Q2 2024 TaskUs Inc Earnings Call

Good afternoon and welcome to the Task Us second quarter 2024 investor call. My name is Josh and I will be your conference facilitator today. At this time all lines have been placed on mute to avoid background noise.

Operator: and I will be your conference facilitator today. At this time, all lines have been placed on mute to avoid background noise.

Operator: After the speaker's remarks, there will be a question and answer period. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. I would now like to introduce Trent Thrash, Senior Vice President of Corporate Development and Investor Relations. Trent, you may begin.

Speaker Change: After the speaker's remarks, there will be a question and answer period. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. I would now like to introduce...

Speaker Change: Senior Vice President of Corporate Development and Investor Relations. Trent, you may begin.

Trent Thrash: Good afternoon, and thank you for joining us for Taskus's second quarter 2024 earnings call. Joining me on today's call are Bryce Maddock, our Co-Founder and Chief Executive Officer, and Balaji Sekar, our Chief Financial Officer.

Trent: Good afternoon and thank you for joining us for task of the second quarter 2024 earnings call.

Trent: Joining me on today's call are Bryce Maddock, our Co-Founder and Chief Executive Officer, and Balaji Sekar, our Chief Financial Officer.

Speaker Change: 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 our website at ir.taskus.com.

Speaker Change: We have also posted supplemental information on our website, including an investor presentation and an Excel-based financial metrics file.

Trent Thrash: Full details of our results and additional management commentary are available in our earnings release, which can be found in the investor relations section of our website at ir.taskus.com. We have also posted supplemental information on our website, including an investor presentation and an Excel-based financial metrics file. Please note that this call is being simultaneously webcast on the Investor Relations section of our 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 law, including but not limited to statements regarding our future financial results and management 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.

Speaker Change: Please note that this call is being simultaneously webcast on the Investor Relations section of our website.

Speaker Change: Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meaning of the Federal Security's law, including but not limited to statements regarding our future financial results and management expectations and plans for the business.

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

Trent Thrash: You should not place undue reliance on any forward-looking statement. Factors that could cause actual results to differ from these forward-looking statements can be found in our annual report on Form 10-K, which was filed with the SEC on March 8, 2024. This filing, which may be supplemented with subsequent periodic reports we file with the SEC, is accessible on the SEC's website and our Investor Relations website. Any forward-looking statements made on today's conference call, including responses to questions, are based on current expectations as of today, and Taskus assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law.

Speaker Change: You should not place and be reliant on any forward-looking statements.

Speaker Change: Factors that could cause actual results to differ from these forward-looking statements can be found in our annual report on Form 10-K , which was filed with the SEC on March 8, 2024.

Speaker Change: This filing, which may be supplemented with subsequent periodic reports we file with the SEC, is accessible on the SEC's website and our Investor Relations website.

Speaker Change: Any forward-looking statements made on today's conference call, including responses to questions, are based on current expectations as of today.

Speaker Change: and task us as soon as no obligation to update or revise them, whether as a result of new developments or other odds, except as required by law.

Trent Thrash: The following discussion contains non-GAAP financial measures; for a reconciliation 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. Now I will turn the call over to Bryce Maddock, our co-founder and chief executive officer.

Speaker Change: The following discussion contains non-gap financial measures.

Speaker Change: for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP metric.

Speaker Change: Please see our earnings press release, which is available in the IR section of our website.

Speaker Change: Now I will turn the call over to Bryce Maddock, our co-founder and chief executive officer, Bryce.

Bryce Maddock: Thank you, Trent. Good afternoon, everyone, and thank you for joining us.

Bryce Maddock: Thank you, Trent. Good afternoon, everyone, and thank you for joining us. In the second quarter, we generated $237.9 million, outperforming the top end of our revenue guidance by approximately $6 million, or 2.6%.

Bryce Maddock: In the second quarter, we generated $237.9 million, outperforming the top end of our revenue guidance by approximately $6 million, or $2.6 I'm proud of our team, which has worked tirelessly throughout the challenges of the past 18 months. Their efforts paid off, and we returned to year-over-year growth in Q2, delivering nearly 4% revenue growth in the quarter. Our investments in sales and marketing are paying off.

Bryce Maddock: I'm proud of our team, which has worked tirelessly throughout the challenges of the past 18 months. Their efforts paid off and we returned to year-over-year growth in Q2, delivering nearly 4% revenue growth in the quarter.

Bryce Maddock: In Q2, we had our best bookings quarter since 2020. As a result of this, and continued sales momentum in early Q3, we have even greater confidence that our year-over-year revenue growth rate will continue to accelerate in Q3 and Q4 of this year. Accordingly, we're increasing both the bottom and top ends of our annual revenue guidance and now expect revenue of $955 to $975 million for the year. In just one quarter, we've increased the midpoint of our full year guidance by $27.5 million.

Bryce Maddock: Our investments in sales and marketing are paying off. In Q2, we had our best bookings quarter since 2022.

Bryce Maddock: As a result of this, and continued sales momentum in early 23, we have even greater confidence that our year over year revenue growth rate will continue to accelerate in Q3 and Q4 of this year.

Bryce Maddock: Accordingly, we're increasing both the bottom and top ends of our annual revenue guidance and now expect revenue of $955 to $975 million for the year.

Bryce Maddock: In just one quarter, we've increased the midpoint of our full year guidance by $27.5 million.

Bryce Maddock: The acceleration of revenue growth requires additional investments in operations, facilities, hiring, and training, which impacts our margins and cash flow. On a sequential basis, we grew Adjusted EBITDA in the quarter to $51.3 million for an Adjusted EBITDA margin of 21.5%, which was below our expectations.

Bryce Maddock: The acceleration of revenue growth requires additional investments in operations, facilities, hiring, and training, which impacts our margins and cash flow.

Bryce Maddock: On a sequential basis, we grew Adjusted EBITDA in the quarter to $51.3 million for an Adjusted EBITDA margin of 21.5%.

Bryce Maddock: As our growth rate accelerates in the back half of 2024, we expect this trend to continue. We now expect to deliver approximately 22% adjusted EBITDA margins and approximately $120 million in free cash flow for the full year 2024. In summary, we've emerged from the challenges we faced in 2023.

Bryce Maddock: This was below our margin guidance.

Bryce Maddock: As our growth rate accelerates in the back half of 2024, we expect this trend to continue.

Bryce Maddock: We now expect to deliver approximately 22% adjusted EBITDA margins and approximately $120 million in free cash flow for the full year 2024.

Bryce Maddock: We are experiencing robust global demand from new and existing clients. We expect our revenue growth rate to accelerate in the back half of the year. In fact, at the top end of both our Q3 and updated annual guidance, we would expect to return to double-digit revenue growth in Q4. This is a tremendous accomplishment for our global team.

Bryce Maddock: In summary, we've emerged from the challenges we faced in 2023. We are experiencing robust global demand from new and existing clients.

Bryce Maddock: We expect our revenue growth rate to accelerate in the back half of the year. In fact, at the top end of both our Q3 and updated annual guidance, we would expect to return to double-digit revenue growth in Q4.

Bryce Maddock: With the increase in our growth rate, we will see a temporary reduction in margins as we invest to support our scaling operation. As we look towards 2025, our goal is to continue driving growth while improving our margin and cash flow profile. Next, I'll spend time going through some of the highlights of our Q2 performance. Balaji will then walk through our Q2 financials and Q3 outlook and our increased full year 2024 guidance.

Bryce Maddock: This is a tremendous accomplishment for our global team. With the increase in our growth rate, we will see a temporary reduction in margins as we invest to support our scaling operations.

Bryce Maddock: As we look towards 2025, our goal is to continue driving growth while improving our margin and cash flow profile.

Bryce Maddock: Q2 revenue was $237.9 million, an increase of 3.8% on a year-over-year basis. The 4.6% sequential quarterly revenue increase was reflective of quarter over quarter growth in all three of our service lines and continued strength in revenue and bookings from our top 20 clients, who generated 68% of total revenue during the quarter. In particular, we have seen strong demand from our largest client, who contributed approximately 20% of total revenue in Q2 of 2024. In terms of delivery geographies, as expected, revenue from US delivery declined 32% in Q2 on a year-over-year basis.

Bryce Maddock: Next, I'll spend time going through some of the highlights of our Q2 performance. Balaji will then walk through our Q2 financials and Q3 outlook and our increased full year 2024 guidance.

Balaji Sekar: Q2 revenue was $237.9 million, an increase of 3.8% on a year-over-year basis.

Balaji Sekar: The 4.6% sequential quarterly revenue increase was reflective of quarter-over-quarter growth in all three of our service lines and continued strength in revenue and bookings from our top 20 clients who generated 68% of total revenue during the quarter.

Balaji Sekar: In particular, we have seen strong demand from our largest client who contributed approximately 20% of total revenue in Q2 of 2024.

Balaji Sekar: In terms of delivery geographies, as expected, revenue from U.S. delivery declined 32% in Q2 on a year over your basis.

Bryce Maddock: As a result, U.S. revenue was approximately 11% of total revenue during Q2. Our offshore geographies continue to demonstrate strong revenue results, growing by approximately 11% year-over-year. While Q2 saw rapid growth in Latin America, again at more than 40% year-over-year, we also delivered year-over-year growth in all of our major delivery geographies, including the Philippines, India, and the rest of the world. We ended the quarter with approximately 51,700 global teammates, an increase of approximately 2,100 teammates from the end of Q1.

Balaji Sekar: As a result, U.S. revenue was approximately 11% of total revenue during Q2.

Balaji Sekar: Our offshore geographies continue to demonstrate strong revenue results, growing by approximately 11% year-over-year.

Balaji Sekar: While Q2 saw rapid growth in Latin America, again at more than 40% year over year, we also delivered year over year growth in all of our major delivery geographies, including the Philippines, India and the rest of the world.

Balaji Sekar: We ended the quarter with approximately 51,700 global teammates, an increase of approximately 2,100 teammates from the end of Q1.

Bryce Maddock: In Q2, our sales and client service teams once again delivered strong performance. Like Q1, the majority of sales were driven by bookings from existing clients, which accounted for approximately 66% of total sign-ups. This marked a positive shift towards growth in new client bookings, which made up 34% of total signings compared to 28% in Q1. The size, quality, and depth of pipeline opportunities across our service lines from new and existing clients of all sizes continue to be encouraging and supportive of our commitment to accelerate growth throughout the remainder of 2020.

Balaji Sekar: In Q2, our sales and client service teams once again delivered strong performance.

Balaji Sekar: Light Q1, the majority of sales were driven by bookings from existing clients, which accounted for approximately 66% of total savings.

Balaji Sekar: This marked a positive shift towards growth in new client bookings, which made up 34% of total signings, compared to 28% in Q1.

Balaji Sekar: The size, quality, and depth of pipeline opportunities across our service lines from new and existing clients of all sizes continue to be encouraging and supportive of our commitment to accelerate growth throughout the remainder of 2024.

Bryce Maddock: During Q2, we again made progress on our strategic goal of cross-selling our suite of specialized services to our client base; the number of clients using multiple services increased by more than 10% year-over-year. We also continued expanding our presence in new markets, including adding notable use cases for clients in the fintech and health tech industries, as well as with fast-growing clients in the generative AI and technology world. Shifting focus to our service lines, in Q2 of 2024, digital customer experience revenue declined by 1.7% compared with Q2 of 2023.

Balaji Sekar: During Q2, we again made progress on our strategic goal of cross-selling or specialized services to our client base.

Balaji Sekar: The number of clients using multiple services increased by more than 10% year-over-year.

Balaji Sekar: We also continued expanding our presence in new markets, including adding notable use cases for clients in the FinTech and health tech industries, as well as with fast-growing clients in the generative AI and technology verticals.

Balaji Sekar: Shifting focused to our service lines in Q2 of 2024, digital customer experience revenue declined by 1.7% compared with Q2 of 2023.

Bryce Maddock: In DCX, year-over-year growth from new clients was more than offset by the prior year's termination of a travel industry client and other client cost optimization initiatives, which we've discussed on prior calls. However, compared to a sequential decline of 5.6 percent in Q1, sequential quarterly growth accelerated to an increase of approximately 3.4 percent in Q2.

Balaji Sekar: In DCX, year-over-year growth from new clients was more than offset by the prior year's termination of a travel industry client and other client cost optimization initiatives, which we've discussed on prior calls.

Balaji Sekar: However, compared to a sequential decline of 5.6% in Q1, sequential quarterly growth accelerated to an increase of approximately 3.4% in Q2.

Bryce Maddock: We now expect DCX to return to year-over-year growth during the second half of the year. In terms of DCX signings in Q2, we saw broad-based strength in bookings across most of our vertical markets, including our on-demand travel and transportation, technology, media and entertainment, health tech, and FinTech verticals. Consistent with recent quarters, crypto and equity trading-related revenue remained below 5% of total revenues for Q2.

Balaji Sekar: We now expect DCX to return to year-over-year growth during the second half of the year.

Balaji Sekar: In terms of DCX signings in Q2, we saw broad base strength in bookings across most of our vertical markets, including our on-demand travel and transportation, technology, media and entertainment, health tech, and FinTech verticals.

Balaji Sekar: Consistent with recent quarters, crypto and equity trading-related revenue remained below 5% of total revenues for Q2.

Bryce Maddock: In connection with our healthcare expansion strategy, in Q2, we signed two new multi-million dollar DCX contracts. One, with a provider of consumer healthcare and pharmacy services, leveraging our onshore work-from-home solutions, and the second, delivering provider and patient support and revenue cycle management services from our operations in Columbia to a company in the mental health industry. Lastly, as an example of the continued strength and demand we have seen for Latin American-based delivery, we signed a DCX contract with a leading provider of cloud-based website and e-commerce solutions for services to be delivered from Colombia. Moving on to trust and safety, which includes our risk and response solutions.

Balaji Sekar: In connection with our healthcare expansion strategy, in Q2 we signed two new multi-million dollar DCX contracts.

Balaji Sekar: One, with a provider of consumer health care and pharmacy services, leveraging our onshore work from home solutions, and the second delivering provider and patient support and revenue cycle management services from our operations in Columbia to accompany in the mental health industry.

Balaji Sekar: Lastly, as an example of the continued strength and demand we have seen for Latin American-based delivery, we signed a DCX contract with a leading provider of cloud-based website and e-commerce solutions for services to be delivered from Colombia.

Bryce Maddock: Revenue growth in this service line was again accretive to our overall growth rate, increasing 30.7% year-over-year and 6.9% quarter-over-quarter. This quarter, we again saw broad-based growth, including strong performance with our largest client, as well as with certain fintech, social media, and on-demand travel and transportation. During Q2, growth from our risk and response offering was again contributed to the overall growth rate of the Trust and Safety Services. I want to take a moment to highlight the success we have had in growing the financial crimes and compliance work that we classify as risk and response. Revenue from this subservice line doubled year over year.

Speaker Change: Moving on to trust and safety, which includes our risk and response solutions, revenue growth in this service line was again accretive to our overall growth rate, increasing 30.7% year-over-year and 6.9% quarter-over-quarter.

Balaji Sekar: This quarter, we again saw broad-based growth, including strong performance with our largest client, as well as with certain fintech, social media, and on-demand travel and transportation clients.

Balaji Sekar: During Q2, growth from our risk and response offering was again accrued to the overall growth rate of the trust and safety service line.

Balaji Sekar: I want to take a moment to highlight the success we have had in growing the financial crimes in compliance work that we classify as risking response. Revenue from this sub-service line doubled year or year.

Bryce Maddock: From a sales perspective, we continue to see strong demand for our trust and safety service. Based on recent booking trends and the increasing number of clients utilizing the service line, we expect Trust and Safety to continue outpacing DCX and AI services growth rates, resulting in Trust and Safety representing an increasing percentage of total revenue in future quarters. Notably, during Q2, we signed an expansion of European language content moderation and platform integrity operations with our largest client.

Balaji Sekar: From a sales perspective, we continue to see strong demand for our trust and safety services.

Operator: Josh and I will be your conference facilitator today. At this time, all lines have been placed on mute to avoid background noise.

Balaji Sekar: Based on recent booking trends and the increasing number of clients utilizing this service line, we expect Trust & Safety to continue outpacing DCX and AI Services' growth rate, resulting in Trust & Safety representing an increasing percentage of total revenue in future quarters.

Operator: After the speakers or marks, there will be a question and answer period. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

Trent Thrash: I would now like to introduce Trent Thrash, Senior Vice President of Corporate Development and Investor Relations. Trent, you may begin. Good afternoon, and thank you for joining us for Taskus' second quarter, 2024 earnings call. Joining me on today's call are Bryce Maddock, our co-founder and chief executive officer and Balaji Sekar, 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 our website at ir.taskus.com. We have also posted supplemental information on our website, including an investor presentation, and an Excel-based financial metrics file. Please note that this call is being simultaneously webcast on the Investor Relations section of our website.

Balaji Sekar: Notably, during Q2, we signed an expansion of European language content moderation and platform integrity operations with our largest client.

Bryce Maddock: We also increased the scope of work we provide to a global marketplace for unique and creative goods and the world's leading multi-channel social and gaming communications platform. Turning to AI services, while revenues declined approximately $2.5 million, or 7.7% on a year-over-year basis, we were pleased with the improved trajectory of this service line when compared to the 23.6% year-over-year decline we saw in Q1. As discussed last quarter, Q2 year-over-year AIS revenue comparisons continue to be impacted by declines at our largest client and our largest autonomous vehicle.

Balaji Sekar: We also increase the scope of work we provide to a global marketplace for unique and creative goods and the world's leading multi-channel, social and gaming communications platform.

Balaji Sekar: Turn to AI Services.

Speaker Change: While revenues declined approximately $2.5 million, or 7.7% on a year-over-year basis, we were pleased with the improved trajectory of this service line when compared to the 23.6% year-over-year decline we saw in Q1.

Balaji Sekar: As discussed last quarter, Q2 year over year AIS revenue comparisons continue to be impacted by declines at our largest client and our largest autonomous vehicle client.

Bryce Maddock: Despite the year-over-year decline, we were pleased that our AI service line returned to growth on a sequential basis in Q2, generating sequential growth of approximately 6.3%. As noted in our Q1 call, we anticipate AI services revenue to continue to stabilize over the course of 2024 as difficult comparisons lapse and recent signings continue to ramp. Moving to sales, we continue to see strong demand for AI services across multiple client verticals, including from clients in the social media and generative AI industries.

Trent Thrash: Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meaning of the Federal Security's law, including but not limited to statements regarding our future financial results and management's expectations and plans for the business. These statements for 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.

Balaji Sekar: Despite the year of a year decline, we were pleased that our AI service line returned to growth on a sequential basis in Q2, generating sequential growth of approximately 6.3%.

Balaji Sekar: As noted in our Q1 call, we anticipate AI services revenue to continue to stabilize over the course of 2024 as difficult comparisons lapse and recent signings continue to ramp.

Balaji Sekar: Moving to sales, we continue to see strong demand for AI services across multiple client verticals.

Trent Thrash: Factors that could cause actual results differ from these forward-looking statements can be found in our annual report on Form 10K, which is filed with the SEC on March 8, 2024. This filing, which may be supplemented with subsequent periodic reports we follow at the SEC, is accessible on the SEC's website and our Investor Relations website. Any forward-looking statements made on today's conference call, including responses to questions are based on current expectations as of today, and task us as soon as no obligation to update or revise them, whether as a result of new developments or otherwise, except is required by law.

Bryce Maddock: We signed multiple new statements of work supporting our largest client's generative AI development initiatives and an expansion of our relationship with the world's leading large language model developer in Q2. We continue to support this client across all three of our service lines in multiple geographies. Given this recent success selling AI services, we now anticipate a return to year-over-year growth in this service line during the second half of the year. Before moving on to our updated 2024 Outlook, I want to provide a brief update on our own generative AI initiative.

Balaji Sekar: including from clients in the social media and generative AI industries. We signed multiple new statements of work supporting our largest clients' generative AI development initiatives and an expansion of our relationship with the world's leading large-language model developer in Q2.

Balaji Sekar: We continue to support this client across all three of our service lines in multiple geographies.

Balaji Sekar: Given this recent success selling AI services, we now anticipate or return the year or the year growth in this service line during the second half of the year.

Balaji Sekar: Before moving on to our updated 2024 outlook, I want to provide a brief update on our own

Bryce Maddock: We continue to see success deploying our task GPT solutions to increase the efficiency and accuracy of our team. In the near term, we believe the biggest impact from generative AI will come from combining these technologies with well-trained teammates to deliver results that improve the customer experience on behalf of our clients. However, many clients have been slow to launch customer-facing generative AI initiatives, citing concerns with accuracy and data security.

Trent Thrash: The following discussion contains non-GAAP financial measures. For a reconciliation 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.

Balaji Sekar: We continue to see success deploying our task GPT solutions to increase the efficiency and accuracy of our teammates.

Balaji Sekar: In the near term, we believe the biggest impact from generative AI will come from combining these technologies with well-trained teammates to deliver results that improve the customer experience on behalf of our clients.

Bryce Maddock: Now, I will turn the call over to Bryce Maddick, our co-founder and chief executive officer. Bryce? Thank you, Trent.

Bryce Maddock: Good afternoon, everyone, and thank you for joining us. In the second quarter, we generated $237.9 million outperforming the top end of our revenue guidance by approximately $6 million, or 2.6%. I'm proud of our team, which has worked tirelessly throughout the challenges of the past 18 months. Their efforts paid off, and we return to year-over-year growth in Q2, delivering nearly 4% revenue growth in the quarter. Peter. Our investments in sales and marketing are paying off.

Balaji Sekar: Many clients have been slow to launch customer-facing generative AI initiatives, citing concerns with accuracy and data security. Thus far, we believe GenAI has created more opportunity than risk for Taskus.

Bryce Maddock: Thus far, we believe Gen AI has created more opportunities than risk for Taskus. Having said that, we recognize that over the next few years, clients will use GenAI to automate basic customer interactions. We've embraced this and are working hard to support our clients' automation efforts. However, we have and will continue to focus our offerings on the more complex and sensitive customer interactions and content types that we believe are less likely to be automated.

Balaji Sekar: Having said that, we recognize that over the next few years, clients will use GenAI to automate basic customer interactions.

Balaji Sekar: We've embraced this and are working hard to support our clients' automation efforts. We have and will continue to focus our offerings on the more complex and sensitive customer interactions and content types that we believe are less likely to be automated.

Bryce Maddock: Additionally, we will continue pursuing opportunities to support the emerging business process needs of companies in the GNI industry. Before handing it over to Balaji to provide more details on our Q2 results, I want to touch briefly on our 2024 outlook. In light of our strong operational execution and sales momentum, we're increasing our full-year revenue guidance to between $955 and $975 million. This represents a $27.5 million increase over our midpoint of $965 million.

Bryce Maddock: In Q2, we had our best bookings quarter since 2022. As a result of this, and continued sales momentum in early Q3, we have even greater confidence that our year over year revenue growth rate will continue to accelerate in Q3 and Q4 of this year. Accordingly, we're increasing both the bottom and top ends of our annual revenue guidance, and now expect revenue of $955 to $975 million for the year. In just one quarter, we've increased the midpoint of our full year guidance by $27.5 million.

Balaji Sekar: Additionally, we will continue pursuing opportunities to support the emerging business process needs of companies in the Gen AI industry.

Balaji Sekar: Before handing it over to Balaji to provide more details on our Q2 results, I want to touch briefly on our 2024 outlook.

Balaji Sekar: In light of our strong operational execution and sales momentum, we're increasing our full-year revenue guidance between $9,955 million. This represents a $27.5 million increase to a midpoint of $965 million.

Bryce Maddock: The acceleration of revenue growth requires additional investments in operations, facilities, hiring, and training, which impacts our margins and cash flow. On a sequential basis, we grew adjusted EBITDA in the quarter to $51.3 million for an adjusted EBITDA margin of 21.5%. This was below our margin guidance. As our growth rate accelerates in the back half of 2024, we expect this trend to continue. We now expect to deliver approximately 22% adjusted EBITDA margins and approximately 120 million in free cash flow for the full year 2024.

Bryce Maddock: We expect our revenue growth rate to continue to accelerate in the back half of the year. As such, we will be investing in new facilities, hiring, and training initiatives during the back half of 2024, which will have some impact on our market. Additionally, we have seen an increase in pricing pressure as some of our competitors, who have excess capacity, reduce their rates. We believe we are a premium provider of specialized services.

Balaji Sekar: We expect our revenue growth rate to continue to accelerate in the back half of the year.

Balaji Sekar: As such, we will be investing in new facilities, hiring, and training initiatives during the back half of 2024, which will have some impact on our margins this year.

Balaji Sekar: here.

Balaji Sekar: Additionally, we have seen an increase in pricing pressure as some of our competitors who have excess capacity reduce their rates.

Bryce Maddock: As such, we've been able to maintain adjusted EBITDA margins that are among the best in the industry, but we expect to continue to price our services competitively in order to achieve above market growth. As a result of these factors, we now expect full-year adjusted EBITDA margins of approximately 22% and free cash flow of approximately $120 million. As we look to 2025, our team is working tirelessly to lead the industry in adjusted EBITDA margins and revenue growth. With that, I'll hand it over to Balaji to go through the Q2 financials and our 2024 outlook in more detail.

Balaji Sekar: We believe we are a premium provider of specialized services. As such, we've been able to maintain adjusted EBITDA margins that are among the best in the industry.

Balaji Sekar: But we expect to continue to price our services competitively in order to achieve above market growth rates.

Bryce Maddock: In summary, we've emerged from the challenges we faced in 2023. We are experiencing robust global demand from new and existing clients. We expect our revenue growth rate to accelerate in the back half of the year. In fact, at the top end of both our Q3 and updated annual guidance, we would expect to return to double digit revenue growth in Q4. This is a tremendous accomplishment for our global team. With the increase in our growth rate, we will see a temporary reduction in margins as we invest to support our scaling operations.

Balaji Sekar: As a result of these factors, we now expect full-year adjusted EBITDA margins of approximately 22% and free cash flow of approximately $120 million.

Balaji Sekar: As we looked at 2025, our team is working tirelessly to lead the industry on adjusted EBITDA margins and revenue growth.

Balaji Sekar: With that, I'll hand it over to Balaji to go through the Q2 financials and our 2024 outlook in more detail.

Balaji Sekar: Thank you, Bryce, and good afternoon. I'm going to discuss the financial results for the second quarter of 2024. Please note that some of these items are non-GAAP measures, and the relevant reconciliations are attached to the press release we issued earlier. In the second quarter, we earned total revenues of $237.9 million, once again beating our guidance rate of $230 to $232 million. Revenues increased by 3.8% compared to the previous year, delivering on our promise to return to year-over-year growth in Q2.

Balaji Sekar: Thank you, Bryce, and good afternoon, everyone.

Balaji Sekar: I'm going to discuss about financial results for the second quarter of 2024. Please note that some of these items are non-GAAP measures and the relevant reconciliations are attached to the press release we issued earlier today.

Bryce Maddock: As we look towards 2025, our goal is to continue driving growth while improving our margin and cash flow profile.

Bryce Maddock: Next, I'll spend time going through some of the highlights of our Q2 performance.

Balaji Sekar: In the second quarter, we are total revenues of $237.9 million, once again beating our guidance range of $232 million.

Bryce Maddock: Biology will then walk through our Q2 financials and Q3 outlook and our increased full year 2024 guidance. Q2 revenue was $237.9 million, an increase of 3.8% on a year-over-year basis. The 4.6% sequential quarterly revenue increase was reflective of quarter-over-quarter growth in all three of our service lines and continued strength in revenue and bookings from our top 20 clients who generated 68% of total revenue during the quarter. In particular, we have seen strong demand from our largest client who contributed approximately 20% of total revenue in Q2 of 2024. In terms of delivery geographies, as expected, revenue from U.S, delivery declined 32% in Q2 on a year-over-year basis. As a result, U.S, revenue was approximately 11% of total revenue during Q2.

Balaji Sekar: They've been using increased by 3.8% compared to the previous year, they're living on our promise to return to year over year growth in Q2.

Balaji Sekar: We outperformed our guidance as a result of new client ramps and existing client volumes, both of which came in stronger than we expected. In the second quarter, our DCX offering generated $148.4 million, for a year-over-year decline of 1.7%.

Balaji Sekar: We outperformed our guidance as a result of new client ramps and existing client volumes, both of which came in stronger than we expected.

Balaji Sekar: In the second quarter, our DCX offering generated $148.4 million for a year-over-year decline of 1.7 percent.

Balaji Sekar: As Bryce covered earlier, the decline was primarily attributable to a U.S. travel industry client who lost a large contract and certain client cost optimization initiatives, including the Q1 2023 project ramp down from our largest client, both of which we have discussed in prior. These declines were largely offset by a mix of existing client growth and strong new client revenue performance, including seeing positive results from our strategic focus on fintech, healthtech, and Our trust and safety business, which includes our risk and response solutions, grew by 30.7% compared to Q2 of 2023, resulting in $59.1 million of revenue.

Balaji Sekar: As Bryce told earlier that the coin was primarily attributable to a U.S. travel industry client.

Bryce Maddock: who lost a large contract and certain client cost optimization initiators, including the Q1 2023.

Bryce Maddock: project randoms from our largest clients, both of which we have discussed on prior calls.

Bryce Maddock: Two. Our offshore geographies continue to demonstrate strong revenue results, growing by approximately 11% year-over-year. While Q2 saw rapid growth in Latin America, again at more than 40% year-over-year, we also delivered year-over-year growth in all of our major delivery geographies, including the Philippines, India, and the rest of the world. We ended according with approximately 51,700 global teammates, an increase of approximately 2,100 teammates from the end of Q1. In Q2, our sales and client service teams once again delivered strong performance.

Speaker Change: These declines were largely offset by a mix of existing client growth and strong new client revenue performance, including seeing positive results from our strategic focus on the fintech, healthtech, and generative AI industries.

Balaji Sekar: Our trust and safety business, which includes our risk and response solutions, grew by 30.7% compared to Q2 of 2023, resulting in $59.1 million of revenue.

Balaji Sekar: Sequential growth also accelerated from 5.8% in Q1 to 6.9% in Q2. As discussed earlier, we are excited about the progress in this service line, which included a return to year-over-year growth by our largest clients, as well as certain new and existing clients across our on-demand travel and transportation, social media, and FinTech workstations. Our AI services business declined by 7.7% year-over-year for revenues of $13.5 million due to the contractions of our largest client and our largest autonomous vehicle. However, we have seen demand from our AI services pick up in generative AI and social media.

Balaji Sekar: Sequential growth also accelerated from 5.8% in Q1 to 6.9% in Q2.

Bryce Maddock: Like Q1, the majority of sales were driven by bookings from existing clients, which accounted for approximately 66% of total signings. This marked a positive shift towards growth in new client bookings, which made up 34% of total signings compared to 28% in Q1. The size, quality, and depth of pipeline opportunities across our service lines from new and existing clients of all sizes continue to be encouraging and supportive of our commitment to accelerate growth throughout the remainder of 2024.

Balaji Sekar: As discussed earlier, we are excited about the progress in this service line, which included a return to year-over-year growth by our largest clients, as well as certain new and existing clients across our on-demand travel and transportation, social media, and FinTech verticals.

Speaker Change: Our AI service is business, declined by 7.7% euro per year for revenues of 30.5 million dollars due to contractions of a largest client and a largest autonomous race with client.

Speaker Change: We've seen the mind from a rare service of speaker, among generated rare and social media clients.

Bryce Maddock: During Q2, we again made progress on our strategic goal of cross-selling our suite of specialized services to our client base. The number of clients using multiple services increased by more than 10% year-over-year. We also continued expanding our presence in new markets, including adding notable use cases for clients in the FinTech and health tech industries, as well as with fast-growing clients in the generative AI and technology verticals. Shifting focus to our service lines in Q2 of 2024, digital customer experience revenue declined by 1.7% compared with Q2 of 2023.

Balaji Sekar: This increased demand and our return to sequential growth of approximately 6.3% in Q2 gives us confidence that this service line will return to growth in the back half of the year as we face the difficult year-over-year comparisons from client-driven cost optimization programs in 2020. In Q2, revenue concentration with our largest client was approximately 20%, up from 19% in Q2 of 2020. With strong bookings in Q1 and Q2, we have returned to growth with our largest client and now expect our revenue concentration with our largest client to increase for the remainder of the year.

Speaker Change: This increased demand, and our return to sequential growth of approximately 6.3% in Q2, gives us confidence that this service line will return to growth in the back half of the year, as we lap the difficult year-over-year comparisons from client-driven cost optimization programs in 2023.

Speaker Change: In Q2, revenue concentration at the world largest client was approximately 20% up from 19% in Q2 of 20%

Speaker Change: With strong bookings in Q1 and Q2, we have returned to growth with our largest client and now expect our revenue concentration with our largest client to increase for the remainder of the year.

Bryce Maddock: In DCX, year-over-year growth from new clients was more than offset by the prior year's termination of a travel industry client and other client cost optimization initiatives, which we've discussed on prior calls. However, compared to a sequential decline of 5.6% in Q1, sequential quarterly growth accelerated to an increase of approximately 3.4% in Q2. We now expect DCX to return to year-over-year growth during the second half of the year. In terms of DCX signings in Q2, we saw broad-based strength in bookings across most of our vertical markets, including our on-demand travel and transportation, technology, media and entertainment, health tech and FinTech verticals.

Balaji Sekar: Our top 10 and top 20 clients accounted for 55% and 68%, respectively, compared to 55% and 69% in Q2 of the previous year. We continue to see strength from our clients outside of our top 20, which grew 6.2% year over year.

Speaker Change: Our top 10 and top 25, accounted for 55% and 68% respectively, compared to 55% and 69% in Q2 of the previous year.

Speaker Change: We continue to see strength from our clients outside of our top 20, which grew 6.2% year-over-year.

Balaji Sekar: In the second quarter, we generated 58% of our revenues in the Philippines, 11% in the United States, 12% in India, and 19% from the rest of the world. We saw particularly strong year-over-year revenue growth of in excess of 40% in Latin America. For the full year 2024, we now expect to see year-over-year revenue growth in all of our delivery geographies, with the exception of United. Our cost of service as a percentage of revenue was 60.5% in the second quarter, compared to 58.3% in Q2 of the prior year.

Speaker Change: In the second quarter, we generated 58% of our revenues in the Philippines, 11% in the United States and 12% in India and 19% from the rest of the world.

Speaker Change: We hope that people are least drawn year over year revenue growth in excess of 40% in Latin America

Speaker Change: For the full year 2024, we now expect to see year-over-year revenue growth in all of our delivery geographies, with the exception of the United States.

Bryce Maddock: Consistent with recent quarters, crypto and equity trading-related revenue remained below 5% of total revenues for Q2. In connection with our healthcare expansion strategy, in Q2, we signed two new multi-million dollar DCX contracts. One, with a provider of consumer healthcare and pharmacy services, leveraging our onshore, work from home solutions, and the second, delivering provider and patient support and revenue cycle management services from our operations in Colombia to accompany in the mental helping.

Speaker Change: Our cost of service as a percentage of revenue was 60.5% in the second quarter compared to 58.3% in Q2 of the prior year.

Balaji Sekar: The increase was due to typical wage and benefits cost inflation, competitive pricing pressures, and higher recruiting and facilities expansion costs to support revenue expansion as a result of our improved revenue output. These increased expenses were partially offset by forest improvements in the Philippines, Colombia, and Mexico versus the prior year due to slightly stronger U.S. dollars.

Speaker Change: The increase was new to typical wage and benefits concentration, competitive pricing pressures, and the higher recruiting and facility expansion costs to support revenue expansion as a result of our improved revenue outlook.

Speaker Change: These increased expenses were partially offset by forest improvements in the Philippines, Colombia, and Mexico versus the prior year due to slightly stronger U.S. dollars.

Bryce Maddock: Industry. Lastly, as an example of the continued strength and demand we have seen for Latin American based delivery, we signed the DCX contract with a leading provider of cloud-based website and e-commerce solutions for services to be delivered from Colombia. Moving on to trust and safety, which includes our risk and response solutions, revenue growth in this service line was again accretive to our overall growth rate, increasing 30.7% year-over-year and 6.9% quarter of a quarter.

Balaji Sekar: In the second quarter, our SG&E expenses were $56.3 million, or 23.7% of the total. This compares to SG&E in Q2 of 2023 of $58.2 million, or 25.4% of revenue. Earned Out Consideration and Soft Compensation expenses decreased by $1.3 million and $3.4 million, respectively, compared to the previous.

Speaker Change: In the second quarter, our SG&E expenses were $56.3 million or 23.7% of revenue.

Speaker Change: This compares to a gene in Q2 of 20 23 of 58.2 million dollars or 25.4 percent of revenue.

Speaker Change: Earned Out Consideration and Stock Compensation expenses decreased by $1.3 million and $3.4 million, respectively, compared to the previous year.

Bryce Maddock: This quarter, we again saw broad-based growth, including strong performance with our largest client, as well as with certain thin tech, social media, and on-demand travel and transportation clients. During Q2, growth from our risk and response offering was again accretive to the overall growth rate of the trust and safety service line. I want to take a moment to highlight the success we have had in growing the financial crimes and compliance work that we classify as risk and response, revenue from this subservice line doubled year-over-year.

Balaji Sekar: These reductions were partially offset by our ongoing investments in sales, marketing, and technology that we discussed in prior fall reports and higher bonus expense, primarily due to better company performance. Q2 of 2024 also included an increase of $2.3 million related to litigation costs that are non-recurring and outside the ordinary course of business. In the second quarter of 2024, we earned adjusted EBITDA of $51.3 million, a 21.5% margin. This compares to $54.3 million in the previous year and $50.6 million in Q1 of 2021.

Speaker Change: These reductions were partially offset by our ongoing investments in sales, marketing, and technology that we discussed on prior calls, and higher bonus expense, primarily due to better company performance.

Speaker Change: Q2 of 2024 also included an increase of $2.3 million related to litigation costs that are non-recurring and outside the ordinary course of business.

Bryce Maddock: From a sales perspective, we continue to see strong demand for our trust and safety services. Based on recent booking trends and the increasing number of clients utilizing this service line, we expect trust and safety to continue outpacing DCX and AI services growth rate, resulting in trust and safety representing an increasing percentage of total revenue in future corners. Notably, during Q2, we signed an expansion of European language content moderation and platform integrity operations with our largest client.

Speaker Change: In the second quarter of 2024, we earned adjusted EBITDA of $51.3 million, a 21.5% margin.

Speaker Change: This compares to $54.3 million in the previous year and $50.6 million in Q1 of 2024.

Balaji Sekar: While roughly in line on a dollar basis, we came in lower than our adjusted EBITDA margin guidance, partially due to the ramped expenses associated with the higher than expected revenue growth for the year. We are also increasing our investments in operational leadership to take advantage of the momentum in the business.

Speaker Change: While roughly in line on a dollar basis, we came in lower than our adjusted if it down margin guidance, partially due to the ramp expenses associated with the higher than expected revenue growth for the year.

Bryce Maddock: We also increase the scope of work we provide to a global marketplace for unique and creative goods and the world's leading multi-channel social and gaming communications platform. Turning to AI services, while revenues declined approximately $2.5 million for 7.7% on a year-over-year basis, we were pleased with the improved trajectory of this service line when compared to the 23.6% year-over-year decline we signed Q1. As discussed last quarter, Q2 year-over-year AIS revenue comparisons continue to be impacted by clients at our largest client and our largest autonomous vehicle client.

Speaker Change: We are also increasing our investments in operational leadership to take advantage of the momentum in the business.

Balaji Sekar: Adjusted net income for the quarter was $28.6 million, and adjusted earnings per share was $0.31. By comparison, in the year-ago period, we earned adjusted net income of $31.8 million and adjusted EPS of $32.6 million. Our adjusted EPS included the impact of our lower share count, resulting from our stock repurchase program. Now moving on to the banishment.

Speaker Change: Adjusted net income for the quarter was $28.6 million and adjusted earnings per share was $0.31.

Speaker Change: By comparison, in the year-ago period, we earned adjusted net income of $31.8 million and adjusted EPS of $0.32.

Speaker Change: Our adjusted EPS included the impact of our lower share town, resulting from our stock free purchase program.

Balaji Sekar: Cash and cash equivalents were $171.1 million as of June 30, 2024, compared with the December 31, 2023 balance of $125.8 million. In the quarter, we bought back approximately a million shares at an average price of $11.33. As of quarter end, we had approximately $42.2 million of authorization left on our plan. Given the programmatic design of our share repurchase plan, we repurchased a limited number of shares during Q2. Our net leverage ratio continues to be healthy and was 0.4 times as of the quarter end.

Speaker Change: Now moving on to the balance sheet.

Speaker Change: Cash and cash equivalents were $171.1 million as of June 30, 2024, compared with the December 31, 2023 balance of $125.8 million.

Bryce Maddock: Despite the year-over-year decline, we were pleased that our AI service line returned to growth on a sequential basis in Q2, generating sequential growth of approximately 6.3%. As noted in our Q1 call, we anticipate AI services revenue to continue to stabilize over the course of 2024 as difficult comparisons laps and recent signings continue to ramp. Moving to sales, we continue to see strong demand for AI services across multiple client verticals, including from clients in the social media in generative AI industries.

Speaker Change: In the quarter, we bought back approximately a million shares at an average price of $11.36.

Speaker Change: As of quarter-range, we had approximately 42.2 million dollars of authorization left on our plan.

Speaker Change: Given the programmatic design of our share repurchase plan, we repurchase a limited number of shares during Q2.

Speaker Change: Our net leverage ratio continues to be healthy and was 0.4 times as of the quadrant.

Bryce Maddock: We signed multiple new statements of work supporting our largest clients' generative AI development initiatives and an expansion of our relationship with the world's leading large-language model developer in Q2. We continue to support this client across all three of our service lines in multiple geographies.

Balaji Sekar: Cash generated from operations was $30 million for the second quarter of 2024, as compared to $38.5 million in Q2 of 2021. The decline was primarily driven by an increase in accounts receivable related to the sequential growth in revenues from Q1 to Q2 of 2024 and an increase in tax payments compared to the prior year. Our capital expenditure decreased in the second quarter of 2024 to $4.5 million compared to $9.8 million in Q2 of 2020.

Speaker Change: Gas generated from operations was 30 million dollars for the second quarter of 2020 Ford as compared to 38.5 million dollars in June of 2023.

Speaker Change: The decline was primarily driven by an increase in accounts receivable related to the sequential growth in revenues from Q1 to Q2 of 2024 and an increase in tax payments compared to the prior year.

Bryce Maddock: News. Given this recent success, selling AI services, we now anticipate or return the year-of-year growth in this service line during the second half of the year.

Bryce Maddock: Before moving on to our updated 2024 outlook, I want to provide a brief update on our own generative AI initiatives. We continue to see success deploying our task GPT solutions to increase the efficiency and accuracy of our teammates. In the near term, we believe the biggest impact from generative AI will come from combining these technologies with well-trained teammates to deliver results that improve the customer experience on behalf of our clients. Many clients have been slow to launch customer-facing generative AI initiatives, citing concerns with accuracy and data security.

Speaker Change: Our capital expenditure decreased in the second quarter of 2024 to $4.5 million compared to $9.8 million in Q2 of 2023.

Balaji Sekar: The strength of our anticipated client ramp will continue driving an increase in investments during the remainder of 2020. As a result, we now expect CapEx to be approximately $42 million for the year. Year-to-date free cash flow was $73.1 million, or 71.8% of adjusted EBIT. As noted in Q1, we expect lower free cash flow conversion due to increased capital expenditures and the buildup of working capital associated with accelerating revenues during the remainder of 2021.

Speaker Change: The strength of our anticipated client ramp will continue driving an increase in investments during the remainder of 2024.

Speaker Change: As a result, we now expect Katz to be approximately 42 million dollars for the year.

Speaker Change: Year-to-date free cash flow was $73.1 million or 71.8% of adjusted EBITDA.

Bryce Maddock: Thus far, we believe Genai has created more opportunity than risk for Taskus. Having said that, we recognize that over the next few years, clients will use Genai to automate basic customer interactions. We've embraced this and are working hard to support our client's automation efforts. We have and will continue to focus our offerings on the more complex and sensitive customer interactions and content types that we believe are less likely to be automated. Additionally, we will continue pursuing opportunities to support the emerging business process needs of companies in the Genai industry.

Speaker Change: As noted in Q1, we expect lower free casserole conversion due to increased capital expenditures and the buildup of working capital associated with our accelerating revenues during the remainder of 2024.

Balaji Sekar: In terms of our financial outlook for the remainder of the year, we now anticipate full-year 2024 revenues to be in the range of 955 million to 975 million, and we expect to earn a fully adjusted EBITDA margin of approximately 22%. The revision in Adjusted EBITDA Margin Guidance captures the impact of ramped costs to deliver the increased revenue forecast, additional investment in operations, and the impact of the competitive pricing environment that we are currently in.

Speaker Change: In terms of a financial outlook for the remainder of the year, we now anticipate full year, 20, 24 revenues to be the range of 955 million to 975 million dollars.

Speaker Change: We expect to earn a fully-adjusted EBITDA margin of approximately 22%.

Speaker Change: The revision in Adjusted EBITDA Margin Guidance captures the impact of ramped costs to deliver the increased revenue forecast, additional investment in operations, and the impact of competitive pricing environment that we are currently in.

Bryce Maddock: Before handing it over to apology to provide more details on our Q2 results, I want to touch briefly on our 2024 outlook. In light of our strong operational execution and sales momentum, we're increasing our full-year revenue diagrams between $9.55 and $975 million. This represents a $27.5 million increase to a midpoint of $965 million. We expect our revenue growth rate to continue to accelerate in the back half of the year. As such, we will be investing in new facilities, hiring and training initiatives during the back half of 2024, which will have some impact on our margins this year.

Balaji Sekar: Including the additional investments supporting our improved outlook, we expect to generate free cash flow of approximately $120 million for the year. This implies a conversion rate of over 50% from adjusted EBITDA, a great demonstration of our financial strength. Our free cash flow guidance excludes the impact of certain litigation costs which are non-recurring and outside the ordinary course of business. In the first half of 2024, we incurred approximately $2.6 million related to this litigation matter.

Speaker Change: including the additional investment supporting our improved outlook, we expect to generate free cash flow of approximately $120 million for the year.

Speaker Change: This implies a conversion rate of 1.5% from a gist-to-diving dust, a great demonstration of our financial discipline.

Speaker Change: Our Freak National Guidance, exclusive impact of certain litigation costs which are non-pretering and outside the ordinary course of business.

Speaker Change: In the first half of 2024, we incurred approximately 2.6 million dollars related to these litigation matters.

Balaji Sekar: We will continue to exclude these costs from our adjusted EBITDA calculations. For the third quarter, we expect revenues to be in the range of $244 million to $246 million, and we expect our adjusted EBITDA margin to be approximately 21.5%. The adjusted wisdom margin guidance for the third quarter and full year is based on current forecasts, so any change to currency rates would impact our market. As a reminder, the majority of our revenues are built and collected in U.S. dollars, so we do not see the impact of U.S. dollar fluctuations in our revenues. I would now hand it back to Bryce.

Bryce Maddock: Additionally, we have seen increase in pricing pressure as some of our competitors who have excess capacity reduced their rates. We believe we are a premium provider of specialized services. As such, we've been able to maintain adjusted EBITDA margins that are among the best in the industry. But we expect to continue to price our services competitively in order to achieve above market growth rates. As a result of these factors, we now expect full-year adjusted EBITDA margins of approximately 22% and a free cash flow of approximately $120 million.

Speaker Change: We will continue to exclude these costs from our adjusted EBITDA calculations.

Speaker Change: For the third quarter, we expect revenues to be the range of 24 million to 246 million dollars and we expect our adjusted EBITDA margin to be approximately 21.5%.

Speaker Change: The adjusted-to-dump margin guidance for the third quarter and full year is based on current forex rates. So any change to currency rates would impact our margins.

Speaker Change: As a reminder, the majority of our revenues are built and collected in U.S. dollars, so we do not see the impact of U.S. dollar fluctuation in our revenues.

Bryce Maddock: As we look to 2025, our team is working tirelessly to lead the industry on adjusted EBITDA margins and revenue growth.

Bryce Maddock: Thank you, Balaji. Before we open for questions, I'd like to share a story about one of our dedicated Taskus team members. Bulbul Saigal is a team leader at our site in Indore, India. She loves working for Taskus because we're deeply committed to the health, well-being, and career development of our employees. We strive to create a supportive environment where employees can thrive and build fulfilling careers. Bulbul has been actively utilizing our academy learning platform to advance her career and prepare for her next role.

Speaker Change: I will now hand it back to Bryce.

Balaji Sekar: With that, I'll hand it over to apology to go through the Q2 financials and our 2024 outlook in more detail. Thank you, Bryce, and good afternoon everyone. I'm going to discuss about financial results for the second quarter of 2024.

Bryce Maddock: Thank you, Balaji. Before we open for questions, I'd like to share a story about one of our dedicated task estimates.

Speaker Change: Mobile Sekar is a team leader at our site in indoor India. She loves working for Tascos because we're deeply committed to the health well-being and career development of our employees.

Balaji Sekar: Please note that some of these items are non-gap measures and the relevant recommendations are attached to the press release we issued earlier. Today. In the second quarter, we earned total revenues of $2.37.9 million, once again beating our guidance rate of $2.30 to $2.32 million. The revenues increased by 3.8% compared to the previous year, delivering on our promise to return to year over year growth in Q2. We outperformed our guidance as a result of new client rams and existing client volumes, both of which came stronger than we expected.

Speaker Change: We strike creative support of environment where teammates can thrive and build fulfilling careers.

Speaker Change: Obol has been actively utilizing our academy learning platform to advance her career and prepare for her next role. She's enrolled in our Taskus Operations Manager Preparatory Academy and aspires to be promoted to an Ops Manager after gaining the necessary experience.

Bryce Maddock: She's enrolled in our Taskus Operations Manager Preparatory Academy and aspires to be promoted to an Ops Manager after gaining the necessary experience. When it comes to health and wellness, Ullvold shares that our wellness team in Indoor has been incredibly supportive. They're well equipped to help teammates navigate both their personal and professional lives. Global has regular one-on-one sessions with one of our local wellness counselors and says the guidance and support she receives is a critical part of her. Bobo's story is a testament to our focus on personal and professional growth and our unwavering commitment to our community.

Speaker Change: When it comes to health and wellness, we'll bold share that our wellness team and indoor has been incredibly supportive of her news.

Speaker Change: They're well equipped to help teammates navigate both their personal and professional lives.

Global: Global has regular one-on-one sessions with one of our local wellness counselors and says the guidance and support she receives is a critical part of her success.

Balaji Sekar: In the second quarter, our DCX offering generated $1.48.4 million for a year over year decline of 1.7%. As Bryce covered earlier, the decline was primarily attributable to a U.S, travel industry client who lost a large contract and certain client cost optimization initiatives, including the Q1.2023 project rams from our largest client, both of which we have discussed on prior talks. These declines were largely offset by a mix of existing client growth and strong new client revenue performance, including thin positive results from our strategic focus on the flintech, health tech and generative AI industries.

Speaker Change: Bobo's story is a testament of our focus on personal and professional growth and our unwavering commitment to our teammates.

Bryce Maddock: I'll be traveling to our sites in India later this month, where I look forward to meeting Bulbul and many of our hardworking and talented teammates in person. With that, I'll ask the operator to open our line for our question and answer session. Operator? Thank you.

Speaker Change: I'll be traveling to our sites in India later this month where I look forward to meeting global and many of our hardworking and talented teammates in person. With that, I'll ask the operator to open our line for her question and answer session. Operator.

Operator: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for questions. Our first question comes from Jonathan Lee with Guggenheim Securities. He may proceed.

Speaker Change: Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for questions.

Jonathan Lee: Great, thanks for taking our questions. It's tremendous to see the inflection of your top client. You touched on some of the uptick there, but can you help unpack some of the moving pieces, how you're thinking about the durability there, and perhaps whether that's a share shift dynamic or maybe the client just is doing more work broadly?

Speaker Change: Our first question comes from Jonathan Lee with Guggenheim Securities. He may proceed.

Balaji Sekar: Our trusted safety business, which includes our risk and response solutions, grew by 30.7%, compared to Q2 of 2023, resulting in $59.1 million of revenue. Sequential growth also accelerated from 5.8% in Q1 to 6.9% in Q2. As this goes earlier, we are excited about the progress in this service line, which included a return to year over year growth by our largest client, as well as certain new and existing clients across our on-demand travel and transportation, social media, and flintech verticals.

Jonathan Lee: Great, thanks for taking our questions. It's tremendous to see the inflection of your top client. You touched on some of the uptick there, but can you help unpack some of the moving pieces?

Speaker Change: is how you're thinking about the durability there, and perhaps whether that's a shared shift dynamic or maybe the client just.

Bryce Maddock: Sure. Yeah, our relationship with our largest client continues to be incredibly strong. We've won multiple large pieces of business with this client this year. We're scaling operations in every country where we operate with them and are expanding our operations into two new countries. We're supporting them on vital initiatives like their investments in Gen AI and trust and safety. And I'll also note that while we're supporting them in this year's election, that is not the source of the recent growth. And we don't anticipate any reductions at this client post-November.

Jonathan Lee: is doing more work broadly.

Speaker Change: Sure. Yeah, our relationship with our largest client continues to be incredibly strong. We've won multiple large pieces of business with this client this year. We're scaling operations in every country where we operate with them and are expanding our operations into two new countries.

Speaker Change: We're supporting them on vital initiatives like their investments in JNI and trust in safety and I'll also note that while we're supporting them on this year's elections, that is not the source of recent growth and we don't anticipate any reductions at this client post no number.

Balaji Sekar: Our AI services business declined by 7.7% year over year for revenues of $30.5 million due to contractions of our largest client and our largest autonomous basis client. We have seen demands from our AI services because among generative AI and social media clients, this increased demand and our return to sequential growth of approximately 6.3% in Q2 gives us confidence that this service line will return to growth in the back half of the year as we last the difficult year over year comparisons from client-driven cost optimization programs in 2023.

Bryce Maddock: In some cases, this business is being taken from the competition. As I outlined in the annual call this year, the first growth lever that we're focused on is going after our competition and trying to take business from them. And we've been successful in doing that at this client, along with other clients. But in other cases, we're just getting net new business that our team has competed for in one. So given the success here, we expect our revenue growth with this client to outpace the rest of the business, and our revenue concentration with this client to increase over the next few years.

Speaker Change: In some cases this business is being taken from the competition.

Speaker Change: As I outlined in the annual call started this year, the first growth lever that we're focused on is going after our competition and trying to take this from them and we've been successful in doing that at this client along with other clients.

Speaker Change: But in other cases, we're just getting net new business that our team has competed for in one. So given the success here, we expect a revenue growth of this client to outpace the rest of the business and the revenue concentration with the clients to increase over the next few quarters.

Bryce Maddock: Got it. Appreciate your insight there. And as a follow-up, can you help decompose some of the pricing pressure you're seeing across your service lines and customer base, especially as you look to expand into the enterprise customer base? I want to also understand whether AI will augment your pricing discussions in the quarter. Yeah, it's an interesting idea

Balaji Sekar: In Q2, revenue concentration with our largest client was approximately 20% up from 19% in Q2 of 2023. With strong bookings in Q1 and Q2, we have returned to growth with our largest client and now expect our revenue concentration with our largest client to increase for the remainder of the year. Our top 10 and top 20 clients are counted for 55% and 68% respectively compared to 55% and 69% in Q2 of the previous, of India.

Speaker Change: Got it. Appreciate your insight there. And as a follow-up, can you help decompose some of the pricing pressure you're seeing across your service lines and customer base, especially as you look to expand into the enterprise customer base? I want to also understand if you've seen...

Bryce Maddock: Yeah, it's an interesting environment right now because, if you look at the broader market, the growth rates that we saw in the post-COVID era have really slowed down. And so, as I said, this year, we decided to focus exclusively on one goal, and that goal was to return to growth. We spent 15 years doing nothing but growing at Taskus, and in the past 18 months, we stopped growing and started shrinking. And having experienced both growth and decline, I can tell you growth is a lot more. It may not solve all of our problems, but it certainly is a much better position to be in than to have declining revenues.

Dean: Dean, the VAI Augmentary Pricing Discussions in the Quarter.

Dean: Yeah, it's an interesting environment right now because if you look at the broader market, the growth rates that we saw in the post-COVID era have really slowed down.

Speaker Change: And so, as I said, [inaudible]

Speaker Change: We, this year, have decided to focus exclusively on one goal and that goal was to return to growth.

Balaji Sekar: We continue to see Trent from our clients outside of our top 20, which grew 6.2% year-over-year. In the second quarter, we generated 58% of our revenues in the Philippines, 11% in the United States, and 12% in India, and 19% from the rest of the world. We saw particularly strong year-over-year revenue growth in excess of 40% in Latin America. For the full year 2024, we now expect to see year-over-year revenue growth in all of our delivery geographies with the exception of United States.

Speaker Change: We spent 15 years doing nothing but growing at Taskus, and the past 18 months we stopped growing and started shrinking, and having experienced both growth and decline, I can tell you growth is a lot more fun.

Speaker Change: I mean, that's all of our problems, but it certainly is a much better position to be in than to have the client revenue. So we've invested heavily in sales and marketing and aligned our teams with a single focus on growth.

Bryce Maddock: So we've invested heavily in sales and marketing and aligned our teams with a single focus on growth. Because the overall growth rate of the industry slowed, we've gone after our competitors. We outlined earlier that we're going to go and take share from the competition. Since then, we've been successful in taking tens of millions of dollars of business from our competitors. But in those pursuits, we have made the strategic decision to be more aggressive on price. As you mentioned, another part of our growth strategy was going after enterprise clients in the banking, financial services, and healthcare spaces. And here too, we've priced our offerings competitively to drive growth. And the strategy's working.

Speaker Change: Because the overall growth rate of the industry slowed, we've gone after our competitors. We outlined earlier that we're going to go and take a share from the competition.

Balaji Sekar: Our cost of surveys as a percentage of revenue was 60.5% in the second quarter compared to 58.3% in Q2 of the prior year. The increase was due to typical wage and benefits cost inflation, competitive pricing pressures, and the higher recruiting and facilities expansion costs to support revenue expansion as a result of our improved revenue outlook. These increased expenses were partially offset by forex improvements in the Philippines, Colombia, and Mexico versus the prior year due to a slightly stronger US dollar.

Speaker Change: and since then we've been successful in taking 10 to million dollars of business from our competitors, but in those pursuits we have made this strategic decision to be more aggressive on Christ.

Speaker Change: As you mentioned, another part of our growth strategy was going after enterprise clients.

Speaker Change: and the banking, financial services, and healthcare spaces, and here too we've priced our offerings competitively to drive growth. So the strategy's worked, it's returned us to accelerating revenue growth with the possibility of achieving double-digit growth by the end of this year, but it's also impacted our margins.

Bryce Maddock: It's returned us to accelerating revenue growth with the possibility of achieving double-digit growth by the end of this year. But it's also impacted our margins. And even though it's impacted our margins, we continue to have the best, or among the best EBITDA margins in the industry, so we're proud of that fact. But we recognize that we're gonna have to continue to work hard to get back to a growth rate that's better than the industry's while maintaining

Speaker Change: And even though it's impacted our margins, we continue to have the best, or among the best EBITDA margins in the industry, so we're proud of that fact. But we recognize that we're going to have to continue to work hard to get back to a growth rate that's better than the industry's while maintaining those margins.

Balaji Sekar: In the second quarter, our Jinli expenses were 56.3 million dollars or 23.7% of revenue. This compares to a Jinli in Q2 of 2023 of $28.2 million or 25.4% of revenue. Ownout consideration and soft compensation expenses decreased by $1.3 million and $3.4 million respectively compared to the previous year. These reductions were partially offset by our ongoing investments in sales, marketing, and technology that we discussed on prior fall and higher bonus expense, primarily due to better company performance.

Bryce Maddock: Thanks very much for the detail there.

Speaker Change: Thanks very much for the detail there.

Maggie Nolan: Our next question comes from Maggie Nolan with William Blair. You may proceed.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Maggie Nolan with William Blair. You may proceed.

Maggie Nolan: Building on the margin commentary there, Bryce, you brought the guidance down, you mentioned needing to make some investments in people and facilities. I'm curious if those investments are for revenue that you expect to materialize in the remainder of this year or more so to prepare you for next year, and how much visibility do you have into those expected ramp-ups? Thank you.

Maggie Nolan: Hi, thank you.

Maggie Nolan: Building on the margin commentary there, Bryce, so you brought the guidance down. You mentioned needing to make some investments in people and facilities.

Maggie Nolan: I'm curious if those investments are for revenue that you expect to materialize in the remainder of this year, or more so to prepare you for next year, and how much visibility do you have into those expected ramp-ups?

Balaji Sekar: Q2 of 2024 also included an increase of $2.3 million related to litigation costs that are non-recurring and outside the ordinary course of business. In the second quarter of 2024, we earned adjusted EBITDA of $51.3 million or 21.5% margin. This compares to $54.3 million in the previous year and $50.6 million in Q1 of 2024. While roughly in line on a dollar basis, we came in lower than our adjusted EBITDA margin partially due to the ramp expenses associated with the higher than expected revenue growth for the year.

Bryce Maddock: Yeah, the answer is both. We've got good visibility because what we're building for now is business that we've been awarded. Either we've signed contracts, or we've been verbally awarded the business. And so those investments, which include new office space, ramping up our recruitment efforts, and investing heavily in the training period. Those investments are well underway. We will see revenue growth from those investments in Q3 and Q4, and we'll also see continued revenue growth into 2025. So does that answer your question, Maggie?

Bryce Maddock: Yeah, the answer is both. We've got good visibility because what we're building for now is business that we've been awarded.

Maggie Nolan: Either we've signed contracts or we've been verbally awarded the business. And so, those investments, which include, we see new office space, ramping up our recruitment efforts, investing heavily in the training period. Those investments are well underway. We will see revenue growth from those investments in Q3 and Q4, and we'll also see continued revenue growth into 2025.

Bryce Maddock: Yeah, thank you. And then on the competitive pricing that you both mentioned, the environment's been a little bit competitive. Can you elaborate on that? Is that broad-based across the competitor set? Is it at particular clients or within specific geographies or solution offerings?

Bryce Maddock: So, does that answer your question, Maggie?

Balaji Sekar: We are also increasing our investments in operational leadership to take advantage of the momentum in the business. Adjusted net income for the quarter was $28.6 million and adjusted earnings per share was 31 cents. By comparison, in the year ago period, we earned adjusted net income of $31.8 million and adjusted EBITDA of $32.3 million. Sence. Our adjusted EPS included the impact of our lower share town, resulting from our stock green purchase program.

Maggie Nolan: Yeah, thank you.

Speaker Change: And then one on the competitive pricing that you both mentioned, the environment's been a little bit competitive. Can you elaborate on that? Is that, you know, broad-based across the competitor set? Is it at particular clients or within, you know, specific geographies or solution offerings?

Bryce Maddock: Yeah, let me elaborate a bit more. So I think ultimately we're seeing the majority of this come in new deal pursuits. As I mentioned on the call, we had our best new logo sales quarter in Q2 that we've had since 2022. And we're seeing an environment in which buyers have more pricing power than they have had historically. My sense is that this may be because the growth rate of the industry has slowed and there's excess capacity in the system, and so some of our competitors are slashing their rates just to fill that capacity.

Speaker Change: Yeah, let me elaborate a bit more, so I think ultimately we're seeing the majority of this come in new deal pursuits. As I mentioned on the call, we had our best new logo sales quarter into two that we had since 2022, and we're seeing an environment in which...

Balaji Sekar: Now moving on to the balance sheet. Cash and cash equivalence, where $1.71.1 million as of June 30, 2024, compared with the December 31, 2023 balance of 125.8 million dollars. In the Potter, we bought back approximately a million shares at an average price of $11.36. As of quarter end, we had approximately $42.2 million of authorization left on our plan. Given the programmatic design of our share repurchase plan, which repurchase a limited number of shares during Q2.

Speaker Change: Buyers have more pricing power than they have had historically.

Speaker Change: My sense is that that may be because the growth rate of the industry is slowed and there's excess capacity in the system and so some of our competitors are slashing their rates just to fill that capacity.

Bryce Maddock: Ultimately, Taskus has always priced itself as a premium provider, and we've been able to do that because we deliver for our clients. But we recognize in this space that getting back to growth and getting back to growth that's better than our competitors is the most important thing we can do. And so to do that, we've had to rethink our offerings.

Speaker Change: Ultimately, Taskus has always priced ourselves as a premium provider, and we've been able to do that because we deliver for our clients, but we recognize in this space that getting back to growth

Speaker Change: And getting back to growth that's better than our competitors is the most important thing we can do. And so to do that, we've had to price our offerings competitively.

Balaji Sekar: Our net leverage ratio continues to be healthy and was 0.4 times as of the quadrant. Cash generated from operations was $30 million for the second quarter of 2024, as compared to $38.5 million in Q2 of 2023. The decline was primarily driven by an increase in amounts receivable related to the sequinsured growth in revenues from Q1 to Q2 of 2024 and an increase in tax payments compared to the prior year. Our capital expenditure decreased in the second quarter of 2024 to $4.5 million compared to $9.8 million in Q2 of 2023.

Maggie Nolan: Thank you; I appreciate it.

Speaker Change: i

Speaker Change: Thank you, appreciate it.

Cassie Chan: Our next question comes from Cassie Chan with Bank of America. You may proceed.

Maggie Nolan: Thanks, Maggie.

Maggie Nolan: Thank you.

Cassie Chan: Hey, just wanted to follow up on the strong booking commentary that you mentioned. I guess, you know, any more detail about the type of contract, the length of it, are they utilizing multiple specialized services, you know, just I just wanted a little bit more color.

Speaker Change: Our next question comes from Cassie Chen with Bank of America, you may proceed.

Cassie Chen: Hey, this one's to follow up on the Sean Booking commentary that you mentioned. I guess just, you know, any more detail about the type of contract length of it or the utilizing multiple specialized services, you know, just, I just want to know a little more color. Thanks.

Bryce Maddock: Yeah, thanks so much, Kathy. We've seen a lot of really exciting things, both new logos and existing clients signing new statements of work. On the digital customer experience front, I mentioned on the call a very large provider of e-commerce and website building solutions. And that was a competitive takeaway.

Speaker Change: Yes, thanks so much Cassie, we've seen a lot of really exciting news.

Speaker Change: both new logos and existing clients signing new statements of work. On the digital customer experience front, I mentioned on the call, a very large provider of e-commerce and website building solutions.

Balaji Sekar: The strength of our anticipated client ramps will continue driving an increase in investments during the remainder of 2024. As a result, we now expect CapEx to be approximately $42 million for the year. Year-to-day free cash flow was $73.1 million or 71.8% of adjusted in itself. As noted in Q1, we expect lower free cash flow conversion due to increased capital expenditures and the build-up of working capital associated with our accelerating revenues during the remainder of 2024.

Bryce Maddock: So I'm very proud of the team for doing that. Inside trust and safety, we're seeing expansion in our risk and response offering here; primarily FinTech clients are using us to do any money laundering and know your customer work. And then the broader trust and safety offering continues to expand. Obviously, at social media clients and at our largest client, we're seeing an acceleration of growth, but inside trust and safety, we're also seeing meaningful demand from our generative AI clients and from clients in different industries where trust and safety maybe isn't as apparent as a need, but the need has definitely expanded across many industries now.

Speaker Change: And that was a competitive takeaway, so I'm very proud of the team for doing that. Inside trust and safety, we're seeing expansion in our risk and response offering.

Speaker Change: Here, primarily send tech clients are using us to do any money laundering and know your customer work.

Speaker Change: And then the broader trust and safety offering continues to expand. Obviously, at social media clients, at our largest client, we're seeing an acceleration in growth. But inside trust and safety, we're also seeing meaningful demand.

Speaker Change: from our generative AI clients and from clients in different industries where trust and safety maybe isn't as apparent as a need, but the need has definitely expanded across many industries now.

Balaji Sekar: In terms of our financial outlook for the remainder of the year, we now anticipate full year 2024 revenues to be the range of $955 million to $975 million. We expect to earn full year-adjusted EBITDA margin of approximately 22%. The revision in adjusted EBITDA margin guidance captures the impact of ramps to deliver the increased revenue forecast, additional investment in operations and the impact of competitive pricing environment that we are currently in. Including the additional investment supporting our improved outlook, we expect to generate free cash flow of approximately $20 million for the year.

Bryce Maddock: Lastly, inside AI services, last quarter, I was pretty frustrated with the fact that our business was declining in a market that was growing so rapidly. And obviously, we saw another year over year decline this quarter, but I'm proud of the fact that we got back to sequential quarterly growth. I'm also very proud of the fact that we will get back to year-over-year growth in the back half of 2024. Again, that growth is being driven by new generative AI initiatives at our largest clients, along with success selling into many other generative AI companies. So I think we're getting back on the right foot when it comes to our AI service business, and I hope that that will be a big lever of growth in 2025.

Speaker Change: Lastly, Inside AI Services, last quarter...

Speaker Change: I was pretty frustrated with the fact that our business was declining in a market that was growing so rapidly. And obviously, we saw another year-over-year decline this quarter, but I'm proud of the fact that we got back to sequential quarterly growth.

Speaker Change: I'm also very proud of the fact that we will get back to year-over-year growth in the back half of 2024. Again, that growth is being driven by new generative AI initiatives at our largest clients along with

Speaker Change: success selling into many other generative AI companies. So I think we're getting back on the right foot when it comes to our AI service business. And I hope that that will be a big lever of growth in 2025.

Balaji Sekar: This implies a conversion rate of over 50% from adjusted EBITDA, a great demonstration of our financial discipline. Our free cash flow guidance excludes the impact of certain litigation costs which are non-recurring and outside the ordinary course of. Business. In the first half of 2024, we incurred approximately $2.6 million due to these litigation matters. We will continue to exclude these costs from all adjusted EBITDA calculations. For the third quarter, we expect revenues to be the range of $24 million to $246 million and we expect our adjusted EBITDA margin to be approximately 21.5%.

Cassie Chan: Got it. That's helpful. And I guess just to pivot a bit, another question on margins. I guess, you know, is there any way that we can sort of think about what the lower margin guidance profile is relative to, you know, the different pieces, like maybe mixed in terms of the different, you know, is there a difference in the margin profile for AI services versus DCX versus trust and safety? And then, you know, the reinvestments, additional reinvestments that you're making versus some of the pricing pressures that you're talking about. So I guess I have two questions. Thanks.

Speaker Change: Got it. That's helpful. And I guess just to pivot a bit, another question on margins. I guess, you know, is there any way that we can sort of think about

Speaker Change: What the lower margin guidance profile is relative to, you know, the different pieces like maybe make in terms of the different, you know, is there a difference in the margin profile for AI services or CCX versus trust and safety and then, you know, the reinvestment, a disturbing investment that you're making versus some of the pricing pressures that you're talking about. So I guess I kind of see questions. Thanks.

Bryce Maddock: Yeah, let me make two comments and then I'm going to hand it to Balaji to fill in the details. Firstly, the majority of what we're seeing in terms of the decline in the adjusted EBITDA margin is because of the investments that we're making. So I just want to be very, very clear. We're acknowledging that we are seeing some pricing pressure, but that is certainly not the majority of the reason why our EBITDA margins have come down somewhat. So I think that's an important point.

Speaker Change: Yeah, let me make two comments and then I'm going to hand it to Balaji to fill in the details. Firstly, the majority of what we're seeing in terms of the decline in the adjusted EBITDA margin is because of the investments that we're making for growth.

Balaji Sekar: The adjusted EBITDA margin guidance for the third quarter and full year is based on current foreign trades. So any change to currency rates would impact our margins. As a reminder, the majority of our revenues is built and collected in US dollars, so we do not see the impact of US dollar fluctuation in other revenues. I will now hand it back to Bryce. Thank you, Balaji.

Speaker Change: So, I just want to be very, very clear, we're acknowledging that we are seeing some pricing pressure, but that is certainly not the majority of the reason why I'm purged us to be with our margins to have come down and somewhat.

Balaji Sekar: And then as far as the margin mix, you know, historically, we've had similar margins across our service lines, but the biggest differentiator for margin has been geographic delivery area. We have a large business in the Philippines and India, where margins tend to be highest. Our business in the U.S. is shrinking where margins tend to be lowest, but we are seeing significant growth in Latin America and Europe, and typically, the margins in Latin America and Europe tend to be kind of in between the U.S. and the offshore geographies in the Philippines and India.

Balaji Sekar: So I think that that's that's an important point and then as far as the the margin mix you know historically we've had similar margins across our service line but the biggest differentiator for margin has been geographic delivery area.

Bryce Maddock: Before we open for questions, I'd like to share a story about one of our dedicated Taskus teammates. Bobo Saigal is a team leader at our site in indoor India. She loves working for Taskus because we're deeply committed to the health, well-being, and career development of our employees. We strive to create a supportive environment where teammates can thrive and build the sewing careers. Bobo has been actively utilizing our Academy Learning Platform to advance her career and prepare for her next role.

Bryce Maddock: She's enrolled in our Taskus Operations Manager Preparatory Academy and aspires to be promoted to an office manager after gaining the necessary experience. When it comes to health and wellness, Bobo shares that our wellness team in indoor has been incredibly supportive of her needs. They are well equipped to help teammates navigate both their personal and professional lives. Bobo has regular one-on-one sessions with one of our local wellness counselors and says the guidance and support she receives is a critical part of her success.

Balaji Sekar: We have a large business in the Philippines and India where margins tend to be highest.

Balaji Sekar: our business in the U.S. is shrinking where margins tend to be lowest, but we are seeing significant growth in Latin America and Europe , and typically the margins in Latin America and Europe tend to be kind of in between the U.S.

Balaji Sekar: So there's some dilutive effect on the overall margin when we're seeing that kind of growth, but we're very happy that we're strengthening our global footprint. So I'll hand it to Balaji to add. Yeah, yeah, thank you very much.

Speaker Change: and the off-road geographies in the Philippines and India. So, there's some delude of respect to the overall margin when we're seeing that kind of growth, but we're very happy that we're strengthening our global.

Balaji Sekar: Yeah, thanks, Bryce. And just to add to what Bryce said, a couple of things that we also see from a year-over-year perspective, beyond the investments that we are making in sales, marketing, and technology that we spoke about in the Q1 call, is also the impact of annual labor and benefits cost inflation that we typically see mostly in our offshore locations, which is where it is highest. But that's where, like Bryce mentioned, the margins also tend to be higher.

Balaji Sekar: I'll hear the Balaji there to answer.

Balaji Sekar: in the color.

Balaji Sekar: Yeah, thanks Bryce. And just to add on to what Bryce said, a couple of things that we also see from a year-over-year perspective.

Balaji Sekar: Beyond the investments that we are making in sales marketing and technology that we spoke about in the Q1 call is also the impact of annual labor and benefits concentration that we typically see is mostly in our offshore location, which is very detail, but that's where like Bryce mentioned.

Bryce Maddock: Bobo's story is a testament of our focus on personal and professional growth and our unwavering commitment to our teammates. I'll be traveling to our sites in India later this month where I look forward to meeting Bobo and many of our hardworking and talented teammates in person. With that, I'll ask the operator to open our line for our question and answer session. Operator? Thank you. As a reminder to ask a question, please press star-1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star-1-1 again. One moment for questions.

Balaji Sekar: And like Bryce discussed earlier, and we spoke about it in the prepared remarks, the ramp costs that we are incurring currently to deliver the ramp that we saw in Q2 where we beat our revenue guidance, and then the increase in guidance for the rest of the year in Q3 and Q4. So those are some of the other contributing factors that are leading to the 22% adjusted EBITDA for the full year.

Speaker Change: The margins also tend to be higher, and like Bryce discussed earlier, and we spoke about it in the prepared remarks, is the ramp costs that we are incurring currently to deliver to the ramp that we saw in Q2 where we beat our revenue guidance, and then the increase in guidance for the rest of the year in Q3 and Q4. So those are some of the other contributing factors.

Cassie Chan: Got it. Really helpful. Thanks, guys.

Cassie Chan: Got it. Really helpful. Thanks.

Speaker Change: are that is ready to be, for me to personally have just said a bit now, for the studio.

Speaker Change: Got it. Really helpful. Thanks, guys.

James Faucette: Our next question comes from James Faucette with Morgan Stanley. Please proceed.

Speaker Change: Thank you.

James Faucette: Great, thank you very much. I wanted to ask a couple questions about the customers as well as the pricing environment we talked about. First, on your customers, and particularly your largest customers, great to see that you're regrowing with them. What is the composition of work or type of work that you're doing now and as you grow with them? And how has that changed at all versus maybe what you were doing with them a year or two ago as they started to contract and kind of reposition a little bit the work that Taskus was doing? Yeah, look...

Speaker Change: Our next question comes from James Fossett with one of his family he may proceed.

Jonathan Lee: Our first question comes from Jonathan Lee with Guggenheim Securities he may proceed. Great, thanks for taking our question. It's tremendous to see the inflection of your top client. You touch on some of the uptick there but can you help unpack some of the moving pieces? How you're thinking about the durability there, perhaps whether that the shareship dynamic or maybe the client just is doing more work broadly?

James Fossett: Great, thank you very much. I wanted to ask a couple questions on the customers as well as the pricing environment. We talked about first on your customers.

James Fossett: And particularly your largest customers. Great to see that you're regrowing with them.

Speaker Change: What is the composition of work or type of work that you're doing now and as you're growing with them?

Bryce Maddock: Sure. Yeah, our relationship with our largest client continues to be incredibly strong. We've won multiple large pieces of business with this client this year. We're scaling operations in every country where we operate with them and are expanding our operations into two new countries. We're supporting them on vital initiatives like their investments in Gen AI and trust and safety and I'll also note that while we're supporting them on this year's elections, that is not the source of every single growth and we don't anticipate any reductions at this client post-November.

Speaker Change: How has that changed at all versus maybe what you've been doing with them a year or two ago as they've started to contract and kind of reposition a little bit the work that Taskus was doing for them?

Bryce Maddock: Yeah, so we're continuing to do some of the same activities. We've always had a very strong trust and safety business.

Speaker Change: Yeah, so we're continuing to do some of the same activities. We've always had a very strong trust in safety business.

Bryce Maddock: But we've also seen a real increase in demand for their generative AI initiatives. Last year, however, we saw a reduction in AI services at our largest client, which was related to R&D investments that they were making not related to Gen AI. So these were previous initiatives that they decided to decommission, and that obviously had an impact on both our overall revenue as well as our AI service revenue with that client. We are adding new geographies, so we're going to be covering many more languages for our largest client as we continue to grow there.

Speaker Change: But we've also seen a real increase in demand for their generative AI initiatives.

Bryce Maddock: In some cases, this business is being taken from the competition as I outlined in the annual call start of this year. The first growth lever that we're focused on is going after our competition and trying to take business from them and we've been successful in doing that at this client along with other clients. But in other cases, we're just getting net new business that our team is competing for on one. So given the success here, we expect a revenue growth with this client to outpace the rest of the business and the revenue concentration with the client to increase over the next year.

Speaker Change: Last year, we saw a reduction in AI services at our largest client, which was related to R&D investments that they were making not related to Gen AI. So these were previous initiatives that they decided to...

George: George. Got it, appreciate your insight there.

Speaker Change: Decommission, and that obviously had an impact in both our overall revenue as well as our ad service revenue with that client.

Speaker Change: We are adding new geographies so we're going to be covering many more languages for our largest client as we continue to grow there and I would say we are moving up the value chain in terms of the sophistication of work that we're doing and that's really true across all of our clients.

Bryce Maddock: And I would say we are moving up the value chain in terms of the sophistication of the work that we do, and that's really true across all of our clients. We've got clients in the on-demand travel and transportation space, clients in the e-commerce space, where maybe where we started with them was more kind of basic level support. Increasingly, we're moving into sales and lead generation, Tier 2 and Tier 3 support workflows, risk and response, the anti-money laundering and know your customer work that I mentioned on the call.

Bryce Maddock: And as a follow-up, can you help decompose some of the pricing pressure you're seeing across your service lines and customer base, especially as you look to expand into the enterprise customer base? Want to also understand if you've seen maybe AI augment your pricing discussions in the quarter? Yeah, it's an interesting environment right now because if you look at the broader market, the growth rates that we saw in the post-COVID era have had really slowed down.

Speaker Change: We've got clients in the on demand travel and transportation space, clients in the e-commerce space where

Speaker Change: Maybe where we started with them was more kind of basic level support. Increasingly, we're moving into

Speaker Change: Fails and Legion. We've cured two in tier three, support work flows.

Bryce Maddock: So I think we're making good progress as we continue to move up the value chain and into jobs that are more resilient to the threat of AI and also just more meaningful for our relationships with our customers.

Speaker Change: Risk and Response, the Anti-Money Laundering and Know Your Customer work that I mentioned on the call. So I think we're making good progress as we continue to move up the value chain into jobs that are more resilient to the threat of AI.

Bryce Maddock: And so as I said, we this year have decided to focus exclusively on one goal. And that goal was to return to growth. We spent 15 years doing nothing but growing at Taskus. And the past 18 months, we stopped growing and started shrinking and having experienced both growth and decline. I can tell you growth is a lot more fun. It may not solve all of our problems, but it certainly is a much better position to be in than to have declining revenues.

Speaker Change: and also just, you know, more meaningful for our relationships with our customers.

James Faucette: Got it. And then, thanks for that. Great to hear.

Speaker Change: [inaudible]

Speaker Change: Got it. And then, thanks for that. That's great to hear. And then the second thing I was going to ask is, you know, you mentioned the pricing pressure, and at least one of your editors has acknowledged that. How are you feeling about

James Faucette: And then the second thing I was going to ask you is, you mentioned the pricing pressure, and at least one of your competitors has acknowledged that. How are you feeling about, you know, kind of what the response is going to be? How well that's contemplated into your own outlook? And as those competitors respond and get more aggressive on pricing on their own, right? You know, do you think that's well-anticipated in the way that you've formulated your outlook, or what things should we be aware of there?

Bryce Maddock: So we've invested heavily in sales and marketing and aligned our teams with a single focus on growth. Because the overall growth rate of the industry slowed, we've gone after our competitors, and we outlined earlier that we're going to go and take share from the competition. And since then, we've been successful in taking 10 to millions of dollars of business from our competitors. But in those pursuits, we had made the strategic decision to be more aggressive on price.

Speaker Change: You know kind of what the response is going to be, how well that's contemplated into your to your own outlook and And as those competitors get respond and get more aggressive on pricing on their own, right? You know

Speaker Change: Do you think that's well anticipated in the way that he's formulated outlook or what things should we deal with right there?

Bryce Maddock: Yeah, I mean, I think we're in a privileged position to have margins that are amongst the best in the industry, and it gives us a lot of room to be competitive while maintaining great margins. We are definitely seeing and expect to continue to see an environment in which clients are looking for better pricing. We are continuing to be creative in our solutions to meet that pricing. We're very lucky to have a large offshore footprint that we can leverage to reduce client costs while protecting our margins.

Speaker Change: Yeah, I think we're in a privileged position to have margins that are amongst the best in the industry and they give us a lot of room to be competitive while maintaining great margins.

Bryce Maddock: As you mentioned, another part of our growth strategy was going after enterprise clients. Please come and be banking financial services and health care spaces. And here too, we've priced our offerings competitively to drive growth. So the strategy's worked. It's returned us to accelerating revenue growth with the possibility of achieving double-digit growth by the end of this year. But it's also impacted our margins. And even though it's impacted our margins, we continue to have the best are among the best EBITDA margins in the industry, so we're proud of that fact. But we recognize that we're going to have to continue to work hard to get back to a growth rate that's better than the industries while maintaining those margins.

Maggie Nolan: Thanks very much for the detail there. Thank you.

Speaker Change: We are definitely seeing and expect to continue to see an environment in which clients are looking for better pricing.

Speaker Change: We are continuing to be creative in our solution for that pricing we're very lucky in having a large offshore footprint that we can leverage.

Bryce Maddock: And we're also using our technology to move clients to outcome-based contracts where we can drive efficiencies for them. And as we get more productive, our margins expand. So the answer is sort of multifaceted. I believe that we will continue to see this environment for some time. And certainly, in our 22% adjusted EBITDA margin guidance for the year, we've contemplated a continuation of the competitive environment.

Speaker Change: to reduce client costs while protecting our margins. And we're also using our technology to move clients to outcome-based contracts where we can drive efficiencies for them. And as we get more productive, our margins expand.

Bryce Maddock: Next question comes from Maggie Nolan with William Blair. You may proceed. Hi, thank you. Building on the margin commentary there, Bryce. So you brought the guidance down. You mentioned needing to make some investments in people and facilities. I'm curious if those investments are for revenue that you expect to materialize in the remainder of this year or more so to prepare you for next year. And how much visibility do you have into those expected ripups?

Speaker Change: So, the answer is sort of multi-faceted. I believe that...

Speaker Change: We will continue to see this environment for some time and, you know, certainly in our 22% adjusted EBITDA margin guidance for the year, we've contemplated a continuation of the competitive environment.

James Faucette: Great. Thanks for all that, Bryce.

Speaker Change: Great. Thanks for all that, Bryce.

Jim Schneider: Our next question comes from Jim Schneider with Goldman Sachs. He may proceed.

Speaker Change: Thank you.

Bryce Maddock: Yeah, the answer is both. We've got good visibility because what we're building for now is business that we've been awarded. Either we sign contracts or we've been verbally awarded the business. And so those investments, which include we see new office space ramping up our recruitment efforts investing heavily in the training period. Those investments are well underway. We will see revenue growth from those investments in Q3 and Q4 and we'll also see continue revenue growth into 2025. So does that answer your question Maggie?

Jim Schneider: Good afternoon. Thanks for taking my question. Just to return to the AI services market for a moment, can you maybe comment on just the broader market and what you're seeing in terms of client priorities? Are we getting to a point where some of the models out there are getting more fully trained, and thus there's kind of a diminution of what's being asked of you in terms of incremental work? Or are you seeing an expansion of the overall number of clients who are doing these kinds of training activities and just a broader kind of sweep of opportunity sets? Yeah.

Speaker Change: Our next question comes from Jim Schneider with Goldman Sachs, he may proceed.

Jim Schneider: Good afternoon. Thanks for taking my question. Just to return to the AI Services Market for moment, give me a comment on just the broader market and what you're seeing in terms of client priorities.

Speaker Change: are leading to a point where some of the models out there are getting more fully trained and thus there's the kind of delinution of what's being.

Speaker Change: Asked of you in terms of incremental work, or are you seeing an expansion of the overall number of clients who are doing these kind of training activities and just a broader kind of sweep of opportunity sets.

Bryce Maddock: Yeah, thanks for the question, Jim. I mean, certainly, we have not done as well in this space as others. But what we've seen is the sophistication of the demand has increased markedly. In the past, we used to do basic data tagging and annotation for autonomous vehicles, looking at images of street scenes and essentially annotating what was in those images.

Bryce Maddock: Yeah, thank you. And then one on the competitive pricing that you both mentioned, the environment's been a little bit competitive. Can you elaborate on that? Is that, you know, broad base to cross the competitor set? Is it at particular clients or within, you know, specific geographies or solution offerings? Yeah, let me elaborate a bit more. So I think ultimately we're seeing the majority of this come in new deal pursuits. As I mentioned on the call, we had our best new logo sales quarter in Q2 that we had since 2022.

Speaker Change: Yeah, thanks for the question, Jim. I mean, certainly we have not done as well in this space as others. What we've seen is the the sophistication of the demand has increased markedly.

Speaker Change: In the past, we used to do basic data tagging and annotation.

Speaker Change: for Autonomous Vehicles, looking at images of street scenes and essentially annotating what was in those images. Now we're recruiting people with master's degrees and PhDs in particular subjects.

Bryce Maddock: Now we're recruiting people with master's degrees and PhDs in particular subjects to look at the answers that large language models are producing and rate their accuracy, or, in some cases, rewrite those answers from scratch. So I think it is a fundamental market shift in terms of just the complexity of the work that we're doing. We've certainly not seen any abatement in demand. I mean, there is a large and rapidly growing market for AI services.

Speaker Change: to look at the answers that large language models are producing and rate their accuracy, or in some cases, rewrite those answers from scratch.

Bryce Maddock: And we're seeing an environment in which buyers have more price and power than they have had historically. My sense is that that maybe because the growth rate of the industry has slowed and there's excess capacity in the system. So some of our competitors are slashing their rates just to fill that that capacity. Ultimately, Taskus has always priced ourselves as a premium provider. And we've been able to do that because we deliver for our clients.

Speaker Change: So I think it is a fundamentally...

Speaker Change: market shift in terms of just the complexity of the work that we're doing. We've certainly not seen any abatement in demand. I mean, there's, there is a large and rapidly growing market for AI services.

Bryce Maddock: I think it's a combination of the biggest players continuing to invest more in quality training data, and the number of players in the space continues to grow exponentially. So we're going to get back to growth in the service line in the back half of the year. And I think if we execute properly, it will be a good growth story for 2020.

Speaker Change: I think it's a combination of the biggest players are continuing to invest more in quality training data.

Speaker Change: and the number of players in the space continues to grow exponentially. So, we're going to get back to growth in the service line in the back half of the year, and I think if we execute properly, it will be a good growth story for 2025.

Bryce Maddock: But we recognize in this space that getting back to growth and getting back to growth is better than our competitors is the most important thing we can do. And so to do that, we've had to price our offerings competitively.

Jim Schneider: And then relative to the increased cost to support the new growth ramps, can you maybe give us a sense of whether that is sort of tied to incremental headcount? Is it tied to specific projects? And, more broadly speaking, is there a point at which you get to a certain amount of absolute cost addition, and then you're able to kind of get more leverage off of that increased cost? Or is it more proportional to headcount? Yeah, I think what's happened here is we've gone through a bit.

Maggie Nolan: Thank you. Appreciate it. Thanks, Maggie.

Speaker Change: Thank you. And then, relative to the increased cost to support the new growth ramp,

Operator: Thank you.

Cassie Chen: Our next question comes from Cassie Chen with Bank of America. You may proceed. Hey, just want to follow up on the strong booking commentary that you mentioned. I guess just, you know, any more detail about the type of contracts, length of it are the utilizing multiple specialized services, you know, just. I just want to know a little bit more color and thanks. Yeah, thanks so much, Cassie. We've seen a lot of really exciting both new logos and existing clients, signing new statements of work.

Speaker Change: Can you maybe give us a sense, is that sort of tied to incremental headcount? Is it tied to specific projects? And I guess, more broadly speaking, is there a point at which you get to a certain amount of absolute cost addition and then you're able to kind of get more leverage off of that increased cost, or is it more proportional to headcount?

Bryce Maddock: Yeah, I think what's happened here is we've gone through a bit of a 180. So at the end of last year, we were actively looking to remove capacity. We were getting out of leases, closing facilities, I mean, really focusing on how we could cut costs in order to protect our margins. And at the beginning of this year, as we went back to investing heavily in growth, we knew that if we were successful, we would have to do a rapid about-face and build a bunch of new offices very, very quickly. And so that's what we've had to do.

Speaker Change: Yeah, I think what's happened here is we've gone through a bit of a 180. So at the end of last year, we were actively looking to remove capacity.

Cassie Chen: On the digital customer experience from I mentioned on the call a very large provider of e-commerce and website building solutions. And that was a competitive takeaway. So I'm very proud of the team for doing that. Inside trust and safety, we're seeing expansion in our risk and response offering. Here, primarily FinTech clients are using us to do any money laundering and know your customer work. And then the broader trust and safety offering continues to expand.

Speaker Change: We were getting out of leases, closing facilities, and really focusing on how can we cut costs in order to protect our margins.

Speaker Change: And in the beginning of this year as we went back to investing heavily in growth, we knew that if we were successful, we would have to do a rapid about facing build a bunch of new offices very, very quickly.

Bryce Maddock: I mean, we're building offices on four different continents right now, and they're all being done at a breakneck pace. And as a result of the focus on speed, perhaps not as efficiently as they could be done if we went through kind of a proper procurement process. So that's just an example. I mean, when we're doing these large ramps, we're also getting very aggressive in terms of trying to meet our hiring timelines, needing to provide for extra things like sign-on bonuses or, in the case of our European business, relocation packages.

Speaker Change: And so that's what we've had to do. I mean, we're building offices on.

Speaker Change: Four different continents right now, and they're all being done at a breakneck pace.

Cassie Chen: Obviously, at social media clients and at our largest client, we're seeing an acceleration in growth. But inside trust and safety, we're also seeing meaningful demand from our generative AI clients and from clients in different industries where trust and safety, maybe even as a parent as a need, but it's the media definitely expanded across many industries now. Lastly, inside AI services last quarter, it was pretty frustrated with the fact that our business was declining in a market that was growing so rapidly.

Speaker Change: and as a result of the focus on speed, perhaps not as efficiently as they could be done if we went through kind of a proper.

Speaker Change: procurement process.

Speaker Change: So that's just an example. I mean, when we're doing these large ramps, we're also getting very aggressive in terms of trying to meet our hiring timeline, needing to provide for extra things like sign-on bonuses, or in the case of our European business, relocation packages.

Bryce Maddock: And then, at some of these ramps, we're also providing free training to our clients. So that can sort of artificially reduce margins, at least in the beginning of an engagement. So yeah, to answer the question, I mean, I think it's fair to ask, you look back, and you're like, hey, you grew faster than this before, and your margins were better. What's different this time? I really think it's just the abruptness with which we've had to turn the ship around and some of the concessions that we've made in order to win this.

Speaker Change: And then in some of these ramps, we're also providing free training to our clients so that can sort of artificially reduce margins, at least in the beginning of an engagement.

Cassie Chen: And obviously, we saw another year over year decline this quarter, but I'm proud of the fact that we got back to sequential quarterly growth. I'm also very proud of the fact that we will get back to year over year growth in the back half of 2024. Again, that growth is being driven by new generative AI initiatives at our largest clients, along with success selling into many other generative AI companies. So I think we're getting back to back on the right foot when it comes to our AI service business. And I hope that that will be a big level of growth in 2020. Five. God, it's helpful.

Speaker Change: So, yeah, I think it's a question, I mean, I think it's fair to ask you look back and you're like, hey, you grew faster than this before in your margins for better or what's different this time. I really think it's just a roughness with which we've had to turn the ship around in some of the conditions that we've made in order to win business.

Speaker Change: Thank you.

Matt VanVliet: Our next question comes from Matt VanVliet with BTIG. Please proceed.

Speaker Change: Thank you.

Matt VanVliet: Yeah, good afternoon. Thanks for taking the time to ask the question. I guess when you look at some of the growth and you highlighted Latin America as a big growth area, you know, are you seeing any shift of business that maybe historically was serviced from the Philippines and looking at sort of more similar time zones with some of your customers? Is that helping a little bit of the revenue-driven growth here or anything you can add in terms of customers sort of moving, or relocating their work?

Speaker Change: Our next question comes from Matt VanVliet with BTIG. You may proceed.

Bryce Maddock: And I guess just a pivot a bit, another question on margins. I guess, you know, is there any way that we can sort of think about what the lower margin guidance profile is relative to, you know, the different pieces like maybe make in terms of the different, you know, is there a difference in the margin profile for AI services versus DCX versus trust and safety? And then, you know, the reinvestment, additional reinvestments that you're making versus some of the pricing pressures that you're talking about.

Matt VanVliet: Yeah, good afternoon, thanks for taking the question. I guess when you look at some of the growth and you highlighted Latin America as a big growth area,

Matt VanVliet: Are you seeing any shifting of business that maybe historically was serviced from the Philippines?

Speaker Change: and looking at sort of more similar time zones, some of your customers, is that helping a little bit of the revenue driving growth here or anything you're going to have in terms of customer sort of moving, relocating their work.

Bryce Maddock: Yeah, we've seen a huge demand in the last 12 to 18 months for nearshore delivery. And by nearshore, I mean Latin America operations in Mexico and Colombia. Part of that demand is coming from people who have previous operations in the U.S., and they see the nearshore opportunity to reduce cost, stay in the same time zone, and get bilingual coverage. There's also, I think, among some clients, an overexposure to the Philippines for English language support.

Bryce Maddock: So I guess I got two questions. Thanks. Yeah, let me, let me, let me make two comments and then I'm going to hand it to Balaji to fill in the details. You firstly, the majority of what we're seeing in terms of the decline in the adjusted EBITDA margin is because of the investments that we're making for growth. So it, I just want to be very, very clear. We're acknowledging that we are seeing some pricing pressure, but that is certainly not the majority of the reason why our adjusted EBITDA margins have come down somewhat.

Speaker Change: Yeah, we've seen a huge demand in the last...

Speaker Change: 12 to 18 months for a near shore delivery. And by near shore, I mean Latin America operations in Mexico and in Columbia.

Speaker Change: Part of that demand is coming from people who had previous operations in the U.S.

Matt VanVliet: and they see the nearshore opportunity to reduce cost, stay in the same time zone, get bilingual coverage.

Bryce Maddock: So I think that's that's an important point. And then as far as the margin mix, you know, historically, we've had similar margins across our service line, but the biggest different theater for margin has been geographic delivery area. We have a large business in the Silicon teams in India where margins tend to be highest. Our business in the US is shrinking where margins tend to be lowest, but we are seeing significant growth in Latin America and Europe.

Matt VanVliet: There's also, I think...

Matt VanVliet: Among some clients, an overexposure to the Philippines for English language support.

Bryce Maddock: And so they've been interested in Colombia and Mexico as a sort of BCP strategy. So, yeah, it's multifaceted, but it's very encouraging. I mean, I think we'll have a triple-digit revenue business in Latin America this year, which is just incredible when you think where we're coming from.

Matt VanVliet: and so they've been interested in Columbia and Mexico with a sort of BCP.

Speaker Change: strategy. So, yeah, it's multifaceted, but it's very encouraging. I mean, I think we'll have a triple-digit revenue business in Latin America this year, which is just incredible when you think where we're coming from.

Matt VanVliet: Very helpful. And then as you look at a number of your very large tech clients that maybe have had a fair amount of reduction in their own headcount over the last year and a half or two, as we've seen those headlines at least slow down, do you feel like that's helping drive some of the growth in the business, maybe a stabilization of their own internal expectations and now understanding, you know, how Taskus plays into that equation? Or would you point to maybe other drivers that are seeing more of this return of growth? Yeah, I mean, you know 2022 was the year of efficiency.

Bryce Maddock: And typically the margins in Latin America and Europe tend to be kind of in between the US and the offshore geographies in the Philippines and India. So there's some dilutive effect to the overall margin when when we're seeing that kind of growth, but we're very happy that we're strengthening our global footprint. So I'll hand it to Balaji to add some more color. Yeah, thanks, and just to add on to what Bryce said, some of the things that we also see from a year-over-year perspective beyond the investments that we are making in sales, marketing, and technology that we spoke about in the Q1 call is also the impact of annual labor and benefits cost inflation that we typically see is mostly in our offshore location, which is where it is highest, but that's where like Bryce mentioned, the margins also tend to be higher.

Speaker Change: Very helpful. And then as you look at a number of your very large tech clients that maybe have had a fair amount of reduction in their own headcount over the last year and a half or two,

Speaker Change: As we've seen those headlines at least slow down, do you feel like that's helping drive some of the growth in the business, maybe a stabilization of their own internal expectations and now?

Speaker Change: Understanding how task plays into that equation, or would you point to maybe other drivers that are seeing more of this return of growth here?

Bryce Maddock: Yeah, I mean, 2022 was the year of efficiency. We, you know, we all saw the headlines, and certainly we felt it directly ourselves as our clients reduced internal headcount and spent on external vendors. At the start of this year, it felt like clients had optimized just about as much as they could, and there was a lot of new excitement in areas like generative AI where investment dollars were being freed up. And so we capitalized on that opportunity and I think we did a really good job of selling our value proposition to clients that are back in growth mode.

Speaker Change: Yeah, I mean, you know, 2022 was the year of efficiency. We, you know, we all saw that the headlines and certainly we felt it directly ourselves as our clients reduced internal headcount and spend on external vendors.

Bryce Maddock: And like Bryce discussed earlier, and we spoke about it in the prepared remarks, is the ramp cost that we're including currently to deliver to the ramp that we saw in Q2 where we beat our revenue buy-dance, and then the increase in guidance for the rest of the year in Q3 and Q4. So those are some of the other contributing factors that is leading to the 22 percent adjusted a bit now for the full year. God, it really helpful. Thanks, guys.

Speaker Change: At the start of this year Salt Lake

Speaker Change: Clients had optimized just about as much as they could.

Speaker Change: and there was a lot of new excitement in areas like generative AI where investment dollars were being freed up.

Speaker Change: and so we capitalized on that opportunity.

Speaker Change: and I think have done a really good job of selling our value proposition to clients that are back in growth mode.

Bryce Maddock: Thank you. Our next question comes from James Spasit with Morgan Stanley. You may proceed. Great. Thank you very much. I wanted to ask a couple of questions on the customers as well as the pricing environment. We talked about first on your customers, and particularly your largest customers, great to see that you're re-growing with them. What was the composition of work or type of work that you're doing now in your, and as you're growing with them?

Speaker Change: Great, thank you.

Jacob Hagerty: Our next question comes from Jacob Hagerty with Baird. You may proceed.

Speaker Change: Thank you.

Jacob Hagerty: Hey guys, thanks for taking my question. I just have a question about the shift to offshore. So the US was the same percent of revenue as last quarter, it looks like. So are you guys seeing that stabilizing? And then furthermore, are you seeing the shift to near shore as sort of a stepping stone to the Philippines and India? So are clients using LATAM and then eventually shifting over to the Philippines and India as they progress?

Speaker Change: Our next question comes from Jacob Haggerty with Baird. You may proceed.

Jacob Haggerty: Hey guys, thanks for taking my question. I just have a question about the shift to offshore. So, U.S. was the same percent of revenue as last quarter, it looks like. So, are you guys seeing that stabilizing?

Bryce Maddock: And how has that changed up at all versus maybe what you've been doing with them a year or two ago, as they're starting to contract and can kind of re-reposition a little bit the work that that passes through. James Faucette. Yeah, so we're continuing to do some of the same activities. We've always had a very strong trust and safety business, but we've also seen a real increase in demand for their generative AI initiatives.

Speaker Change: And then furthermore, are you seeing the ship to ensure a sort of a stepping stone to the Philippines in India? So, our client's using Latham, and then eventually shifting over to Philippines in India as it regards.

Bryce Maddock: Yeah, so, you know, historically, we don't think our U.S. business is going to get below 10% of total revenue. I think, at this point, it'll be between 11 and 12% for the rest of the year.

Speaker Change: Yeah, so, you know, we've said historically we don't think our U.S. business is going to get below 10% of total revenue.

Speaker Change: I think at this point it'll be between 11 and 12 percent.

Bryce Maddock: That would indicate that we're seeing some sequential quarterly growth in our U.S. business, which is great. We continue to have both existing and new clients that want onshore delivery either for regulatory reasons or just individual client preference. And as far as the near-short piece goes, I don't know if it's a stepping stone.

Speaker Change: for the rest of the year, that it would indicate that we're seeing some sequential quarterly growth in our U.S. business, which is great.

Bryce Maddock: Last year we saw a reduction in AI services that are largest clients, which was related to R&D investments that they were making not related to Gen AI. So these were previously initiatives that they decided to decommission. And that obviously had an impact in both our overall revenue as well as our AI service revenue with that client. We are adding new geographies, so we're going to be covering many more languages for our largest client as we continue to grow there.

Speaker Change: We continue to have...

Speaker Change: both existing and new clients that want onshore delivery either for regulatory reasons or just

Speaker Change: individual client preference.

Bryce Maddock: Historically, getting people started in the U.S. always seemed like a good stepping stone to leverage our global footprint. But once people get into Mexico and Colombia, we haven't seen as much movement to places like the Philippines and India. You know, again, our business in the Philippines is by far our largest geography. And on a headcount basis, India is definitely our second largest geography. So we've got strong businesses there, and we're excited about the business that we're growing a lot.

Speaker Change: And as far as the near short piece goes, I don't know if it's a stepping stone. Historically, getting people started in the U.S. always seemed like a good stepping stone to...

Jacob Hagerty: Gotcha, that's helpful. And then I just wanted to follow up on some of the AI services.

Bryce Maddock: And I would say we are moving up the value chain in terms of the sophistication of work that we're doing. And that's really true across all of our clients. We've got clients in the on-demand travel and transportation space, clients in the e-commerce space where maybe where we started with them was more kind of basic level support. But increasingly, we're moving into sales and lead gen, tier 2 and tier 3 support workflows, risk in response, the anti-money laundering, and know your customer work that I mentioned on the call.

Speaker Change: leveraging our global footprint. But once people get into Mexico and Colombia, we haven't seen as much movement to places like Philippines and India. Again, our business in the Philippines is by far our largest geography.

Speaker Change: and on a headcount basis, India is definitely our second largest geography. So we've got strong businesses there and we're excited about the business that we're growing a lot in America.

Bryce Maddock: So as you see this grow, is this going to be mostly in the Philippines and India as well? And then, kind of on top of that, is that going to start to drive a meaningful increase in revenue per employee, especially with tools implemented internally? Yeah, AI services have been a global effort.

Speaker Change: Gotcha, that's helpful. And then I just wanted to follow up on some of the AI services. So as you see this grow, is this going to be mostly in the Philippines and India as well? And then kind of on top of that, is that going to start to drive a meaningful increase in revenue per employee, especially with like tools implemented internally?

Bryce Maddock: So I think we're making good progress and continue to move up the value chain into jobs that are more resilient to the front of AI, and also just more meaningful for our relationships with our customers. Got it. And then thanks, Scott, that's great to hear. And then the second thing I was going to ask is, you know, you mentioned the pricing pressure and at least one of your headers has acknowledged that how are you feeling about, you know, kind of what the response is going to be, how well that contemplated into your, to your own outlook.

Bryce Maddock: Yeah, AI services have been a global effort. As far as revenue per employee is concerned, it really depends on the level of sophistication of the task. A lot of the work we're talking about doing with experts is being done onshore, and certainly there should be an increase in revenue per employee. But some of the work continues to be done by our teammates in places like the Philippines and India, where revenue per employee may not go up quite as much, just depending on the sophistication of the demand for service.

Speaker Change: Yeah, AI services has been a global effort. As far as revenue per employee, it really depends on the level of sophistication of the task. A lot of the work

Speaker Change: We're talking about doing with experts is being done onshore and certainly there there should be an increase in revenue per employee

Speaker Change: Some of the work continues to be done by our teammates in places like the Philippines and India, where revenue per employee may not go up quite as much, just depending on the sophistication of the demand for service.

Bryce Maddock: And as those competitors get responded and get more aggressive on pricing on their own right, you know, do you think that's well anticipated in the way that he formulated outlook or what things should we deal with there. Yeah, I think we're in a privileged position to have margins that are amongst the bank best in the industry. And they give us a lot of room to be competitive while maintaining great margins. We are definitely seeing and expect to continue to see an environment in which clients are looking for better pricing.

Speaker Change: you

Operator: And I'm not showing any further questions at this time. This concludes the conference. Thank you for your participation. You may now disconnect.

Speaker Change: Thank you.

Speaker Change: And I'm not showing any further questions at this time. This concludes the conference. Thank you for your participation. You may now disconnect.

Bryce Maddock: We are continuing to be creative in our solutioning for that pricing. We're very lucky in having a large offshore footprint that we can leverage to reduce client costs while protecting our margins. And we're also using our technology to move clients to outcome based contracts where we can drive efficiencies for them. And as we get more productive margins expand. So the answer is sort of multifaceted. I believe that we will continue to see this environment for some time. And certainly in our 22% adjusted EBITDA margin guidance for the year we've contemplated a continuation of the competitive environment. Thank you for all that, Bryce. Thank you.

Speaker Change: Thank you for watching Like, Comment and Subscribe

Jim Schneider: Our next question comes from Jim Schneider with Goldman Tax, he may proceed. Good afternoon. Thanks for taking my question.

Bryce Maddock: Just to return to the AI services market for a moment, give me a comment on just the broader market and what you're seeing in terms of client priorities, are we getting to a point where some of the models out there are getting more fully trained and thus there's the kind of a diminution of what's being asked of you in terms of incremental work, or are you seeing an expansion of the overall number of clients who are doing these kind of training activities and just a broader kind of sleep of opportunity sets? Yeah, thanks for the question, Jim.

Bryce Maddock: I mean, certainly, we have not done as well in this space as others. What we've seen is the the sophistication of the demand has increased markedly. In the past, we used to do basic data tagging and adaptation for autonomous vehicles, looking at images of street scenes and essentially annotating what was in those images. Now, we're recruiting people with master's degrees and PhDs in particular subjects to look at the answers that large language models are producing and rate their accuracy or in some cases, free right those answers from scratch.

Bryce Maddock: So, I think it is a fundamentally market shift in terms of just the complexity of the work that we're doing. We've certainly not seen any abatement in demand. I mean, there is a large and rapidly growing market for AI services. I think the combination of the biggest players are continuing to invest more in quality training data. And the number of players in the space continues to grow exponentially. So, we're going to get back to growth in the service line in the back path of the year. And I think if we execute properly, it will be a good growth story for $20, $20.

Jim Schneider: Thank you.

Bryce Maddock: And then relative to the increased cost to support the new growth ramps, can it be give us a sense? Is that sort of tied to incremental headcount? If it's tied to specific projects, then I guess more broadly speaking, is there a point at which you get to a certain amount of absolute cost addition, and then you're able to kind of get more leverage off of that increased cost or the more proportionally headcount?

Bryce Maddock: Yeah, I think what's happened here is we've gone through a bit of a 180. So, at the end of last year, we were actively looking to remove capacity. We were getting out of leases, closing facilities, really focusing on how can we cut costs in order to protect our margins. And in the beginning of this year, as we went back to investing heavily in growth, we knew that if we were successful, we would have to do a rapid about-face and build a bunch of new offices very, very quickly.

Bryce Maddock: And so, that's what we've had to do. I mean, we're building offices on four different continents right now, and they're all being done at a break-knit pace. And as a result of the focus on speed, perhaps not as efficiently as they could be done if we went through a proper procurement process. So, that's just an example. When we're doing these large ramps, we're also getting very aggressive in terms of trying to meet our hiring timeline, needing to provide for extra things, like sign-on bonuses or in the case of our European business relocation packages.

Bryce Maddock: And then in some of these ramps, we're also providing free training to our clients, so that can sort of artificially reduce margins, at least in the beginning of an engagement. So, yeah, I think this is a question that I mean, I think it's fair to ask. You look back and you're like, hey, you grew faster than this before in your margins for better or what's different this time. I really think it's just the abruptness with which we've had to turn the ship around, and some of the concessions that we've made in order to win business.

Matt Henry: Thank you.

Matt Henry: Our next question comes from Matt Henry with BTIG, you may proceed. Yeah, good afternoon. Thanks for taking the question.

Bryce Maddock: I guess when you look at some of the growth and you highlighted Latin America as a big growth area, you know, are you seeing any shifting of business that maybe historically was serviced from the Philippines and looking at sort of more familiar climate zones or some of your customers is that you know helping a little bit of the revenue driving growth here or anything you're going to have in terms of, you know, customers sort of moving relocating their their work. Yeah, we see a huge demand in the last 12 to 18 months for a year short delivery and by near sure I mean Latin America operations in Mexico and in Colombia.

Bryce Maddock: Part of that demand is coming from people who had previous operations in the US and they see the near sure opportunity to reduce cost, stay in the same time zone, get bilingual coverage. There's also I think amongst some clients and overexposure to the Philippines for English language support and so they've they've been interested in in Colombian Mexico is a sort of a BCP strategy so yes, it's multifaceted but but it's very encouraging and I think we'll have a triple digit revenue business in Latin America this year, which is just incredible when you think where we're coming from.

Bryce Maddock: Very helpful and then as you look at a number of your very large tech clients that maybe have had a fair amount of reduction in their own head count over the last year and a half or two. As we've seen those headlines at least slow down do you feel like that helping drive some of the growth in the business, maybe a stabilization of their own internal expectations and now. Understanding how task us plays into that equation or would you would you point to maybe other drivers that are seeing more of this return of growth here.

Bryce Maddock: Yeah, I mean you know 2022 was the year of efficiency we we you know we all saw that the headlines and certainly we felt it directly ourselves as our clients reduced internal head count and spend on external vendors. At the start of this year felt like clients had optimized just about as much as they could and there was a lot of new excitement in areas like generative AI where investment dollars were being freed up and so we we capitalized on on that opportunity and and I think had done done a really good job of selling our our value proposition to clients that are that are back in growth month. Right thank you. Thank you.

Jacob Hagerty: Our next question goes from Jacob Haggerty with Baird you may proceed. Hey guys this is for taking my question I just have a question about the shift offshore so US was the same percent of revenue at last quarter it looks like so are you guys seeing that stabilizing. And then furthermore are you seeing the shift to your shore as sort of a stepping stone to the Philippines in India so our clients using Latin and then eventually shifting over to Philippines and India as it progress.

Bryce Maddock: Thanks. Yeah, so, you know, we've said historically, we don't think our US business is going to get below 10% of total revenue. I think at this point, it'll be between 11 and 12% for the rest of the year. That it would indicate that we're seeing some sequential or really growth in our US business, which is great. We continue to have both existing and new clients that want on short delivery. Either for regulatory reasons or just individual client preference.

Bryce Maddock: And as far as the near short piece goes, I don't know if it's a stepping stone. Historically, getting people started in the US, always seemed like a good stepping stone to leverage our global footprint. But once people get into the Philippines, into Mexico and Colombia, we haven't seen as much movement to places like Philippines and India. You know, again, our business in the Philippines is by far our largest geography. And on a headcount basis, India is definitely our second largest geography. So we've got strong businesses there and we're excited about the business that we're growing a lot in America. Yeah, that's helpful.

Bryce Maddock: And then I just wanted to follow up on some of the AI services. So as you see this grow, is this going to be mostly in the Philippines and India as well? And then kind of on top of that, is that going to start to drive a meaningful increase in revenue per employee, especially with like tools implemented internally? Yeah, AI services has been a global effort. As far as revenue per employee, it really depends on the level of sophistication of the task.

Bryce Maddock: A lot of the work we're talking about doing with experts is being done on short and certainly there, there should be an increase in revenue per employee. Some of the work continues to be done by our teammates and places like the Philippines and India where revenue per employee may not go up quite as much, just depending on the sophistication of the demand for sure.

Operator: Thank you. And I'm not sure any further questions at this time. This concludes the conference. Thank you for your participation. You may not disconnect. Thank you.

Operator: [inaudible]