates.

As I mentioned on the last call in Q2, we began providing vaccines to our teammates and their families in India.

In the third quarter I'm proud to report we were able to do the same in the Philippines.

To date over 27000 task as teammates approximately 75% of our global population had been vaccinated against COVID-19.

And over 90% of our teammates working from an office are vaccinated.

Pascal has provided many of these vaccines to our teammates.

I'll also note that we completed a successful follow on offering in mid October and look forward to engaging with new shareholders as well as those who have been with us since our IPO.

In terms of financials in Q3, we delivered another quarter of strong top and bottom line growth.

Revenue grew organically by 64, 2% year on year to $201 $1 million above the top end of our guidance range of $186 million adjusted.

EBITDA grew 60% year on year to $48 1 million for an adjusted EBITDA margin of 23, 9% also above the top end of our guidance of 23, 5%.

Our Q3 performance was the result of continued progress executing on our five growth levers.

Last quarter I discussed these five letters, which position us for continued above market growth over the long term.

We made progress on all these fronts in this quarter and I'd like to dig a bit deeper into the specifics.

First we continued to expand with our current clients, who are growing extremely fast themselves and accelerating their outsourcing spend as their business is mature and embrace increasingly distributed workplace.

Both from existing clients accounts for over two thirds of our signings in Q3 as our base business has grown we've seen expansion with existing clients drive an increasing percentage of our total growth.

Given our focus on early stage high growth start ups. We are often the first service provider a client works with and as they grow we grow with them.

In digital customer experience, we expanded with several food delivery clients and saw increasing demand in the ride sharing space as people begin to travel again.

In this space, we took significant share at one of our top 10 clients. We're launching three new locations with that client, taking on health and safety lines as well as premium user support and payments work.

We also saw continued expansion in this service offering for Fintech clients, where we're moving up the value chain and taking on more complex interactions.

We expanded our content security service offering with several clients in the social media and retail and e-commerce verticals in the quarter.

As we enter the holiday season, we expect continued strong performance from this offering in the ecommerce space.

Finally, our <unk> operation service line continued to grow in Q3, we increased revenue from an operations at an astounding 145% year on year.

This was driven by expansion with clients in the social media and travel and transportation spaces.

From our second growth lever, we saw the addition of new clients across verticals.

The name just a few we started working with two rapidly growing fin tech brands.

One in the buy now pay later space and another that is disrupting the credit card business.

We signed multiple new clients in the media and entertainment vertical as well, including in the event ticketing space, where in person activity has begun to Mount a strong come back.

We also saw lots of momentum in health Tech, where we brought on several new clients and upside from recent signings into space in.

In one case, an existing client proactively reached out to a health Tech executive suggests that they speak with us.

We went through a brief evaluation and have now partnered with a fast growing app delivers lab tests on demand.

We're providing them with digital customer experience via chat E Mail voice and video where our experts are able to remotely support some lab tests.

Health Tech has become a high growth vertical for us given the complex and regulated environment. These clients operate within it is exactly the type of work where we succeed.

Following our third lever of growth we expanded our service offerings are constant security team has responded to the rise of nonrefundable tokens or NFS teams by rolling out a service focused on securing the marketplaces are games, where these digital assets are bought and sold.

This leverages, our existing capabilities and brings an adjacent offering to the market.

Additionally, we have begun building a platform to expand the reach of our AI operations work.

We see the need for a system that can supplement the work we do for our large scale AI operations engagements and deliver rapid results by leveraging a combination of task us employees and globally distributed freelance experts.

Developing these service offerings are great examples of the team being hyper focused on where the puck is going our go to market team has listing their DNA, we closely watch trends and the startup and venture capital space working with founders and investors to develop custom service offerings.

This approach has earned us the opportunity to support the fastest growing companies in history, well before anyone else.

Fourth we finalized plans to expand our global delivery footprint and drive more sales by offering new locations and languages to our clients.

I took my first international business trip over 18 months at the start of September I went to London and had the chance to meet with our teams from Ireland, and Greece, and with a number of our clients.

We added multiple new European based clients in the quarter, including our fast growing automotive E Commerce brands.

It's great to see fast returns on our sales and marketing investments that we've made in the region.

We plan to further expand our European delivery footprint in 2022 to develop additional language capabilities.

We'll use our capital light hub and spoke model in which teammates worked from the office part of the time and from home part of the time.

This will give teammates the flexibility and convenience of working from home, while still maintaining the face to face connectivity needed to support team building coaching and culture.

We believe we will see significant growth in Europe in the years to come.

We also announced additional office expansions in fixed locations this past quarter, including new locations in the U S, India, the Philippines and Columbia.

We entered India in October of 2019 as of September of 2021, just two years. After launching we had nearly 5000 teammates in the region, making India the fastest growing region in caskets history.

In terms of M&A, our fifth growth lever.

We're taking a very disciplined approach here since we started task us our growth has been entirely organic as we begin to review acquisition opportunities. We're looking for ways to offer our clients new specialized services or additional geographic delivery capabilities. We're looking for businesses that are similar to us as possible.

In terms of growth rate and margin profile and most importantly that are aligned with our culture.

I'm proud of the progress our team has made on our five growth levers this quarter. Our success on all of these levers is ultimately the result of the hard work of our teammates.

Last quarter I talked about our culture as a core part of our competitive strategy.

This quarter I want to go a bit deeper into what makes our culture unique and why we invest so heavily in our task as teammates.

Since we started task us we've been able to attract incredible talent to our company. We've also built an environment of task best allows an individual to begin their career on the front lines in customer service or content security and grow into a leadership role fairly quickly we helped to foster this talent by investing in education and training.

As well as mentoring new managers.

In Q3, we took this a step further and launched the task. This academy a formalized program to provide training and guidance to frontline teammates looking to move into leadership roles. We saw over 800 employees enroll in the first month of the program.

Academy will help us retain the great teammates that we have to date and provide tasked us with an internal talent development resource.

Retaining great talent is more important than ever in this environment across the globe, we see increasing competition for talent.

Which makes me very proud to report that in Q3, our attrition remains well below 2019 levels.

Our ability to attract and retain talent continues to be key to our stellar performance. The investments that we've made over the years and the employee experience are paying off today more than ever.

We added approximately 4100 net new task as teammates in Q3 and achieved an on time hiring SLA of 99%.

As of September 30, our Glassdoor score was four seven stars and approximately 90% of task as teammates around the globe continue to work safely from home.

As we look towards 2022, we expect to begin to gradually return some teammates to our offices, but we will continue delivering some of our services from home for the foreseeable future.

One of the biggest areas of focus for me personally this year has been adding more world class leaders to our team.

We recently hired Katia Walsh as our new General Counsel and Kelly to Minnelli, Chief Financial Officer of Tri net was recently appointed to our board of directors.

Earlier in the year, Russian <unk> Sinha, Chief people Officer, and Stephane do Chief operating Officer also joined our executive leadership team.

All of these individuals are experienced and passionate leaders, who bring a wealth of knowledge to task us I'm, so excited to be working with them.

Before I wrap up I did want to acknowledge the tremendous performance from the team in a tough operating environment. We had another strong sales quarter delivered operationally for our clients and continue to attract amazing talent to our company.

With that I'll hand, it over to biology to go through the financials in a bit more detail and provide our outlook for the remainder of the year.

Thanks, Brian and good afternoon, everyone.

I'm going to discuss our financial results for the third quarter of particularly one please.

Please note that some of these items, our non-GAAP measures and the relevant reconciliations attached to the press release, we issued earlier today.

In the third quarter total revenues of 201 $1 million, an increase of $64 two person or the prior year.

We saw growth in each of the three specialized service offerings.

In the third quarter, our digital customer experience offering generated Harmon $25 3 million for the year over year growth rate of 64, 3%.

By growth from Fintech retail and e-commerce and on demand transportation clients.

Our content security business grew 34, 3%.

Q3, 2020, resulting in $45 $4 million off revenue.

Air operations business grew higher than 45, 2% year over year for revenues of $34 million.

In Q3, we also saw continued revenue growth from our top line. However, the group are exceeded by the ongoing expansion of our entire client base.

As a result of our revenue concentration with our largest client was just below 27% approximately flat compared with Q2, but less than 2% basically the revenues.

Our second largest client was 11% of our revenue down from 12% in Q2.

Our top 10, and top 20 clients accounted for 61, and 76% of revenues respectively in the quarter.

Revenue competition continues to improve in our thoughts and our top 20 clients, both year over year and quarter over quarter.

Our cost of service as a percentage of revenues and as a result of our margin profile is primarily driven by the geography location from it services provider.

Rather than the specific service line.

In the third quarter, we generated 52% of our revenues in the Philippines three.

3% of net revenues in the United States and 15% of our revenues from the rest of the void.

Mainly driven by our operations in India and Mexico.

Our cost of service as a percentage of revenue was 55, 9% in the third quarter.

Compared to 53, 4% in the prior year.

The increase was primarily driven by additional charges that we incurred in Q3 2021.

Can you elaborate a virtual operating model as well as the expansion cost we incurred as we prepare to return to the office next year.

That's been more of a greater percentage of our teammates at back to the office in 2022, we should see our cost of service as a percentage of revenues increased slightly.

I would note that we're also seeing wage pressure globally. This pressure is most significant in the U S.

This is dynamic we are seeing clients to move more quickly to annoy feasibility model, although the ability to ramp quickly and attract talent.

Initiate a product here.

Net net we think that the environment will ultimately be a benefit for us given the higher margin profile of these operations and our ability to meet our clients' needs.

In the third quarter.

G&A expenses were $16 3 million or 13% of revenues.

As I discussed on the last call in Q3.

<unk> got a full quarter of stock compensation expenses of $19 $2 million relating to equity grants, including new grants awarded in the third quarter.

As compared to the previous quarter of $5 $8 million pretax costs only from the IPO date on June 11th.

We are not accruing any stock compensation expenses in Q3 of 2020, when we've had not a public company.

In the third quarter, we also incurred full quarter of public company related expenses.

I'll, let some transaction related expenses for the secondary offering.

SG&A in Q3, 2022.

Two $2 million or producing 3% of revenues, which included $3 $6 million of lease termination and severance costs.

In the third quarter of 2020 model.

Adjusted EBITDA of $48 $1 million and a 23, 9% margin.

Back to $30 1 billion.

And the 24, 6% margin earned in the third quarter of 2020.

The reduction in adjusted EBITDA margin was primarily driven by public company costs and investments in digital initiatives.

Adjusted net income for the quarter was $32 8 million.

And adjusted earnings per share was <unk> 30.

By comparison in the year ago period, we earned adjusted net income of $2 2 million.

Adjusted EPS of <unk> 24.

Now moving onto the balance sheet cash and cash equivalents were $61 3 million.

As of September 32021.

Third with the June 30 balance of Heartland, $95 9 million.

Recall that the cash balance at the end of Q2 included IPO proceeds of $127 million.

Received in June of 2021.

We use these IPO proceeds in the third quarter two systems, the Phantom share nonrecurring teammate IPO bonuses that were owned in Q2 of $133 $7 million.

Cash from operations.

With a use of $191 million for the third quarter as compared to cash generation of $20 million in Q3 of 2020.

As a reminder, this call.

Cash flow from operations included $133 7 million impact of the IPO related bonus and Phantom stock expense that I just discussed.

In Q2, I briefly discussed the increase in the Holdco to favorable after the first of our strong revenue growth.

We saw the effect of strong revenue growth on receivables are gaining acuity at <unk> increased by $29 7 million from Q2 of 2021.

We are implementing a new order to cash process as we onboard new clients and expect to review their DSO in 2022.

Our capital expenditure increased in the third quarter to $15 2 million compared to $3 $1 million in Q3 of 2020.

The increase was primarily driven by new purchases of computer equipment.

Due to increased headcount and facility expansion as part of the return to office plans.

At this point I will outline our financial outlook for the remainder of the year.

We anticipate full year 2021 total revenues to be in the range of $747 million.

$751 million.

Bruce anything year over year growth of 56, 7% I can be.

We expect to earn a full year 2021 adjusted EBITDA margin of 24% to 24, 2%.

I will note that on the yield over year basis in Q4, adjusted EBITDA margins will continue to be impacted by public company expenses as well as expenses associated with the returning a portion of our teammates to the office.

Also we continue to ramp up our investments in digital innovation.

And development of new service offerings, which will drive above market growth in the long term.

Finally, Q4, typically has slightly higher seasonal operating cost due to the number of holidays in the quarter.

We expect to have an oral small tax benefit this year.

This was driven by the GAAP net loss, we incurred in the first half of the year due to the one time expenses related to the Phantom shares and nonrecurring teammates IPO bonus in <unk>.

Q2 of this year.

In closing, we had a tremendous 2021 nearly doubling our growth rate from 2020 as we head into 2022, we expect to deliver sustainable revenue growth and world class margins, but given the pharma low clip for the next year yet.

I will reaffirm that we remain confident.

Ability to grow at or above 25% in the medium term.

Thank you and I'm going to hand, it back to Brian before we take your questions.

Thank you apologies before we get to Q&A I want to share another task is to make story.

Our teammates are the key to everything we do here at tasked us and our commitment goes well beyond the four walls of our offices.

Deeply about the health of our coworkers and their family members.

In September Chris one of our team leaders based on the Philippines discovered that his father was very ill and rushed to the hospital for immediate medical attention.

This was in the middle of a serious COVID-19 spike in the country and then unfortunately, the hospital was unable to provide Chris its father with a bed.

Over the next few hours Christmas father's situation deteriorated rapidly.

I'm just struggling to bleed.

Chris Texted his fellow teammates for help he knew that in response to Covid task has had stockpiled supplies of oxygen for our team. Our team responded immediately brought Chris the supplemental oxygen, it's Bob a desperately needed.

Chris and his Bob at the time required to transport him to a hospital further away.

I'm happy to say that Christmas father's back home recovering today, thanks in part to the task team.

I am so proud of our team for acting quickly to support Chris and his father I'm also incredibly proud of the task US family Health insurance program, which ensured that Chris and his family were able to afford the quality of care is father needed without facing in surmountable debt.

Stories like these remind us by investing in people is not only the best business strategy, but the right thing to do.

With that I'll ask the operator to open the line for a question and answer session operator.

Thank you and as a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press the pound key please standby, while we compile the Q&A roster.

Our first question comes from Matt Vanvliet with <unk>. Your line is open.

Hey, guys. Thanks for taking my question really nice job on the quarter end.

Congratulations on continuing that run just two quarters and so.

I guess, what the first question you mentioned that two thirds of your signings came from existing logos.

Maybe a couple part question here. So one what has been the trend there over the last several quarters in terms of the overall mix is that higher or is that sort of in line with where we've been and then secondarily are you finding that.

Your customers potentially net new customers investing in task us and your capabilities earlier on in their life cycles.

To where you are sort of landing smaller, but the long term opportunity is much greater.

Yes, Matt Thanks, so much for the question.

So as far as new versus existing sales, we've definitely seen a trend towards more of our sales coming from existing customers and that's exactly what we'd expect to see as we.

The set of customers. We are working continues to expand.

A few years ago, I know that about 60% of our sales came from new logos and 40% came from existing clients. We saw that basically convert in the first half of this year with 60% of our sales coming from existing clients and 40% of our sales.

Coming from new logos, and obviously, we've seen that trend continue into Q3 with over two third of our sales coming from existing clients.

As far as the second question goes we definitely are seeing a trend towards a broad based embrace of outsourcing I think this is being driven by the rise rapid rise of digital Disruptors and also the Covid pandemic, which has forced us all to embrace new ways of working.

<unk> that are increasingly remote so at task as we're focused on identifying the next generation of digital Disruptors and delivering the specialized services that theyre going to need in order to scale.

The one challenge of getting larger.

Is that.

It does it does become more difficult to deal with companies in the very very early stages, we have a product called launch by task us, which enables us to work with companies who need as few as five full time resources.

We built for companies in the series a stage and we've had a lot of success with that product.

Great and then determine the success in the AI ops grew.

<unk> a business there or are you finding yourself in a larger variety of potential engagements there or is it really just embracing some of the specialties that <unk> already developed.

And your proven ability to train models so effectively.

We're finding demand is really expanding.

Implications of artificial intelligence themselves are growing we've gone from.

Beginning doing a lot of work in the autonomous vehicle space, where we continue to focus to working with clients across the social media space and other verticals, who are looking to train their own models in various situations. So certainly as the application of artificial intelligence continue to expand the demand for training.

Data for those services will continue to.

To expand as well.

Alright, great. Thanks for taking my questions.

Thank you.

Thank you. Our next question comes from Jane <unk> with Jpmorgan. Your line is open.

Hey, Thanks for taking my question.

Eight quarters.

Can you comment on the outlook you see for content moderation business, given specifically given the largest client has been in the news so much over the last few months.

What does all that news flow mean for near term outlook of content moderation footing now.

Yeah Puneet. Thanks for the question. So obviously, we can't comment on specifics of any individual customer, but let me talk about the social media space in general clearly social media is facing increasing scrutiny or scrutiny and regulatory pressure here in the United States and Canada.

Dave the most advanced regulatory regime.

Probably existing Europe, there, we've seen increased regulations lead to increased demand for essential services like constant security and AI operations from European service providers. So our belief is that as our clients and the social media space.

Based on the scrutiny they are likely to continue to expand their investments in these services given our reputation as a best in class provider of content security services, we stand to benefit from this growth.

I'll also say that we're finding more and more clients are turning us turning to us for content security services. So to date essentially anywhere content is being generated.

And shared content security services are needed we provide these services to job listing sites dating apps e-commerce and travel marketplaces, but by far the largest purchasers of these services today are the social media companies themselves and in particular, the three largest social networks in the world.

Got you no that's good dinner.

Thanks for that and then second.

With expectations of 25% or higher growth next years.

Very strong exit rate.

This year at around 2% thus far.

Should we think about phasing of growth across the four quarters next year.

Well this season.

Seasonality that we see.

Should expect like different than usual seasonality next year in terms of growth rates.

Let me take on the growth question and then I'll have biology talk about seasonality clearly we've had an amazing 2021 and when we look at the year Q1 is the quarter in which we had the strongest sales quarter in our company's history Q2, and Q3, we're also incredibly strong quarters.

Basically on par with one another but well.

Above the sales targets that we set for ourselves and.

So I think that kind of sets the stage for the growth that we've seen in 2021 in 2022, we're expecting to see sustainable revenue growth and world class margins and clearly we're not in this stage to give a formal outlook, but I will say, we're very confident in our ability to grow at or above 25.

5% into the medium term, so well beyond next year.

And then <unk>, maybe you want to touch on seasonality.

Yes, Thanks, Brian.

Q4, we are currently forecasting sequential quarterly growth of seven percentage points.

Point in the year over year growth of 65% bid, but not see huge seasonal swings in our business.

Four does have some seasonal payments in.

In Q4, we see major growth from e-commerce and to a lesser degree some foot diluted clients.

Also important to note that this tends to work against us in Q1 than.

E Commerce and food delivery demand is generally at its lowest.

Q1 has the additional challenge of having two fewer working days and compared to Q4 and like Brian mentioned, we will provide additional detail on Q1 and FY 'twenty two outlook in our Q4 call.

Got you. Thank you.

Thank you.

Question comes from Maggie Nolan with William Blair. Your line is open.

Thank you.

Congrats Brian you commented a little bit on Europe. So I'm wondering how large you help Europe can be or how fast do you help Europe can grow.

In the next couple of years here and then what's giving you the confidence that you can grow internationally with your clients that are either already global or are becoming increasingly global.

Thanks, Maggie yes, we've seen this incredible explosion of international expansion amongst our client base and for that reason, we're really confident that we're going to see huge growth in Europe over the next few years as I said I got the chance to travel to London and sit down with a lot of our clients.

Few of these folks that I was able to meet with we just signed deals with in Q3.

There's just a tremendous amount of innovation, that's happening in London, and Amsterdam and across the continent, and so we're really excited.

Launch our third site in Europe in 2022.

We're not going to be able to provide specific numbers and guidance, but I think that Europe could be as big for us as a delivery geography as the United States is today.

Okay, Good and then on the delivery points.

<unk> put in the press release.

This has grown substantially fastest growing country in task with history can.

Can you talk a little bit about the growth prospects for head count in India, Philippines, and where you want that mix to land kind of medium term and apology. If there any margin implications from any mix shifts that we should consider in our longer term model.

Yes, let me start I think that India has the potential to be as large for us is the Philippines over the medium term.

It's incredible what our team there has built we've got an incredible country leader in soft number Bonnie and the culture that we've created in India reminds me a lot of what we created in the Philippines over a decade ago. So I'm incredibly bullish on the region for tasked us I'll, let <unk> answer the question on margin impact.

Yes, and then I guess geographies are key drivers of margin photos and India margins are very comparable to the facility, hence growth in India is going to be margin accretive from a mix perspective.

Alright, Thank you Beth.

Thank you and our next question comes from Jason Kupferberg with Bank of America. Your line is open.

Hey, guys. This is Kathy on for Jason I guess, just following up on the hiring question previously what are your expectations in terms of hiring trends for the remainder of the year is there seasonality that we should be aware of and kind of what you got.

Tricia and expectations as well.

In conjunction with that thanks.

Thanks, Cathy Yeah, we expect to continue to hire roughly at the same rate that we have in the first three quarters.

Of the year.

I'm really proud of the team for their focus on attrition. This year, we've seen our attrition rates considerably lower than the rates that we had in 2019, obviously attrition rates in 2020 were artificially.

Depressed they were lower as a result of the Covid environment.

But given the more challenging labor market that we're facing globally to be at an attrition rate that is significantly lower than what we saw in 2019 is a remarkable accomplishment. So we're seeing the investments that we've made in our employee value proposition since day, one and begin to pay off now more than they ever have in Q3, we added.

<unk> thousand 100, net new teammates, we did that with an on time hiring SLA of 99%. Despite the fact that our clients have some very aggressive hiring timeline. So I'm very proud of what our team has been able to accomplish in this environment I will say the market in the U S is a bit more challenging and we expect to see wage pressure.

Here at a higher level than we have historically.

However, if we take a step back we're not the only company facing that wage pressure our clients themselves are facing a lot of that same pressure for internal hires and so we believe that as our customers look to hire the talent.

In the best spot in the world that will increasingly embrace nearshore and offshore models that we're very well positioned to deliver.

And where our gross margins will actually be higher than the onshore.

Alright, Thats really helpful. Thanks, and I guess, if I could ask a follow up.

I know you mentioned in your prepared remarks that youre very disciplined on M&A just wanted to get an update on your appetite or willingness to engage at that when do you use it just started to accelerate some other growth opportunities youre seeing whether that's international or in additional verticals outside of your core kind of eight or so thanks.

Yeah. Great question. So we are very serious about M&A, we've hired an SVP to lead our efforts here and Trent thrash who is absolutely fantastic and our focus really is on getting additional specialized services that we can sell to <unk>.

Customers or additional geographic delivery locations, where we can where we can add additional customers and.

We're really focusing.

Focusing on trying to find companies that are similar to task us as possible in terms of growth and margin profile in one place, where we absolutely will not compromise. The thing you can be culturally accretive to task.

So that limits the universe with which we can do within which we can do transactions were.

Focused on finding very high quality assets, and we'll be ready to pay a market price when we do.

Okay very helpful guys. Thanks.

Thank you.

Our next question comes from Dave Koning with Baird. Your line is open.

Yeah. Thanks, guys good job and I guess, maybe first of all kind of piggybacking on the last question on the gross margins really good in Q3, despite what seems like an environment of a ton of wage inflation I guess, how are you managing that and as we look in the future. It sounds like margins are expected to go up.

Gross margins.

Is it a balance of wage inflation is a little negative, but the mix of India and Philippines the growth in those kind of offsets.

Net benefit to you is that the best way to think about it.

Yes, I'll take that question, so hey, thanks, Steve So from a gross margin perspective, yes.

That's an important point in terms of the V. The mix is shifting that is helping us from a gross margin perspective in terms of predicting into the future.

One more thing as Mike the majority of our client contracts have annual call provisions that are lowest price increases based on wage inflation up to a cap.

So these price increases are enforced annually and even some gives us.

Thus far additional volume, but given the headline around wage increases we are having an easier time, increasing this year than any other time that I can remember so that isn't that is one one.

I'd, probably just the third lever from a from a products perspective is why is the Filipino peso look.

I appreciate that last year and speed Relatedly flat.

So you're starting to see that depreciated in Q3.

You kind of see that trend going forward. So that is also going to be helpful from a gross margin perspective.

Got you no that's really helpful.

I guess operationally I mean, it seems like you guys are just doing like everything right in.

How hard is it like it seems like you've done some things different you create platforms that seems really hard for clients to either move away from you or move to other kind.

Kind of split split volumes or anything maybe explain a little bit about that just about your ability to kind of retain and not have to like split volumes with other vendors and how thats all working.

Yes. Thanks for the question. It is really about identifying the key area of most need for our customers and generally thats a specialized service that brings a degree of sophistication.

That is difficult to deliver and so we want to go on a journey with our clients we want to start with whatever they are initially comfortable outsourcing and very often that can be fairly basic work, but as they get more comfortable outsourcing more sophisticated functions tasked us once.

It would be the provider who moves up the market with our clients' needs and so there are many many cases that I can point to where we've been successful in doing that.

So I think it's a combination of that also it's worth mentioning the technical investments that we've made.

Got an incredible team of technologists and our focus is on building huge enterprise systems CRM systems.

Instead, we are building lightweight browser based extension that actually sit on top of our client systems and suggest next best actions to our teammates are automate large portions of our teammates manual workflow using this approach we built chat bots workflow automation tools and a suite of tools that improve the experience of our teammates on the.

Frontline's of content security.

So I think it's a combination of sophistication of service level of technology technical enablement that that really makes the difference when it comes to the task.

Gotcha, Thanks, great jobs.

Thank you. Our next question comes from James <unk> with Morgan Stanley. Your line is open.

Thank you very much.

I guess one of the things that you're obviously, having a lot of success doing right now is hiring and if you contrast that with a lot of your customers. It seems like you definitely out.

An advantage from that perspective.

And you've been rewarded but I'm wondering if.

That is leading to down approaching route.

Could take on additional work.

How that fits into both of your hiring them.

Planning prospects, especially ones.

And one of our most recent surveys I think 85% of Chief Information Officer, we surveyed said that they had shortages and their attitude departments.

I'm wondering how that.

Factoring into your thinking about areas and capabilities, while adding to task us catalog.

Offering.

Yes, Jamie because very great question, we've seen our clients approach us with opportunities to re badge some of their employees in locations.

And in fact, we've done a number of these engagements in the United States now very successfully and so I think it speaks to the employee value proposition that we've been able to develop and our success in both attracting and retaining talent.

That will be a big growth level for us in the years to come.

Oh.

And then.

You obviously.

Growth is great, but I'm wondering if you could give us a little bit of being excited.

What the drivers are a plus different.

Different business segments, and I guess, what I'm really trying to understand is how sustainable is the demand and growth trajectory that youre seeing right now and what are the key things that youre trying to watch.

Assess whether it's continued.

That trajectory can continue can accelerate or perhaps to celebrate.

Yeah.

It's something I think a lot about we were.

We're ultimately a.

A way too.

Play the high growth Internet space, and if that space is growing we should be growing too.

We do that by delivering the three specialized services that we deliver today and moving up the value chain as our customers sourcing needs become more sophisticated we also do that by identifying the next generation of services that our customers are going to be demanding.

Fintech is a vertical that I've talked about in the past.

Ratably exciting space for us, where we have been adding lots of new customers and lots of new lines of service with existing customers. We've moved into the area of financial crimes anti money laundering know your customer work.

And then we're also looking at existing service lines like content security and saying can we introduce an offering that gets ahead of some of what what are some of our crypto currency clients.

We are doing in the non fungible token spacer NFC space.

So I think to answer the question our growth is going to be largely based on our success continuing to deliver the specialized services that our customers need effectively and then staying a step ahead identifying the next generation of specialized services customers are going to be demanding in developing an offering for them.

Thanks, Brian appreciate it.

Thank you and I'm currently showing no further questions at this time I'd like to.

The conference back over to Mr. By Somatic co founder and Chief Executive Officer of task.

Thanks.

Thank you so much.

Take another moment to thank our teammates our clients and our shareholders for joining us on this journey it is.

Humbling to have our second earnings call now in the books and we look forward to seeing you all on our annual earnings call early next year.

This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.