Q4 2021 Taskus Inc Earnings Call
[music].
Good afternoon, and welcome to the facts as Investor call. My name is Levy and I'll be your conference facilitator today.
At this time all lines have been placed on mute to avoid background noise.
After the Speakers' remarks, there'll be a question and answer session to ask a question. During this session you will need to press. The Star then the one key on you touched on the telephone.
I would now like to introduce Alan Katz, Vice President of Investor Relations.
You may begin.
Good afternoon, and thank you for joining the task of <unk> fourth quarter and year end 2021 earnings call.
Joining me on the call today are priced Mueller co founder and Chief Executive Officer of Casco and ball, just Tucker Chief Financial Officer.
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 website at IR Dot <unk> Dot com.
We also plan to post supplemental information on our website, including an investor presentation and other materials. Following this call.
Please note that this call is being simultaneously webcast on the Investor Relations section of the company's corporate website.
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 taxes, its 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.
Should not place undue reliance on any forward looking statements.
Factors that could cause actual results to differ from forward looking statements can be found at our update a prospectus filed with the SEC on October 22021, which is accessible on the SEC's website as well as in the Investor Relations section of our website.
Supplemented with subsequent periodic reports, we filed with the SEC.
Any forward looking statements made in this conference call, including responses to questions are based on current expectations as of today February 28, 2022, and task of 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 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 on the IR section of our website at IR Dot task of Dot com.
Now I will turn the call over to <unk> co founder and Chief Executive Officer Bryce.
Bryce.
Thank you Alan good afternoon, everyone and thank you for joining US 2021 was a very strong year for capstone and our team delivered growth in the fourth quarter that once again came in above the high end of our guidance range and we set ourselves up for another year of solid growth in 2022.
Okay.
Before I dive into the financial results I wanted to take a minute to acknowledge the great work of our team and keeping our teammates safe and healthy.
The pandemic and the recent world events have impacted everyone in different ways. Many of us have seen our mental health impacted in response, our global wellness resiliency team stepped up to support our teammates during this difficult year.
<unk> nearly 30000 group and one to one counseling sessions with task as teammates across the globe.
At task as our teammates are the most important asset in our company our highest priority is to support them.
Been safe.
Moving to our financials Q4 was another very strong quarter of top and bottom line growth.
Revenue grew organically by 63, 4% year on year to $226 $8 million.
Above the top end of our guidance range of $217 million.
Adjusted EBITDA grew 75% year on year to $56 2 million for an adjusted EBITDA margin of 24, 8% also above the top end of our guidance range of 23, 3%.
For the full year, we achieved $767 million in revenue.
$187 9 million in adjusted EBITDA.
For an adjusted EBITDA margin of 24, 7% again above the top end of our guidance ranges.
We ended the year with top line growth of over 59%, while maintaining margins that we believe are among the highest in the industry.
To say that I'm proud of what we accomplished this year would be an understatement.
2022 is off to a strong start the theme for the year will be growth driven by a broad and diversified client base.
For 2022, we expect to grow revenues organically at 30% at the midpoint of our guidance range of.
Apology will provide a more detailed breakdown of our guidance later in the call.
For now I'll turn it back to Q4, we continue to make great progress across our five growth. This past quarter, we executed, particularly well on the first two growth levers expanding with our current high growth clients and adding new clients across verticals in.
In digital customer experience, we grew revenue by 69% compared to Q4 2020.
Driven by expansions with existing clients and new client signings.
Big part of our success in this area has been driven by our investments in the fin Tech and crypto currency space, where we're delivering the specialized services. These high growth businesses need to grow and protect their brands.
We also saw continued expansion with our ride sharing and food delivery clients. These clients business models continue to evolve and grow and we're being asked to take on more complex work handling premium customers and dedicating teams to support critical rider and driver safety lines as well as investigate and manage fraud into.
<unk>.
Content security revenues grew by 23% compared to Q4, 2020, largely driven by volume growth with existing clients.
We expect content security growth to be a bit more lumpy than the rest of the business as volumes for this service are still highly concentrated amongst three leading social media companies. We currently provide these services to one of these companies and believe the other two companies represent meaningful growth opportunities we.
We have continued to grow our content security services with other clients such as dating apps e-commerce sites and exciting new and FTE marketplaces.
Finally, <unk> operations revenues continued to grow tremendously in Q4.
Revenue from AI operations grew by 128% year on year in the quarter, driven primarily by expansions with new and existing clients in social media fin Tech and E Commerce, and a large autonomous vehicle company.
We've been investing heavily in AI operations, developing a crowdsourcing platform that we call the task force.
Task versus Dot Com is now live and accepting sign ups.
This platform will enable gig workers with barings skill sets from across the globe to perform micro tasks for our high growth Tech clients.
We believe the most common use case for this platform will be collecting an annotated datasets for machine learning projects, but we're excited to see what our clients demand and our community delivers.
We're in the process of rebranding AI operations AI services to better represent our breadth of offerings and aligned to industry nomenclature.
Going forward I'll refer to as service is AI services, which will be made up of the same types of work that we previously described as AI operations.
Moving on to signings growth from existing clients again accounted for approximately two thirds of our signings in Q4, we had our largest signing in the quarter with one of our Fintech clients. This client is a major player in the crypto currency space, we will be expanding the customer experience work that we do for them today.
Increasing our support for institutional clients and providing security analysis of blockchain transactions.
We signed an expansion with our largest health tech client a digital health insurance provider to meet their rapid growth needs were.
We're providing both inbound and outbound services for their patients and providers and expect revenue from this client to roughly triple in 2022.
We added some great new clients in Q4, including an NFC marketplace.
Fast growing outdoor retailer with a cult like following and a large online genealogy business.
Finally, we landed our first contract with one of the largest tech companies in the world here, we're helping them to scale their learning and development function by delivering instructional designers technical writers and learning specialists.
Overall 2021 was a tremendous year for our sales and client service teams. We ended the year with a new client win rate of 49% and a total new business win rate of 60%.
Our net revenue retention rate for the year was 141% up from 117% to 2020, because we retained our high growth clients and help them to scale aggressively.
As we head into 2022, we have a strong pipeline of opportunities with both new and existing clients.
Before we move on I want to provide an update on our largest client.
As we said in the past this client is not only our largest client but also continues to be one of our strongest client relationships in.
In fact, we did more business with them in Q4 than in any other prior quarter.
In January of this year, we began discussing a project to optimize our global delivery footprint for this client.
Just on this analysis, we plan to ship hundreds of roles to our operations in the Philippines and India.
We continue to grow our teammate population globally with this client and expect to have more teammates supporting them at the end of the year than we do currently.
But given the changing geographic mix, we are not forecasting any year on year revenue growth from this client and our 30% revenue growth outlook for 2022.
This optimization project will begin in Q2 and be completed before the end of the year.
Once the transition is complete we will continue to have teammates supporting this client in all four countries from which we provide them services today.
We expect this client to continue to be our largest client for the foreseeable future.
It's also important to note that with robust demand across our broadening client base, we do not anticipate having to eliminate any jobs as a result of this transition.
Teammates supporting this client today, whose roles will be transitioned will move to support some of our most exciting and fast growing clients.
As I said at the start of the call. We expect 2020 to be Europe diversified growth across our growing portfolio of high Tech clients. We did a great job laying the foundation for this last year. For example in 2020, we had 46 clients at $1 million, a year or more in revenue, including eight clients and over.
$10 million a year.
In 2021, we grew to 72 clients over $1 million a year in revenues and the number of clients for whom we delivered $10 million or more in services doubled to 16 clients. We also continue to expand the number of specialized services that we deliver to our largest clients.
2027 of our top 20 clients use two or more of our specialized services in 2021. This number more than doubled to 15 of our top 20 clients.
That segways nicely into our third growth lever expansion of our service offerings.
We increased our investments in fin crime and risk in the fourth quarter in.
In Q4, we appointed our former head of legal to lead this new business line.
We also began hiring a team of experienced fraud risk and compliance practitioners, a crypto currency experts to lead our go to market strategy for these offerings.
We see this as a natural expansion of our capabilities for Fintech clients and see a tremendous opportunity ahead.
We're also expanding our learning experience services.
In addition to the signing that I mentioned earlier, we have multiple clients now turning to us to managed learning and training across their enterprise.
We're helping them to modernize their learning strategies deliver learning analytics and maintain their instructional and knowledge based content.
This service area is borne out of our ability to train and develop our own teammates we're excited.
To continue our investments in thought leadership and people development by broadening our suite of services, we will announce this new offering publicly this quarter branding. It is tasked us learning experience solutions or <unk>.
During the fourth quarter, we also made progress on our fourth lever.
Geographic expansion.
We expanded into Japan, and Malaysia, and expect to expand into Poland and Romania. This year.
We're also growing in our current geographic footprint, adding capacity in India, the Philippines, The U S and Latin America.
Lastly in terms of M&A, our fifth growth driver. We continue to look at deals and have seen some interesting opportunities. We're focusing on companies that are accretive to our long term growth rates margin targets and most importantly, our culture.
We're particularly interested in M&A to accelerate our growth in Europe or add to our specialized service capabilities. It's important to note that any M&A completed in 2022 will be incremental to the revenue guidance, we are providing today.
Our progress on these five growth levers and our broadening base of high growth clients.
<unk> us to deliver on our medium term revenue growth target of 25% or above for the years to come.
Our success in 2021 was equally impacted by our operations across the industry, we've heard about the challenges of attracting and retaining talent.
In Q4, we added approximately 4500 net new cashless teammates and met our clients hiring requirements.
Attracting great talent is key but retaining talent is equally as important our attrition rate for the year as measured by voluntary attrition. After 180 days of employment was 15, 3%.
Our Glassdoor rating was four six stars at the end of the year down 0.1 starts from last quarter, but well above our peers.
As of December 31, approximately 90% of task as frontline teammates around the globe continued to work safely from home.
We expect to begin to return some teammates to our offices starting in Q2, but given the recent variance we're taking a cautious approach here.
A portion of our global teammate population will likely continue to work from home for the foreseeable future.
2022 is off to a strong start our growth is being driven by a broadening base of innovative clients, we're expanding our geographic delivery footprint and deepening the specialized services our clients rely on us for we are well positioned to deliver 30% organic revenue growth at the midpoint of our guidance range.
With that I'll hand, it over to biology to go through the financials in a bit more detail and provide our outlook for Q1 and the year ahead.
Thanks, Mike and good afternoon, everyone.
I am going to focus my remarks on our financial results for the fourth quarter.
Please note that some of these items our non-GAAP measures.
The relevant reconciliations are attached to the press release, we issued earlier today.
In the fourth quarter, we earned total revenues of Gordon with the $6 $8 million, an increase of 63% over the prior year.
Do you think the total revenues for the year of $767 million on growth of 15, 9%.
We saw yoga will yield growth in each of our three specialized service offerings.
In the fourth quarter, although digital customer experience offering generated harlan $48 $1 million for yield or yield growth rate of 16, 9%.
Our content security business grew 23% compared to Q4, 2020, there's something and $44 6 million of revenue.
Our <unk> operations business grew Harlan, 28% year over year for revenues of $34 $1 million.
In Q4, we continued to see diversification of our revenue base.
Grow revenue with our top two clients year over year.
Are you growing with the rest of our clients at an even faster rate.
Also this site.
Our revenue concentration with our largest client was 25% down from 27% in Q3.
32% in 2020.
Even with the improvement in the revenue concentration of our largest clients grew revenues quarter over quarter by approximately $3 million.
Our second largest client was 9% of our revenue down from 11% in the previous quarter.
This slight sequential quarterly decline was the result of our success in helping clients optimize the global footprint and cost structure.
We expect to return to sequential revenue growth with display beginning Q1 of 2022.
And should continue to see sustained growth throughout the year.
In Q4 of 2021 .
Ben and top 20 clients accounted for 60, and 75% of our revenue respectively.
Compared to specifics at 80% in the prior year as the trend of revenue diversification continues.
In the fourth quarter, we generated 52% of our revenues in the Philippines.
1% of our revenues in the United States and 17% of our revenues from the rest of the world, mainly driven by our operations in India and Mexico.
In terms of all the postal service.
As a percentage of revenue it was statistics two person in the fourth quarter compared to 57, 1% in the prior year.
Yeah.
A reduction in cost of services was primarily driven by the depreciation in Philippine peso.
We expect our cost of services as a percentage of revenue to be roughly flat in 2020.
As a gauge inflation and expenses associated with beginning to move our teammates back to the office will be offset by geography mix and the cost of living type increases incorporated and maybe I'll follow up offline.
In the fourth quarter, our G&A expenses were $65 7 million or 19, 9% of revenue.
This compares with the SG&A in Q4, 'twenty 'twenty of $29 $9 million or 21, 5% of revenue.
Our Q4 2021 is G&A expense.
We included a full quarter of public company related expenses as well as stock based compensation expense.
Which we did not even good I hope by the company.
Stock based compensation and transaction costs.
Approximately 10% of revenue.
Excluding stock based compensation.
On transaction, Paul Eugenia would have been approximately 19%.
The adjusted EBITDA of $56 $2 million.
And the third before 8% margin in Q4.
Compared with $32 9 million and 23, 7% adjusted EBITDA margin in the same quarter last year.
Although revenue growth lower cost of service more than offset the recent public company costs and investments in digital initiatives.
For the full year, the $287 $9 million and adjusted EBITDA and adjusted EBITDA margin of 24, 7%, although the topping off a little guidance ranges.
Adjusted net income for the quarter was $37 1 billion.
And adjusted earnings per share was that before.
By comparison in the prior year period, we earned adjusted net income of $20 million and adjusted EPS of 22.
For the full year adjusted net income was $129 $4 million and adjusted earnings per share was $1 46.
Now moving onto our cash flow and balance sheet.
Cash from operations.
Was $38 million for the fourth quarter as compared to $13 2 million.
In Q4, 2020, driven by revenue growth.
Cash and cash equivalent with $63 6 million as of December 31st 2021, compared with September 30th balance of $61.3 million.
The improvement in DSO and according to the suitable both offset by the payment of a portion of it yet in bonus and increased capex associated with investments in technology infrastructure and our offices.
Our DSO reduced from 71 days in Q3 to 65 days in Q4, driven by improvements in our order to cash losses.
We see the opportunity for continued improvement in this process throughout 2022.
In the first half of 2021, although DSO increased as a result of revenue growth leading to unbilled receivables that with higher as a percentage of revenue than the approximately 3% or one month of in period revenue that we would expect to see.
We also had a large claim that is being that invoices almost immediately that began to pay their invoices, albeit complex pumps.
This led to a negative working capital impact in 2021 to be clear. This client has continued to be on or ahead of their agreed upon payment bills.
Although capital expenditure.
In the fourth quarter to $28 million or 9% of David Neal compared to $7 million or 5% of revenues in Q4 2020.
For the full year, Capex was $59 4 million or 8% of revenue up slightly as a percent of revenue compared with fiscal 2020.
Capex was primarily driven by purchases of computer equipment due to increased head count.
Phillip expansions as part of our return to office plan.
We expect this capex would be literally flat as a percent of revenues in 2022, as we build a new geography and continue to invest in technology systems.
At this point I will outline our financial outlook for the remainder of the year.
We anticipate full year 2022 portal revenues to be in the range of $980 million.
Two 1 billion.
The year over year growth rate of 13.1 person at the midpoint.
We expect full year 2022 adjusted EBITDA margin of approximately 23%.
For the first quarter 2022.
PCB revenues to be in the range of $229 million to $232 $2 million.
Listen thing year over year growth of 58% at the midpoint.
We expect two on adjusted.
Adjusted EBITDA margin of approximately 22, 5%.
As a result of the spirit of Omnicom. We saw can you just absenteeism in January .
While attendance has returned to normal levels in February our Q1 revenues will be impacted by approximately $2 million.
This impact is reflected in the Q1 guidance I just provided.
As a reminder, Q1 also has the impact of fewer working days when compared to any other quarter.
Despite the impact of these items, we are expecting over 50% growth at the midpoint.
In terms of margins we have.
Our cost of living price escalators in many of our contracts, which will offset beat inflation through the year.
Certain contract reached it anniversaries.
Overtime, we would also expect to see the positive impact from or the geography mix.
Clients moving work to offshore geographies and the benefit from currency as the dollar has appreciated versus the rupee and the peaceful compared with last year.
The year over year comparison of adjusted EBITDA margins will continue to be impacted by public company expenses in the first two quarters of the year.
Also we are planning for additional expenses associated with returning a portion of the mix of the office.
Finally, we are continuing to invest in developing technology.
Putting our service line expertise and expanding our sales and client organizations.
They could drive growth.
All in we are very well positioned to meet our revenue growth and margin targets. This year as well as deliver upon our medium term targets of two 5% or greater year on year revenue growth.
Adjusted EBITDA margin target I thought of about 25%.
Thank you.
100 back to Brian before we take your questions.
Thank you biology before we move into our Q&A session I wanted to share another task at teammates story.
In December 2021, typhoon that devastated parts of the Philippines, and especially impacted our site and behold.
When it became clear that that was going to hit the site, we mobilized as a company and our people and customers rally to ensure the safety and well being of our teammates.
Genus and mediate or voice or two teammates who work at <unk> playground, our site and ball.
Genesis mediator family home was destroyed by the typhoon.
During the typhoon our team grew concerned as both teammates were unreachable by phone.
The day after the typhoon our door to door rescue team was able to locate genital mediator and our team provided them temporary shelter in a hotel pre food and transportation services.
Despite having lost their home, Jonathan mediate or told us that they were ready to report back to work. So we transformed the second floor of our office into a temporary shelter for teammates and their families like Genesis and media were affected by the typhoon.
During their stay all teammates were provided free food medicine and toiletries.
And today I'm proud to report the genital mediator are having their homes rebuilt by task as teammates as part of our task Us home rebuilding program.
Our clients and teammates around the world donated their time money and resources to make this happen.
With quarantine restrictions now lifted finally going back to the Philippines next quarter and plan to visit our site in the hole to thank our team there personally.
For now I want to give a heartfelt and public. Thank you to all of our teammates their leaders and credible clients, whose compassion made this possible.
With that I will ask our operator to open our line for the question and answer session.
Ladies and gentlemen, if you'd like to ask a question at this time you will need to press. The Star then the one key on your Touchtone telephone to withdraw your question you May press the pound key.
And while we compile the Q&A roster.
Now first question coming from the line of Maggie Nolan with William Blair. Your line is now open.
<unk>.
Hi, Thank you.
Congrats to you guys versus the past one.
Sure.
Brian You said, you're optimizing the global delivery footprint for your largest clients can you talk a little bit more about what does this mean for the relationship and for profitability at the account and then do you expect a pattern and other lifestyle.
Yes, thanks, Maggie so.
The relationship with our largest client remains one of our strongest client relationships at the start of the year. We came together and we put together a plan to optimize our global delivery footprint in under that plan, we're going to move hundreds of roles to the Philippines and India before the end of this year as we said in the past we.
Lower revenue per employee in the Philippines, and India and that's the reason we're not forecasting any annual revenue growth from this client currently.
With that said since we put this plan in place we've actually been awarded.
Two new lines of business that will add hundreds of additional roles to our teams supporting this client globally. So by the end of this year, we're going to have more role supporting this claim globally than we do today to between hundreds of more roles.
It's also worth noting that the Philippines, and India, our highest margin geographies. So once the transition is complete the margins we earned from the client will expand.
And finally, we're seeing very robust growth from our other clients across our global regions. So every single teammate supporting this client today, whose roles will be transition will be offered new role supporting some of our most exciting and fast growing clients.
Thank you that's helpful and then.
Guide, including you know the outlook for Q1 can you talk a little bit about the sales trends and the pipeline. So far this year and how that compares to the prior year in Q1 in the prior year. Thank you.
2021 was one of our strongest actually our strongest sales year ever and I previously shared that Q1 of 2021 was the best quarter that we've ever had in terms of sales in our company's history Q1 of 2022 is off to a very fast start and it feels reminiscent of Q1 of last year.
I'm excited to tell you more about the specifics of the wins we've had so far when we report our Q1 results.
Thank you.
Okay.
And our next question coming from the line of James Faucette with Morgan Stanley . Your line is now open.
Thank you very much I wanted to ask about if youre seeing any incremental wage pressure in the market right now.
How that maybe impacting your expectations.
Expectations for margin evolution through the course of the year.
Yes, so I'll, let <unk> talk a little bit about this in specific but let me let me just.
Talk a little bit about the hiring environment.
We are seeing a very competitive hiring environment.
In environments like this that we see the investments that we've made in our <unk>.
<unk> value proposition since day, one really pay off.
The hiring environment today allows us to further distinguish ourselves from the competition. So in 2021, we added over 16000 net new positions and we actually added progressively more roles in each quarter and delivered against our clients very hiring very aggressive hiring timelines.
At the start of 2022, we're seeing the competition intensified and that's certainly putting pressure on wages.
This most acutely in the U S and for our global leadership positions, but despite this we anticipate.
Adding more as many or more roles in Q1 than we did in Q4 of 2021, which really underlines our ability to attract and retain talent in almost any market Paul do.
Do you want to comment further on margins.
Yes, hey, thanks space so.
So we are seeing wage pressure across all indications.
It could be the U S and the basic inflation actually depends on geography.
Moments I'm tenure, but these are being factored into the margin guidance.
I provided.
We believe that we are seeing current market rates and the geographies in which we opex. So we are not.
In our situation viviano, playing catch up on.
And based pressure will be offset by lower provisions in our contracts demos.
The margin accretive offshore geography mix that we're starting to see this year and positive currency environment.
And we believe that cost of service as a percent of revenues will be roughly flat from 2021 in 2020.
Got it and then if we look at kind of your guide for this year.
And which kind of changes in delivery metric cetera. What do you think is the adequate number of net head Count addition.
At least on a quarterly basis to support the revenue growth and I guess.
Part of that price you mentioned <unk>.
Acquisitions could be incremental to your guide, but what are the other potential upside drivers that you see to your growth rate for this year. Thanks.
Yeah. Thanks for that question James So.
To start we anticipate continuing to add well north of 4000 net new teammates in every quarter of this year.
And we're very confident in our ability to continue to do that for our clients.
As far as as far as the <unk>.
30% growth forecast that we provided at the midpoint.
22 is off to a very very strong start we've got visibility to around 95% of the forecast that we provided today and we're continuing to see robust demand across our broadening portfolio of clients.
With the exception of our largest clients, we expect that the other four of our top five clients will grow revenues significantly year on year, we expect two of our top five clients to grow revenue by double digit percentage points year on year and the other two to grow by triple digits percentages year on year.
And what's best about that is that we're already in the midst of aggressive hiring efforts for these clients today. So a large portion of this growth will be ramped by the end of Q1.
As I've already said Q1 sales are off to a very strong start in Q1 of 2022 feels reminiscent of a record sales quarter for Q1 of 2021.
And I would just finish by saying that we've reported three quarters now as a public company. So hopefully you're getting the sense that we only provide forecast that we have a high degree of conviction that we can meet or exceed.
That's great. Thank you so much guys.
And our next question coming from the line of Puneet Jain with JP Morgan Your line is open.
Hey, Thanks for taking my question.
Bryce or biology can you talk about like margin profile of some of the new services that you're adding and how should we think about margins beyond the SCS.
Like just qualitatively in terms of the levers puts and takes we should consider as we model margins beyond this year.
Yes. Thank you for that question Puneet so.
Start.
In the past, we pointed out that the main driver of MA.
Margin is geography, rather than service line.
And with that said, we are seeing higher margins in some of our new service lines, such as financial crimes learning experience solutions and the more advanced areas of AI services. So as these areas make up a larger and larger percentage of our revenues theyre going to help us to expand our margins.
I'll, let you comment maybe on the midterm margin guidance.
Yes.
So we have a ballpark this year they've indicated about 43% adjusted EBITDA margin what is indicative in the medium term, we would be able to deliver about 25.
But plus percentage from distributed a total of about 35%, leading adjusted EBITDA margin and a couple of things that is going to drive that positive operating leverage that comes from growth. We would see that both in our cost of service and SG&A line items and thickness as the Geo mix shift that we spoke about earlier towards offshore which is margin accretive and lastly, the.
Growth in specialized services that Brexit spoke about which are which.
Better price leading to growth and margins.
Got you and can you also talk about your use of cash priorities I know you talked about M&A.
Organic investments in business.
Can you talk about like with Jade, Yes, Youre looking for deals and the JV as you look into investing.
Yes, I mean, we're investing this year to continue our growth into 2023 and beyond specifically, we're making investments to deepen our specialized services.
Expand into new geographies and to.
Further accelerate our development of technology to help our clients drive efficiencies into their business. We're also expanding our sales and go to market team to accelerate our growth.
As we've indicated we absolutely intend to pursue acquisitions to accelerate all of these efforts and.
And we do not expect to let cash build up on the balance sheet.
And just to add onto what they've said.
You would also be out a very comfortable cash position and our net leverage ratio compared to adjusted EBITDA was above Nymex as of the urine, which is below our debt covenant of about our.
Ultimately that will keep on selling bikes.
Thank you.
And our next question coming from the lineup.
<unk> with Baird. Your line is open.
Yeah, Hey, guys, Congrats and it was all very impressive.
One thing that stood out as particularly impressive just to guide 30% ish and then basically have a headwind from the G. O shift it seems like so maybe could you tell us what your volume growth expectation like it seems like it's gonna be nicely better than the 30%.
I guess to start off.
Dave Yes, that's correct.
What's underlying this is our.
The strength of growth that we're seeing from across the rest of our client portfolio. So with the exception of our largest client we expect the other two of our top five clients to grow revenue year over year by either double or triple digit percentage points.
And.
That is going to lead to.
This really broad diversified base of customers that will help us.
To meet or exceed that at 30% revenue growth guidance.
Got you. Thanks, and then I guess the second question just.
Do you still expect now that the base keeps getting bigger and bigger do you still expect that you can grow 25% a year kind of past this year and are there acquisitions, maybe broadening out the different vertical markets and stuff to either acquisitions, you can find that actually can keep up the same type of growth rate as you see.
Yeah. So.
To answer the first question, we do when we think about medium term, we think about the next two to three years and so we absolutely believe we can grow revenue and 25% or above for the next two to three years at a minimum.
When when we look at our acquisitions, we started by focusing on a modestly sized acquisition that will be easier for a company of our size to digest.
Unfortunately, those companies are growing revenue at a percentage that's comparable or in some cases better than ours.
So we're excited to focus on that type of company.
When we.
When we do our first acquisition.
Great. Thanks nice job.
Yes.
And our next question coming from the line of Jason Kupferberg with Bank of America. Your line is open.
Yeah. Thanks, guys. Congrats on the quarter I know, there's been a lot asked on revenues and margins, but I'll ask on DSO and cash flow because I thought that was quite impressive as well and I know you mentioned the improvement in the DSO I think from 71% to 65 quarter over quarter can you give us the breakdown on the Unbilled portion of the DSO, there and any thoughts on that metric for 2002.
92, and for free cash flow that matter. Thank you Yep Yep.
From a non English perspective.
One of the things that I've mentioned earlier is that we did see an improvement in Q3 and Q4 of 'twenty 'twenty. One so if you look at the.
First half of 2021, Unbilled as a percentage of revenues was about 39%.
And the reason why it wasn't because we had a backlog of invoice because of the growth that we saw in 2021 with T. Coco in Q3, and Q4 and going forward.
In this business.
Typically tends to be about one month of quarterly revenues, which was the case in Q4, where we were at approximately about 33% and that is what it is but.
Continue to see.
Getting into our 2020.
Okay.
I know you guys mentioned Fintech and crypto a couple of times just curious what you might be able to tell us in terms of size and growth of those verticals combined at this point it sounds like it's becoming a much more relevant for you.
Yeah. Thanks for that question, so actually in 2021, Fintech health Tech and retail and E. Commerce all grew revenues at.
At Triple digit percentage point's year over year.
And we're seeing that.
Growth sustained into Q into 2022, particularly for Fintech Health Tech.
We we've been working with some of the industry leaders in both the Fintech and crypto currency space. In addition to providing customer support we're also providing financial crimes work, where we're at.
<unk> blockchain security transactions doing anti money laundering and know your customer work.
And so while we've seen robust growth over the last year. We think we're just getting started in the overall growth potential in this space.
Alright, well thanks for the comments I appreciate it.
And our next question coming from the line of Brian Essex with Goldman Sachs. Your line is open.
Hi, good afternoon, and thank you for taking the question and congrats on one I guess is a better than rule of any quarter.
Wanted to follow up with a bank to Maggie's question with regard to your largest customer in that migration effort.
How long does that take from beginning to end, maybe if you gave us a little bit of color in terms of how that conversation transpired was it was it more of an effort of them to kind of mitigate some rising costs on their side or has this been kind of a playbook from the beginning.
And does this kind of cut over in a specific quarter or is there a general migration throughout the year.
Thanks for the question Brian So.
We as a company go through these migrations with customers over time, we tend to start with clients when theyre very small scale very quickly and then look to optimize our clients' spend and so all of these efforts are done in conjunction and collaboration between <unk> and our clients and so.
This was a conversation that began in January of this year as we looked for ways to optimize our clients' spend.
And we made a recommendation to ship a large portion of these roles to the Philippines.
And to India.
The transition will start in Q2, and we expect it to be completed in Q3, so there'll be a relatively low impact to Q1 revenues and you'll see a full <unk>.
Back to our Q4 revenues.
And with that said I'll, just say again that we continue to win very exciting new business from this client we've won two opportunities since putting this plan in place and that will add hundreds of additional head count to our global delivery footprint for the client. This year. So we're very optimistic about our ability to grow with this client again in 2020.
Great.
Got it that's super helpful. So thank you for that and maybe just a quick follow up just on the top 10 clients.
Just backing out the first.
<unk> two largest for the quarter it looks like clients three through can more than doubled.
If my math is halfway right.
Could you give us a little bit of color in terms of the dynamics at play there was that a relatively diverse set of customers in the top 10, where there once that swapped in or out and what were some of the core drivers of that growth.
Yes, so it isn't a very diverse set of customers and we've got.
On demand transportation clients Fintech clients e-commerce clients.
All in our in our top 10 customers.
And we've seen really strong growth across that group as you said.
About a 100% when you back up the top two clients year over year.
And as I said as we looked forward to 2022.
Amongst our top five.
Other than our largest customer for those clients are going to be growing between double and triple.
Percentage points year on year. So we're really excited about the broad base of growth that we're seeing in 2022.
Got it helpful. Thank you very much.
Okay.
And our next question coming from the line of Dan Perlin with RBC capital. Your line is open.
Thanks.
And I'll Echo my Mic.
My well wishes here on some very good numbers, which we've obviously greatly appreciate.
I had a question around kind of the scope of work and how its changed in the past year or so price you talked about.
He said Fintech health Tech and retail all grew triple digits.
And with it some of it sounds like it's like all of these new clients are moving more they're giving you more specialized work that work seems like it's a positive mix shift for you in terms of both kind of breadth of opportunities, but also potentially.
Longer term margin opportunity. So maybe can you just speak to the scope of work.
And how that's changed over let's say the past maybe 12 months.
Yeah.
Thank you for the question Dan So we have seen increasing demand for more sophisticated services.
As an example in inside AI services going from doing things like data annotation.
Software quality operations, we've seen demand inside our financial technology services going from doing customer support into supporting institutional clients.
We're doing financial crimes work.
We just signed a deal this quarter with one of the largest technology companies in the world with a client that we've been pursuing for a long time and instead of getting in there doing standard customer support work, we're going to be providing learning experience solutions, so actually writing their training content in maintaining their knowledge base.
And all of those are services, where we will make higher margins.
So we're beginning to see the specialized service strategy pay off in the form of higher margins.
Yeah.
Is there something.
Just a follow up you know unique as we think about.
Fintech Crypto health tech, becoming larger and larger percentages of the mix of your business that we need to be mindful of.
Do they tend to want to be a little bit more in lower geo areas.
Which helps in addition to the specialized services that you're providing or is it just it's just the nature of the work that's coming your way now.
Yes, I think in both of these categories worse, we're supporting industry leaders.
And these are companies that really care about the quality of service that they're delivering.
When it comes to things like regulation in many ways, they're helping to champion and some of those regulations and we believe that those regulations will actually lead to an increase in demand for our services.
But when we think about geographic delivery footprint some of our fintech and help that clients.
Uh huh.
Demand that we keep work onshore for either regulatory reasons or just client preferences.
So I think that there's probably a lower probability of that.
Kind of geographic footprint optimization that we're going through with some other clients at the moment.
But ultimately time will tell.
Yeah, Okay. That's great. Thank you.
And our next question coming from the line of Matt <unk> with <unk>. Your line is open.
Yeah, Congrats guys. Thanks for taking the question.
Guess first price you've talked about the learning services opportunity both at the largest tech company in maybe expanding that out so wanted to dig in a little bit more there is this something that you've been doing for a number of your clients for a while and it's now.
Just becoming maybe a little bit more of a formalized product offering or is this something you've really just developed in the last several months or a couple of quarters and are now ready to go to market with it.
Yes, thanks for the question, Matt So and so actually what happened here was really interesting we've always invested.
Huge amount in the employee experience and that starts.
Making sure that we're training our teammates in the most exciting and innovative way possible. So we've got a.
<unk>, an incredible learning leader a gentleman named the ne Sharma, who has really championed our approach to teaching our teammates the skills they need to support our clients and putting our leadership through a really robust leadership development program. So that work attractive one of our large clients a couple of years back.
The large autonomous vehicle company and they were interested in us taking over.
A team that was working on training content for them. This is a re badge of a team based in the United States, We did that successfully.
And have since scaled that offering to multiple clients.
Using a combination of domestic and offshore resources to maintain knowledge based content and put together instructional content in many cases actually conduct the training sessions on behalf of our clients.
Great and then.
You talked about a couple of times.
Both with your largest customer and maybe second and many others as they start to use more of task us.
To look at the offshore markets, maybe a little bit more focus can you give us a sense of maybe how many of all your customers.
Are you some form of offshore today.
Maybe not just revenue mix, but just maybe the longer term kind of what the opportunity is how how that might have kind of puts and takes in the model overall.
Yes so.
As a company we started with delivery operations in the Philippines.
The Philippines, only and it wasn't until 2016, when we launched our operations in the U S that we had operations anywhere else. So the vast majority of our customers today use some some portion of our offshore delivery model.
But that being said we've got operations today.
In 10 different countries and we are.
Really.
Seeing a robust demand amongst customers to not just single source for reasons of business continuity.
Language coverage and sourcing the right talent at the right price.
Our customers are increasingly leveraging two or three or four of our of our countries to deliver their services.
Alright, great. Thank you for taking my questions.
I'm showing no further questions at this time I would now like to turn the call back over to Brian <unk>.
CEO and co founder for closing remarks.
Yeah, Thanks, Olivia and just in closing I want to thank our teammates our clients and our shareholders. We've had a very strong 2021, and we're looking forward to delivering another very strong year in 2022.
Look forward to our next call in May talk soon.
Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.
Okay.
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