Q3 2024 TaskUs Inc Earnings Call

Operator: Good afternoon and welcome to the Taskus fiscal third quarter 2024 conference call.

Good afternoon, and welcome to the task of fiscal third quarter 'twenty 'twenty Four conference call. My name is Michelle and I will be your conference facilitator today at this time all lines have been placed on mute to prevent any background noise.

Michelle: My name is Michelle and I will be your conference facilitator today. At this time, all lines have been placed on mute to prevent any background noise.

Michelle: After the speaker's remarks, there will be a question and answer period. To ask a question during the session, you would need to press star 11 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 11 again.

After the Speakers' remarks, there will be a question and answer period to ask a question. During this session you would need to press star one on your telephone and wait for your name to be announced and to withdraw. Your question. Please press star one again.

Trent Thrash: I would like now to introduce Trent Thrash, Senior Vice President of Corporate Development and Investor Relations. Trent, you may begin.

Speaker Change: I'd like now to introduce Trent thrash senior Vice President of corporate development and Investor Relations.

Trent Thrash: You may begin.

Trent Thrash: Good afternoon, and thank you for joining us for Taskup's third 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. Please note that this call is being simultaneously webcast on the Investor Relations section of our website.

Trent Thrash: Good afternoon, and thank you for joining us for <unk> third quarter 2024 earnings call. Joining me on today's call are Brian <unk>, Our co founder and Chief Executive Officer and Bob.

Trent Thrash: <unk> <unk>, our Chief Financial Officer.

Trent Thrash: 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 Dot task us Dot com.

Trent Thrash: We have also posted supplemental information on our website.

Trent Thrash: Including an investor presentation, and an excel based financial metrics.

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

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 securities laws, 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. 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.

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 securities laws, including but not limited to statements regarding our future financial results and management's expectations and plans for the business.

Trent Thrash: These statements are neither promises or 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 statements.

Trent Thrash: Factors that could cause actual results to differ from these forward looking statements can be found in our annual report on Form 10-K.

Trent Thrash: Which was filed with the SEC on March eight 2020 for this filing which may be supplemented with subsequent periodic reports we file with the FCC is accessible on the SEC website, and our Investor Relations website.

Trent Thrash: 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.

Trent Thrash: Any forward-looking statements made on today's conference call, including responses to questions, are based on the 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.

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

Trent Thrash: <unk> assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.

Trent Thrash: The discussions throughout today's call contain 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.

Trent Thrash: The discussions throughout today's call contain 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.

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

Brian: Now I will turn the call over to Brian <unk>.

Speaker Change: Co founder and Chief Executive Officer Bryce.

Bryce Maddock: Thank you, Trent.

Bryce Maddock: Good afternoon, everyone, and thank you for joining us. In the third quarter, we generated $255.3 million, outperforming the top end of our revenue guidance by $9.3 million. we delivered the most quarterly revenue in Taskus history and returned to double-digit revenue growth of 13.2%. This was made possible by our team's relentless focus on our four strategic growth levers. taking share from competitors, cross-selling our specialized services, diversifying our client base and industry verticals, and leading in the deployment of AI and automation tools. While we are celebrating today's revenue milestone, we aren't done yet. We expect our growth rate to continue accelerating into the fourth quarter of the year for another record-setting quarter.

Brian: Thank you Trent and good afternoon, everyone and thank you for joining us in the third quarter. We generated 255 3 million outperforming the top end of our revenue guidance by $9 3 million.

Brian: We delivered the most quarterly revenue in <unk> history, and returned to double digit revenue growth of 13, 2%.

Brian: This was made possible by our team's relentless focus on our four strategic growth levers taking share from competitors cross selling our specialized services.

Brian: We're supplying our client base and industry verticals and leading in the deployment of AI and automation tools.

Brian: While we are operating today's revenue milestone, we arent done yet we expect our growth rate to continue accelerating into the fourth quarter of the year for another record second quarter, we now expect revenue of $988 million to $990 million for the year.

Bryce Maddock: We now expect revenue of $988 to $990 million for the year, an increase of $24 million at the mid-term. Our team's tireless efforts have enabled us to increase the midpoint of our full year guidance by $64 million since our initial 2024 guide, putting us on pace to grow revenue by 7% for the year. On the back of our strong Q3 revenue, we delivered $54.2 million in adjusted EBITDA in the quarter. This exceeded the $52.7 million midpoint of our most recent guidance by $1.5 million, or nearly 3%. This represents an adjusted EBITDA margin of 21.2%, which was below our guidance of 21.5%.

Brian: An increase of $24 million at the midpoint.

Brian: Our team's tireless efforts have enabled us to increase the midpoint of our full year guidance by $64 million since our initial 2024 guy putting us on pace to grow revenue by 7% for the year.

Brian: On the back of our strong Q3 revenue, we delivered $54 $2 million in adjusted EBITDA in the quarter.

Brian: This exceeded the $52 $7 million midpoint of our most recent guidance by $1 $5 million or nearly 3%.

Brian: This represents an adjusted EBITDA margin of 21, 2%, which was below our guidance of 21, 5%.

Bryce Maddock: Consistent with last quarter, the acceleration in our growth rate requires additional investments in operations, facilities, hiring and training, which impacts our margins and cash flow. In addition to this, we have made the decision to play offense and invest even more in developing our specialized service lines, deploying new technologies, and accelerating sales and marketing. This year, we've watched as many of our competitors have struggled to deliver growth and have reduced their guidance. In response, they are now playing defense as Taskus continues to take share. Given our success, we've decided to significantly increase our investments in the industry and service line expertise and operational excellence that we believe make us the provider of choice for our clients.

Brian: Consistent with last quarter, the acceleration in our growth rate requires additional investments in operations facilities, hiring and training, which impacts our margins and cash flow.

Brian: In addition to this we have made the decision to play offense and invest even more in developing our specialized service lines deploying new technologies and accelerating sales and marketing.

Brian: This year, we've watched as many of our competitors have struggled to deliver growth and have reduced their guidance. In response. They are now playing defense is tasked us continues to take share given.

Brian: Given our success, we've decided to significantly increase our investments in the industry and service line expertise and operational excellence that we believe make us the provider of choice for our clients.

Bryce Maddock: These investments will reduce our margins in the near term. However, it's a tradeoff we're willing to make, because we believe it will allow us to sustain our growth rate into next year. At the midpoint of our guidance, we now expect to deliver approximately $212.6 million in adjusted EBITDA, reflecting a margin of 21.5% and approximately $110 million in adjusted free cash flow for the full year 2024.

Brian: These investments will reduce our margins in the near term.

Brian: It's a trade off were willing to make as we believe it will allow us to sustain our growth rate into next year.

Brian: At the midpoint of our guidance, we now expect to deliver approximately $212 6 million in adjusted EBITDA, reflecting a margin of 21, 5% and approximately $110 million in adjusted free cash flow for the full year 2024.

Bryce Maddock: In summary, our team continues to deliver results that exceed our expectations. We continue to see robust global demand for new and existing clients. We expect our revenue growth will again accelerate in Q4. As we look to 2025, we believe our growth rate and margins will continue to be among the best in the industry.

Brian: In summary, our team continues to deliver results that exceed our expectations. We continue to see robust global demand for new and existing clients. We expect our revenue growth will again accelerate in Q4.

Brian: As we look to 2025, we believe our growth rate and margins will continue to be among the best in the industry.

Bryce Maddock: Next, I'll go through some of the highlights of our Q3 performance, then Balaji will walk through our Q3 financials, Q4 outlook, and our increased full year 2024 guidance. Q3 revenue was $255.3 million, an increase of 13.2% on a year-over-year basis. This increase was reflective of year-over-year and sequential quarterly growth across all three of our services. Q3 saw strength in revenue and bookings from our top 20 clients who generated 68% of total revenue during the quarter. In particular, we again saw strong demand from our largest client, who contributed approximately 23% of total revenue in Q3, up from 20% in Q2.

Brian: Next I'll go through some of the highlights of our Q3 performance and biology will walk through our Q3 financials Q4 outlook and our increased full year 2020 for guidance.

Brian: Okay.

Brian: Q3 revenue was $255 3 million an increase of 13, 2% on a year over year basis. This increase was reflective of year over year and sequential quarterly growth across all three of our service lines.

Brian: Q3 saw strength in revenue and bookings from our top 20 clients, who generated 68% of total revenue during the quarter.

Brian: In particular, we again saw strong demand from our largest client who contributed approximately 23% of total revenue in Q3 up from 20% in Q2.

Bryce Maddock: We anticipate revenue contribution from this client will increase again in Q4. We're excited to continue to grow our relationship with our largest client in support of their generative AI and trust and safety initiatives. Excluding our largest client relationship, revenue from the rest of our business grew approximately 8% in Q3 of 2024. In terms of delivery geographies, as expected, revenue from U.S. delivery declined 4% in Q3 on a year-over-year basis. As a result, U.S. revenue was approximately 12% of total revenue during Q3 versus 14% in the prior year. our offshore geographies again demonstrated strong revenue growth of approximately 16% year-over-year.

Brian: We anticipate revenue contribution from this client will increase again in Q4.

Brian: We're excited to continue to grow our relationship with our largest client in support of their generative AI and trust and safety initiatives.

Brian: Excluding our largest client relationship revenue from the rest of our business grew approximately 8% in Q3 of 2024.

Brian: In terms of delivery geographies as expected revenue from U S delivery declined 4% in Q3 on a year over year basis.

Brian: As a result U S revenue was approximately 12% of total revenue during Q3 versus 14% in the prior year.

Our offshore geographies again demonstrated strong revenue growth of approximately 16% year over year.

Bryce Maddock: For the seventh quarter in a row, revenue delivered in Latin America grew by more than 40% year-over-year in Q3. And we also delivered year-over-year growth in all of our other major delivery geographies outside of the U.S. These include the Philippines, India, and the rest of the world. We ended the quarter with approximately 54,800 global teammates, an increase of approximately 3,100 teammates from the end of Q2. In Q3, our sales and client service teams once again delivered exceptional performance. At 83% of total signings, the majority of our bookings continue to be driven by new wins from existing clients.

Brian: For the seventh quarter in a row revenue delivered in Latin America grew by more than 40% year over year in Q3.

Brian: And we also delivered year over year growth in all of our other major delivery geographies outside of the US These include the Philippines, India and the rest of the world.

Brian: We ended the quarter with approximately 54800 global teammates and increase of approximately 3100 teammates from the end of Q2.

Brian: In Q3, our sales and client service teams once again delivered exceptional performance at.

Brian: At 83% of total signings the majority of our bookings continued to be driven by new wins from existing clients.

Bryce Maddock: This was largely reflective of strong bookings from our largest client, where we continue to have success selling our specialized services against the competition. From a delivery location perspective, Q3 bookings were strongest in Latin America, followed by India and the Philippines. During Q3, we again made progress on our strategic goal of cross-selling our suite of specialized services to our clients. Revenue growth from clients that utilize more than one of our service lines increased 25% year over year. Shifting to our service lines, we return to year-over-year growth in all three of our service lines during Q3 with Trust and Safety and AI services delivering strong double-digit growth.

Brian: This was largely reflective of strong bookings from our largest client where we continue to have success selling our specialized services against the competition.

Brian: From a delivery location perspective, Q3 bookings were strongest in Latin America, followed by India and the Philippines.

Brian: During Q3, we again made progress on our strategic goal of cross selling our suite of specialized services to our client base rep.

Brian: Revenue growth from clients that utilize more than one of our service lines increased 25% year over year.

Brian: Shifting to our service lines, we return to year over year growth in all three of our service lines. During Q3, we trust and safety and AI services delivering strong double digit growth.

Bryce Maddock: Digital customer experience saw mid-single-digit year-over-year growth of 6.3% in Q3, an improvement compared to the 1.7% year-over-year decline we saw in Q2 of this Amongst others, DCX saw improved growth from new clients, particularly in the FinTech, professional services, and health tech verticals as a result of our continued focus on diversifying our client base and industry verticals. While we saw modest revenue increases from certain crypto and equity trading clients in Q3, this cohort remained below 5% of total revenue. Given our year-to-date performance, we expect DCX growth to continue to accelerate, but remain in the single digits during Q4 of 2020.

Brian: Digital customer experience saw mid single digit year over year growth of six 3% in Q3, an improvement compared to the one 7% year over year decline we saw in Q2 of this year.

Brian: Amongst others VCX saw improved growth from new clients, particularly in the Fintech professional services and health Tech verticals as a result of our continued focus on diversifying our client base and industry verticals.

Brian: While we saw modest revenue increases from certain crypto and equity trading clients in Q3. This cohort remain below 5% of total revenue.

Brian: Given our year to date performance, we expect <unk> growth to continue to accelerate but remain in the single digits during Q4 of 2024.

Bryce Maddock: In terms of DCX signings in Q3, we saw broad base strength in bookings across most of our vertical markets. We signed a major expansion with a large global e-commerce retailer. Here, we're delivering services from India, and we are the number one vendor in a network of dozens of providers. A major highlight for the third quarter was an expansion of a Q2 competitive takeaway with an international developer of cloud-based website and e-commerce solutions. Based on the stellar performance that we had out of the gate, this client awarded us a large scale-up commitment in Columbia on top of the initial Q2 win.

Brian: In terms of DCF signings in Q3, we saw broad based strength in bookings across most of our vertical markets.

Brian: We signed a major expansion with a large global e-commerce retailer here, we're delivering services from India and we are the number one vendor in a network of dozens of providers.

A major highlight for the third quarter was an expansion of the Q2 competitive takeaway with an international developer of cloud based website and E Commerce solutions.

Bryce Maddock: This is emblematic of the success of our strategy of taking share from the competition. Here, we've successfully taken millions of dollars of business from one of our direct competitors based on our superior operating performance. Another example of this strategic focus was a significant expansion of the work we provide to a client we first won in Q1 that provides technology-enabled legal solutions. With expansions in India, Mexico, and the United States, we've grown the breadth of the services we provide to include tax support, in addition to customer support, sales, and learning experience. Lastly, while not signed in Q3, we were verbally awarded and began preparing to launch our first contract in support of a large enterprise healthcare payer.

Brian: This is emblematic of the success of our strategy of taking share from the competition.

Brian: Here, we have successfully taken millions of dollars of business from one of our direct competitors based on our superior operating performance.

Brian: Another example of this strategic focus was the significant expansion of the work we provide to our client. We first won in Q1 that provides technology enabled legal solutions with expansions in India, Mexico, and the United States.

Brian: Grown the breadth of the services we provide to include tax.

Brian: In addition to customer support sales and learning experience.

Brian: Lastly.

Speaker Change: We will not find in Q3, we were verbally awarded and began preparing to launch our first contract in support of a large enterprise healthcare payer.

Bryce Maddock: This marquee relationship was cultivated for over a year and is a sign that our enterprise healthcare expansion strategy is working. Turning to trust and safety, revenue growth in this service line was again accretive to our overall growth rate, increasing 30.8% year over year. This marked the third consecutive quarter with growth in excess of 30%. Similar to Q2 of 2024, we again saw broad-based growth, including from our largest client, as well as with certain FinTech, social media, and technology clients. As a reminder, trust and safety includes our financial crime and compliance specialized service offerings, which we previously referred to as risk and response.

Speaker Change: This marquee relationship was cultivated for over a year and as a sign that our enterprise healthcare expansion strategy is working.

Speaker Change: Turning to trust and safety revenue growth in this service line was again accretive to our overall growth rate, increasing 38% year over year.

Speaker Change: This marked the third consecutive quarter with growth in excess of 30%.

Speaker Change: Similar to Q2 of 2024, we again saw broad based growth, including from our largest client as well as with certain fintech, social media and technology clients.

Speaker Change: As a reminder, trust and safety includes our financial crime and compliance specialized service offerings, which we previously referred to as our risk and response.

Bryce Maddock: Going forward, we will refer to these services as Financial Crime and Compliance or FCC in order to better align to market and industry analyst nomenclature. With that said, once again, this subservice line was accretive to the overall growth rate of trust and safety. Based on recent trust and safety booking trends, we expect this service line to continue outpacing the rest of our As a result, trust and safety will represent an increasing percentage of total revenue in future quarters. Notably, during Q3, we signed multiple significant statements of work expanding the scope of the trust and safety solutions we provide to our largest clients.

Speaker Change: Going forward, we will refer to these services as financial crime and compliance or FCC in order to better align to market and industry analysts nomenclature.

Speaker Change: With that said once again this sub service line was accretive to the overall growth rate of trust and safety in Q3.

Speaker Change: Based on recent trust and safety booking trends, we expect this service line to continue outpacing the rest of our business as a result trust and safety will represent an increasing percentage of total revenue in future quarters.

Speaker Change: Notably during Q3, we signed multiple significant statements of work expanding the scope of the trust and safety solutions, we provide to our largest client in.

Bryce Maddock: In addition to traditional content moderation, this included services focused on AI safety, which sits at the intersection of trust and safety and AI services. We also signed a contract to provide European-based content moderation solutions to a video game developer and provider of an online marketplace for PC gaming.

Speaker Change: In addition to traditional content moderation. This included services focused on safety, which sits at the intersection of trust and safety and AI services.

Speaker Change: We also signed a contract to provide European based content moderation solutions to a video game developer and provider of an online marketplace for PC gaming.

Bryce Maddock: Moving on to AI services. Revenues in this specialized service line not only returned to growth in Q3, but accelerated to double-digit growth of 17.8% on a year-over-year basis. We are pleased with the trajectory of this service line, which has been driven by strong revenue growth from our largest client, a provider of tech-enabled legal solutions, our largest autonomous vehicle client, and the world's leading large language model. We continue to see strong demand for AI services across multiple client verticals, including clients in the social media and generative AI industry. We again signed multiple new statements of work supporting our largest client's generative AI initiatives and an expansion of our relationship with our largest autonomous vehicle client in Q3.

Speaker Change: Moving on to AI services revenues in this specialized service line not only returned to growth in Q3, but accelerated to double digit growth of 17, 8% on a year over year basis.

Speaker Change: We are pleased with the trajectory of this service line, which has been driven by strong revenue growth from our largest client <unk>.

Speaker Change: Provider of Tech enabled legal solutions, our largest autonomous vehicle client.

Speaker Change: And the worlds, leading large language model.

Speaker Change: We continue to see strong demand for AI services across multiple client verticals, including clients in the social media and generative AI industries.

Speaker Change: We again signed multiple new statements of work supporting our largest clients generative AI initiatives and an expansion of our relationship with our largest autonomous vehicle client in Q3.

Bryce Maddock: Here we're supporting this client as they expand their fleet of cars in both new and existing markets. We also continue to grow our relationship with the world's leading developer of generative AI technologies across all three of our service lines in multiple geographies. Given this demand and our success selling AI services, we anticipate this service line will again deliver double-digit growth in Q4.

Speaker Change: Here, we're supporting this client as they expand their fleet of cars in both new and existing markets.

Speaker Change: We also continued to grow our relationship with the world's leading developer of generative AI technologies across all three of our service lines in multiple geographies.

Speaker Change: Given this demand and our success selling AG services. We anticipate this service line will again deliver double digit growth in Q4.

Bryce Maddock: Before moving on to our updated 2024 outlook, I want to provide a brief update on our own generative AI initiative. Here too, we're playing offense, deploying our cash GPP platform to clients in order to drive increased efficiency, quality, and customer satisfaction. Combining this technology with our well-trained teammates has delivered a significant impact and supported our return to double-digit growth. We continue to believe generative AI has created more opportunity than risk for tasks. We're seeing that opportunity emerge in the form of demand for our specialized service offerings that focus on AI safety, development, and maintenance. We recognize that over time, GenAI will automate certain customer interactions.

Speaker Change: Before moving on to our updated 2024 outlook I want to provide a brief update on our own generative AI initiatives.

Speaker Change: Here too we are playing offense deploying our cash GPT platform to clients in order to drive increased efficiency quality and customer satisfaction.

Speaker Change: Combining this technology with our well trained teammates has delivered a significant impact and supported our return to double digit growth.

Speaker Change: We continue to believe generative AI has created more opportunity than risk for tasked us we're seeing that opportunity emerge in the form of demand for our specialized service offerings that focus on AI safety development and maintenance.

Speaker Change: We recognize that overtime Gen II will automate certain customer interactions, we are leaning into that possibility automating our own workflows using patch PPP and other tools.

Bryce Maddock: We are leaning into that possibility, automating our own workflows using PaaS GPT and other tools. We also continue to play offense by investing in new capabilities to grow our offerings, supporting complex and sensitive customer interactions and content types. We believe specialized services like our trust and safety, AI services, financial crime and compliance, sales and customer acquisition, customer success, and more complex forms of customer support and technical support are far less exposed to the risk of automation than basic call center work.

Speaker Change: We also continue to play offense by investing in new capabilities to grow our offerings supporting complex insensitive customer interactions and content types.

Speaker Change: We believe specialized services like our trust and safety AI services financial crime and compliance.

Speaker Change: <unk> and customer acquisition customer success, and more complex forms of customer support and technical support.

Speaker Change: Are far less exposed to the risk of automation than basic call Center work.

Bryce Maddock: Before handing it over to Balaji to provide more details on our Q3 results, I want to touch briefly on our 2024 outlook. In light of our strong year-to-date operational execution and sales momentum, we're increasing our full-year revenue guidance to between $988 million and $990 million. This represents a $24 million increase to a midpoint of $989 million. For Q4, we expect to deliver an accelerating double-digit revenue growth rate that will require us to continue investing in new facilities, hiring, and training initiatives, which will have some impact on our margins this year. As a result of these factors and our increased revenue guidance, we expect full-year adjusted EBITDA of approximately $212.6 million, representing a margin of approximately 21.5%, and adjusted free cash flow of approximately $110 million.

Speaker Change: Before handing it over to biology to provide more details on our Q3 results I want to touch briefly on our 2020 for outlook.

Speaker Change: In light of our strong year to date operational execution and sales momentum, we're increasing our full year revenue guidance to between $988 million and $990 million. This represents a $24 million increase to a midpoint of $989 million.

Speaker Change: For Q4, we expect to deliver an accelerating double digit revenue growth rate that will require us to continue investing in new facilities hiring and training initiatives, which will have some impact on our margins this year.

Speaker Change: As a result of these factors and our increased revenue guidance, we expect full year adjusted EBITDA approximately $212 $6 million.

Speaker Change: Representing a margin of approximately 21, 5% and adjusted free cash flow of approximately $110 million.

Bryce Maddock: As we look to 2025, we believe the tireless work of our team has set the company up for another great year.

Speaker Change: As we look to 2025, we believe the tireless work of our team had set the company up for another great year.

Bryce Maddock: I look forward to sharing the details of our 2025 plan during our Q4 earnings call.

Speaker Change: I look forward to sharing the details of our 2025 plan during our Q4 earnings call.

Balaji Sekar: With that, I'll hand it over to Balaji to go through the Q3 financials and our 2024 outlook in more detail. Thank you, Bryce, and good afternoon, everyone. In the third quarter, we earned total revenues of $255.3 million, once again beating our Q3 guidance range of $244 to $246 million. Revenues increased by 13.2% compared to the previous year, beating our expectation of approximately 8.6% growth at the midpoint of our guidance. We outperformed our guidance, primarily driven by stronger-than-expected volumes with existing and new client traffic. In the third quarter, our DCX offering generated $155.2 million for year-over-year growth of 6.3%.

Speaker Change: With that I'll hand, it over to biology to go through the Q3 financials and our 2024 outlook in more detail.

Speaker Change: Thank you, Brian and good afternoon, everyone.

Speaker Change: In the third quarter, we earned total revenues of $255 $3 million.

Speaker Change: Once again, beating our Q3 guidance range of $244 million to $246 million.

Revenues increased by 13, 2% compared to the previous year, beating our expectation of approximately eight 6% growth at the midpoint of our guidance.

Speaker Change: We outperformed our guidance, primarily driven by stronger than expected volume with existing and new clients labs.

Speaker Change: In the third quarter of a <unk> offering generated harlan $55 $2 million for year over year growth of six 3%.

Balaji Sekar: Sequential growth also accelerated from 3.4% in Q2 to 4.6% in Q2. As Bryce covered earlier, this service line growth was primarily attributable to strong new client revenue performance. Similar to Q2, we saw positive results from our strategic focus on clients in the fintech, BFSI, health tech, and generative AI industries. We also saw strength in our entertainment and gaming and professional services vertical. These increases were partially offset by declines from a US travel industry client and certain client cost optimization initiatives, which we have discussed on prior calls. Our trust and safety offering, which includes our content moderation and financial crime and compliance services, grew by 30.8% compared to Q3 of 2023, resulting in $63.7 million of revenue.

Speaker Change: Sequential growth also accelerated from three 4% in Q2 to four 6% in Q3.

Speaker Change: As I covered earlier this service line growth.

Speaker Change: <unk> attributable to strong new client revenue performance.

Similar to Q2, we saw positive results from our strategic focus on clients and the Fintech <unk> health Tech and <unk> industries.

Speaker Change: We also saw strength in our entertainment and gaming and professional services vertical.

Speaker Change: These increases were partially offset by declines from our U S travel industry client and 13 clients cost optimization initiative, which.

Speaker Change: Which we have discussed on prior calls.

Speaker Change: Our trust and safety offering which includes our content moderation and financial crime and compliance services grew by 13, 8% compared to Q3 of 2023, and the third thing and $63 $7 million up revenue.

Balaji Sekar: Sequential growth also accelerated from 6.9% in Q2 to 7.8% in Q3. As discussed earlier, we are excited about the progress in this service line, which included a continued acceleration of growth by our largest client and strong growth in our fintech vertical, where our financial crime and compliance services continue to align well with our client We also saw growth for our trust and safety solutions across most of our verticals from a mix of new and existing clients. Our AI services service line grew by 17.8% year over year, delivering $36.5 million in revenue, primarily as a result of expansion in services we provide to our largest clients and our largest autonomous vehicle Additionally, we have seen demand for AI services pick up in support of our clients generative AI development, testing and maintenance initiatives.

Speaker Change: Sequential growth also accelerated from six 9% in Q2 to seven 8% in Q3.

As discussed earlier.

Speaker Change: We're excited about the progress in this service line, which include a continued acceleration of growth by our largest client and strong growth in our fintech vertical where our financial crime and compliance services continue to align well with our clients needs.

Speaker Change: We also saw growth part of our trust and safety solutions.

Speaker Change: Growth most of our vertical from a mix of new and existing clients.

Speaker Change: Our Air Services service line grew by <unk>, 8% year over year, delivering $6 5 million in revenue primarily as a result of expansion in services, we provide thought largest client under the largest autonomous vehicles.

Speaker Change: Additionally, we have seen demand for air services pick up in support of our clients generating development testing and maintenance initiatives.

Balaji Sekar: We expect AI services year over year growth rate to again accelerate in Q4 as our clients ramp up their generative AI investments. In Q3, revenue concentration with our largest client was approximately 23%, up from 19% in Q3 of 2022. Here we have returned to accelerating growth and expect our revenue concentration to improve again in Q4. Our top 10 and top 20 clients accounted for 56% and 68% respectively, compared to 55% and 67% in Q3 of the previous year. We saw growth across all of our primary client size cohorts, our largest client, top 10 and top 20.

Speaker Change: We expect the AI services year over year growth rate again accelerated in Q4, as our clients ramp up their <unk> investment.

Speaker Change: In Q3 revenue concentration with our largest client was approximately 23% up from 19% in Q3 of 2023.

Speaker Change: Can be a return to accelerating growth and expect to have revenue concentration.

Speaker Change: Sure.

Speaker Change: Gain in Q4.

Speaker Change: Our top 10, and top 20 clients accounted for 56% and 68% respectively.

Speaker Change: 1st% to 55%, 67% in Q3 of the previous year.

Speaker Change: We saw growth across all of our primary client size cohort our largest client.

Speaker Change: Often I stopped print decline.

Balaji Sekar: And we continue to see strength from clients outside of our top 20, which grew 7.5% year-over-year. In the third quarter, we generated 57% of our revenues in the Philippines. 12% 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% again in Latin America, as well as strong acceleration of growth in Europe resulting from recent competitive takeaways in the region. For the full year of 2024, we continue to expect year over year revenue growth in all of our delivery geographies other than the United Our cost of service as a percentage of revenue was 60.2% in the third quarter, compared to 57.7% in Q3 of the prior year.

Speaker Change: And we continue to see strength from clients outside of our top 20, which grew seven 5% year to audio.

Speaker Change: In the third quarter, we generated 57% of our revenues in the Philippines.

Speaker Change: The other person 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% gain in Latin America as well as strong acceleration of growth in Europe, resulting from recent competitive takeaways in the region.

Speaker Change: For the full year of 2024, we continue to expect year over year revenue growth in all of our delivery geographies other than the United States.

Speaker Change: Our cost of services as a percentage of revenue was 62% in the third quarter compared to 57, 7% in Q3 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 costs to support revenue expansion as a result of our improved revenue outlook, offset by the benefit from the stronger U.S. dollar compared to the previous year. In the third quarter, our SG&A expenses were $62.7 million, or 24.5% of revenue. This compares to SG&E Q3 of 2023 of $57.1 million or 25.3% of revenue. Stock compensation expenses decreased by $3.1 million compared to the previous year. This reduction was partially offset by our ongoing investments in operations, sales, marketing and technology.

Speaker Change: The increase was due to typical wage and benefit cost inflation competitive pricing pressures and higher recruiting and facilities costs to support revenue expansion after the third call, but what improved revenue outlook.

Speaker Change: Offset by the benefit from the stronger U S dollar compared to the previous year in the third quarter SG&A expenses were $62 $7 million or 24, 5% of revenue.

Speaker Change: This compares to SG&A in Q3 of 2023 of $57 $1 million or 25, 3% of revenue.

Stock compensation expenses.

Speaker Change: Is by $3 1 million compared to the previous year.

Speaker Change: This reduction was partially offset by our ongoing investment in operations sales marketing and technology.

Balaji Sekar: In addition, we incurred higher bonus expense due to improved company performance that we discussed on our last call. Q3 of 2024 also included an expense of $4.4 million related to litigation costs that are non-recurring and outside the ordinary course of These litigation related expenses have been excluded from our Adjusted Ebit Damage. In the third quarter of 2024, we earned adjusted EBITDA of $54.2 million, a 21.2% margin versus our guidance of $52.7 million and 21.5% margin at the midpoint. Our guidance was based on Forex rates at the time of our forecast, and during Q3, the US dollar declined against certain currencies.

In addition, we incurred.

Speaker Change: Higher bonus expense due to improved company performance that we discussed on our last call.

Speaker Change: Q3 of two liquid before also included an expense of $4 4 million.

Related to litigation costs that are nonrecurring.

Speaker Change: The ordinary course of business.

Speaker Change: This litigation related expenses have been excluded from our adjusted EBITDA metric.

Speaker Change: In the third quarter of <unk> 34, we earned adjusted EBITDA of $54 2 million or 21, 2% margin versus our guidance of $52 7 million and 21, 5% margin at the midpoint.

Speaker Change: Our guidance was based on products right.

Speaker Change: Time of our forecast I am during Q3, the U S dollar declined against certain currencies.

Balaji Sekar: This resulted in an adjusted EBITDA margin reduction of approximately 0.4%. Absent the decline, we'd have slightly outperformed our adjusted EBITDA margin guidance. At $54.2 million, adjusted EBITDA in the quarter was higher than the prior quarter and the same period last year. As Bryce mentioned earlier, the quarter was also impacted by ongoing ramp expenses associated with the higher than expected revenue growth for the year and the investments to support the momentum of the business as we head into 2025. Adjusted net income for the quarter was $34.3 million and adjusted earnings per share was $37,000. By comparison, in the year-ago period, we earned adjusted net income of $30 million and adjusted EPS of $0.32.

Speaker Change: This resulted in an adjusted EBITDA margin reduction of approximately <unk>, 4%.

Speaker Change: Absent the decline slightly.

Speaker Change: Slightly outperformed our adjusted EBITDA margin guidance.

Speaker Change: At $54 $2 million.

Speaker Change: EBITDA in the quarter.

Speaker Change: Higher than the prior quarter and the same period last year.

Speaker Change: As Brian mentioned earlier the quarter was also impacted by ongoing ramp expenses associated with the higher than expected revenue growth for the year and the investments to support the momentum of the business as we head into 2025.

Speaker Change: Adjusted net income for the quarter was $34 $3 million and adjusted earnings per share was 37.

Speaker Change: By comparison in the year ago fee, we earned adjusted net income of $13 million and adjusted EPS up 32%.

Balaji Sekar: Our adjusted EPS included the impact of our lower share count resulting from our stock repurchase program.

Speaker Change: Our adjusted EPS included the impact of a lower share count, resulting from our stock repurchase program.

Balaji Sekar: Now moving on to the balance sheet. Cash and cash equivalents were $180.4 million as of September 30, 2024, compared with the December 31, 2023 balance of $125.8 million. Our net leverage ratio continues to be healthy and was 0.4 times at the end of Q2. As of quarter end, we had approximately $41.8 million of authorization left on our Shari purchase. Given its programmatic design, we repurchased an immaterial number of shares during Q3. Cash generated from operations on a year-to-date basis was $98.2 million through Q3 of 2024, as compared to $103.9 million through Q3 of 2021. The decrease was primarily driven by changes to working capital associated with the growth in the business as well as an increase in tax payments.

Speaker Change: Now moving on to the balance sheet.

Speaker Change: Cash and cash equivalent were hurdle $84 million.

As of September 32024, compared with the December 31st 2023 balance of Harmon $25 8 million.

Speaker Change: Our net leverage ratio continues to be healthy and well.

Speaker Change: 0.4 times at the end of Q3.

Speaker Change: As of quarter end, we had approximately $41 $8 million of authorization left on our share repurchase plan.

Speaker Change: Given its programmatic design.

Speaker Change: Purchased an immaterial number of shares during Q3.

Cash generated from operations on a year to date basis was $98 $2 million through Q3 of 2012 before as compared to one of $3 $9 million through Q3 of 2023.

Speaker Change: The decrease was primarily driven by changes to working capital associated with the growth in the business as a lesson increase in tax payments.

Balaji Sekar: Our capital expenditures decreased on a year-to-date basis to $18.8 million through Q3 of 2024 compared to $22.9 million through Q3 of 2023. The strength of our anticipated client RAMs will continue driving an increase in investments during the remainder of 2024. As a result, we now expect CapEx to be approximately $36 million for the year. Year-to-date adjusted free cash flow was $82.2 million or 52.7% of adjusted EBITDA. As noted in Q2, we expect lower adjusted fee cash flow conversion due to increased capital expenditures and the buildup of working capital associated with our accelerating revenues during the remainder of 2020.

Speaker Change: Our capital expenditures decreased on a year to date basis to $18 $8 million through Q3 of 2024.

Speaker Change: Facebook or incurred $2 9 million through Q3 of 2023.

Speaker Change: The strength of our anticipated client ramp.

Speaker Change: Continued driving an increase in investments during the remainder of 2024.

Speaker Change: Absolutely.

Speaker Change: We now expect capex to be approximately $36 million for the year.

Speaker Change: Year to date, our district free cash flow was $82 2 million or 52, 7% of adjusted EBITDA.

Speaker Change: As noted in Q2, we expect lower a district fee cash flow conversion due to increased capital expenditures and the buildup of working capital associated with the 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 $988 million to $990 million. We expect to earn full year 2024 adjusted EBITDA margin of approximately 21.5%. The revision in Adjusted EBITDA Margin Guidance captures the impact of foreign exchange ramp costs to deliver the increased revenue forecast and additional investment that we spoke about earlier. We expect to generate adjusted free cash flow of approximately $110 million for the year. This implies a conversion rate of over 50% from adjusted EBITDA, a great demonstration of our financial discipline.

Speaker Change: In terms of our financial outlook for the remainder of the year.

Speaker Change: We now anticipate full year 'twenty 'twenty four revenues to be in the range of 988 million to $990 million.

Speaker Change: We expect the full year 'twenty 'twenty four adjusted EBITDA margin of approximately 21, 5%.

Speaker Change: The revision in our adjusted EBITDA margin guidance captures the impact of foreign exchange.

Speaker Change: Land cost to deliver the increased revenue forecasts and additional investment that we spoke about earlier.

Speaker Change: We expect to generate adjusted free cash flow of approximately heartlands $10 million for the year.

Speaker Change: This implies a conversion rate of over 50% from adjusted EBITDA, a great demonstration of our financial discipline.

Balaji Sekar: Our adjusted fee cash flow guidance excludes the impact of certain litigation costs which are non-recurring and outside the ordinary course of business. For the fourth quarter, we expect revenues to be in the range of $267.3 million to $269.3 million, which includes approximately $6 million of seasonal revenue. We expect our adjusted bid-down margin to be approximately 21.1%. The adjusted EBITDA margin guidance for the fourth quarter and full year is based on current Forex rates, so any change to current fee rates would impact our margin. As a reminder, the majority of our revenue is built and collected in U.S.

Speaker Change: Our adjusted free cash flow guidance exclude the impact of certain litigation costs, which are nonrecurring and then outside the ordinary course of business.

Speaker Change: For the fourth quarter, we expect revenues to be in the range of $267 3 million to two.

Speaker Change: $269 $3 million, which includes approximately $6 million of seasonal revenues.

Speaker Change: We expect our adjusted EBITDA margin to be approximately 21, 1%.

Speaker Change: The adjusted EBITDA margin guidance for the fourth quarter and full year is based on current product right. So any change to current speed it would impact our margin.

Speaker Change: As a reminder, the majority of our revenue is billed and collected in U S. Dollars. So we do not see the impact of U S dollar fluctuations on our revenues.

Balaji Sekar: dollars, so we do not see the impact of U.S. dollar fluctuations on our revenue.

Bryce Maddock: I will now hand it back to Bryce. Thank you, Balaji.

Speaker Change: I'll now hand, it back to Brian.

Brian: Thank you biology before we open for questions I'd like to share another task of teammates story.

Bryce Maddock: Before we open for questions, I'd like to share another Taskus teammate's story. George Piamendis is a Taskus teammate based in Thessaloniki, Greece. His story is one of resilience. Born with dwarfism, George was always a talented and driven individual who dreamed of building a successful career. After earning his bachelor's degree, he was ready to join the workforce. However, a medical commissioner ruled that, due to his condition, he was unfit for employment, a decision that would bar him from working for eight years. But George was not one to give up. Instead of letting this setback define him, he decided to make the most of his time.

Brian: George <unk> is a task as teammate based incest linear decrease.

Brian: The story is one of resilience.

Brian: Born with dwarfism, George was always a talented and driven individuals who dreamed of building a successful career.

After earning his bachelors degree.

Brian: Is ready to join the workforce. However, a medical commission ruled that due to his condition. He was unfit for employment.

Brian: A decision that would our him from working for eight years.

Brian: But George was not wanting to give up instead of letting this step back define them. He decided to make the most of his time. He returned to school steadied music production and soon began composing and releasing his own songs.

Bryce Maddock: He returned to school, studied music production, and soon began composing and releasing his own songs. But George still felt something was missing. He wanted the chance to work and fulfill his career aspirations. For two years, George tirelessly advocated for his right. He took his case back to the medical commission, determined to change their mind. Thanks to his perseverance, he succeeded. With this newfound opportunity, George wasted no time. He attended a career day event where he connected with the Taskus team who immediately recognized his potential. He went on to join us becoming a part of the trust and safety team for our biggest client in Thessaloniki.

Brian: But George still felt something was missing you wanted the chance to work and fulfill his career aspirations.

For two years, George tirelessly advocated for his right to work. He took his case back to the medical Commission determined to change their minds. Thanks.

Brian: Thanks to his perseverance he succeeded.

Brian: With this new found opportunity George wasted no time, he attended to career day event, where he connected with the task is team who immediately recognized as potential <unk>.

Speaker Change: He went on to join US, becoming a part of the trust and safety team for our biggest client in Tesla Nicky.

Bryce Maddock: Today, George thrives in his role, bringing his unique perspective, passion, and commitment to each day's work.

Speaker Change: Date, George thrives in his role, bringing his unique perspective passion and commitment to each day's work history inspires us all to always reach for the opportunities we deserve with that I'll ask the operator to open our lines for our question and answer session.

Bryce Maddock: His story inspires us all to always reach for the opportunities we deserve.

Operator: With that, I'll ask the operator to open our line for our question and answer session.

Operator: Operator. Thank you.

Speaker Change: Operator.

Speaker Change: Yes.

Operator: And to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Thank you and to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Jonathan Lee: And the first question will come from Jonathan Lee with Guggenheim. Your line is now open. Great, thanks for taking our questions. Tremendous to see the return to double digit growth here. What are some of the underlying drivers that give you confidence around continuing this pace of acceleration into 4Q? And while we understand it may be early days, you did highlight momentum into next year. So are there any initial demand or budgeting trends you may be seeing that'll shape how you think about growth in 2025? Thanks for the question, Jonathan.

Speaker Change: And the first question will come from Jonathan Lee with Guggenheim. Your line is now.

Jonathan Lee: Great. Thanks for taking our questions tremendous to see the return to double digit growth here.

Speaker Change: What are some of the underlying drivers that give me confidence around continuing at this pace of acceleration into <unk> and while we understand it may be early days you did highlight momentum into next year. So are there any initial demand or budgeting trends you may be seeing that will shape. How you think about growth in 2025.

Thanks for the question Jonathan in Q4, we expect revenue growth will again accelerate this is being driven by expected double digit revenue growth in both our trust and safety and AI services business. We expect the growth rates in both of these service lines are going to accelerate from Q3 due to.

Bryce Maddock: In Q4, we expect revenue growth will again accelerate. This is being driven by expected double-digit revenue growth in both our trust and safety and AI services. We expect the growth rates in both of these service lines are going to accelerate from Q3 due to our expanded strategic relationship with our largest client. We're also currently growing our operations with this client in five different countries to support their investments in Gen AI and trust and safety. Finally, we've made a lot of progress in expanding our AI service offerings with foundational model developers and our largest autonomous vehicle clients.

Speaker Change: Our expanded strategic relationship with our largest client.

We're also currently growing our operations with this client in five different countries to support their investments in Gen AI and trust and safety.

Speaker Change: Finally, we've made a lot of progress in expanding our AI service offerings with foundational model developers and our largest autonomous vehicle client.

Bryce Maddock: Secondly, we're also seeing growth in our digital customer service business line, and there our growth rate is also expected to accelerate in Q4 into the high single digits. We're continuing to take share from the competition driven by our superior operating performance. And this simple and repeatable work is slated for automation. We believe a lot of clients are expanding their investments in the kind of premium support offerings that Taskus is known for.

Speaker Change: Secondly, we're also seeing growth in our digital customer service business line.

Speaker Change: And there our growth rate is also expected to accelerate in Q4 into the high single digits.

Speaker Change: We're continuing to take share from the competition driven by our superior operating performance and is simple and repeatable work is slated for automation. We believe a lot of clients are expanding their investments in the kind of premium support offerings that task is known for.

Bryce Maddock: As for 2025, consistent with prior years, we'll provide formal guidance on our Q4 earnings call, which will happen early next year. For now, what I want investors to know is that we're leaning into the opportunities we see in front of us. We're investing more in specialized service expertise and operational excellence to continue to take share from the competition and to sustain our growth rate. I think if we execute properly, that our 2025 margin and growth rate will be amongst the best in the industry.

Speaker Change: As for 2025 consistent with prior years, we will provide formal guidance on our Q4 <unk>.

Speaker Change: Earnings call, which will happen early next year for now what I want investors to know is that we're leaning into the opportunities we see in front of US we're investing more in specialized service expertise and operational excellence to continue to take share from the competition and to sustain our growth rate I think if we execute properly would properly that our.

Speaker Change: 2025 margin and growth rate will be amongst the best in the industry.

Speaker Change: Okay.

Jonathan Lee: Thanks for that detail.

Bryce Maddock: And as a follow up, I think you guys highlighted some pricing pressure in your prepared remarks. Can you help unpack some of those pricing and contract structure trends you may have seen with new signings in the quarter and whether you expect those dynamics to continue in the near medium term?

Speaker Change: Thanks for that detail and as a follow up I think you guys highlighted some pricing pressure in your prepared remarks can you help unpack some of those pricing and contract structure trends. You may you may have seen with new signings in the quarter and whether you expect those dynamics to continue in the near medium term.

Bryce Maddock: Yeah, we haven't seen an increase in competition since the time of our last call, when we pointed out the trends in some pricing pressure from larger competitors who may not be growing as fast as Taskus. You know, we continue to fare a lot better than most of our direct competitors, returning to double-digit revenue growth and sustaining above 21% adjusted EBITDA margins. And so, as we think about the environment currently, we really feel like the premium offerings that we're known for are sustaining demand for Taskus services in a way that you're not seeing in traditional call center pricing.

Speaker Change: Yes, we haven't seen increase in competition since the time of our last call when we pointed out the.

Speaker Change: The trends in some pricing pressure from from larger competitors, who may not be growing as fast as task us.

Speaker Change: We continue to feel a lot better than most of our direct competitors returning to double digit revenue growth and sustaining above 21% adjusted EBITDA margins.

Speaker Change: As we think about the environment currently we really feel like the premium offerings that we're known for.

Speaker Change: Our sustaining demand for task of services in a way that you.

Speaker Change: Youre not seeing in traditional call center providers.

Bryce Maddock: We've always been a provider of specialized services. And I think that positioning is really paying off.

Speaker Change: Always been a provider of specialized services and.

Speaker Change: And I think that positioning is really paying off as we look to 2025 strategy is to lead on the deployment of AI and simple workflows, while continuing to grow the more complex work types like trust and safety services financial crime and compliance and more complex forms of customer support.

Bryce Maddock: As we look to 2025, the strategy is to lead on the deployment of AI and simple workflows while continuing to grow the more complex work types like trust and safety, AI services, financial crime and compliance, and more complex forms of customer service.

Bryce Maddock: Appreciate the color there, Bryce.

Speaker Change: I appreciate the color there Brian.

Puneet Jain: And our next question comes from Puneet Jain with JP Morgan. Your line is open. Yes, hi, thanks for taking my question and very strong results. So if you take like a step back, look at your guidance. change throughout this year, like the low end moved up by $90 million on revenue, high end moved up by about $40 million. So what drove that increase? I know it's probably many reasons, but is there anything that jumps out, like maybe the FinTech clients or adding more processes with existing clients or new clients or just more transaction volume at existing processes?

Speaker Change: And our next question comes from Puneet Jain with Jpmorgan. Your line is open.

Puneet Jain: Yes, hi, Thanks for taking my question and very strong results.

Puneet Jain: So if you take a step back look at your guidance.

Puneet Jain: Throughout this year, it's like the low end moved up by $19 million on revenue.

Puneet Jain: High end moved up by about $40 million.

Speaker Change: So what drove that increase like I know like it's.

Speaker Change: Probably many reasons.

Speaker Change: But like is there anything that jumps out like maybe the fintech clients.

Speaker Change: Adding more processes with existing clients or new clients or just more.

Speaker Change: Transaction volume at existing processes.

Puneet Jain: What drove like such a significant increase in guidance from when we started the year to now?

Speaker Change: Joe like such a significant increase in guidance from when we started the year till now.

Bryce Maddock: Yeah, if we look back over the last two years, we had a really challenging 18 month period where we were dealing with large volume shifts from onshore to offshore and a real focus on cost reduction across our client base. This year, our clients feel more confident. They're making investments, particularly in Generative AI and other initiatives and we've been a beneficiary of those investments. If I if I look at our fastest growing service line, which is trust and safety, here, we are continue to expand our relationship with our largest client. We've had massive success in growing a financial crimes and compliance business across many different clients, which was a service offering that really only got introduced at Taskus in the last few years.

Speaker Change: Yes, if we look back over the last two years, we had a really challenging 18 month period, where we were dealing with.

Speaker Change: Large volume shifts from onshore to offshore and a real focus on cost reduction across our client base. This year, our clients feel more confident theyre, making investments, particularly in <unk>.

Speaker Change: Generally of AI and other initiatives and we've been a beneficiary of those investments if.

Speaker Change: If I if I look at our.

Speaker Change: Our fastest growing service line, which is trust and safety.

Speaker Change: We are continue to expand our relationship with our largest client we have had massive success in growing.

Speaker Change: Financial crime and compliance business across many different clients, which was a service offering that really only got introduced a task us in the last few years.

Bryce Maddock: In AI services, we were really suffering for the better part of a year. at a time in which both our largest autonomous vehicle client and our largest client had reprioritized some of their investment efforts and moved some work offshore. Again, there, our largest client is investing huge amounts of money in generative AI, and so our AI services with them are growing. Our largest autonomous vehicle client is scaling, rolling out autonomous vehicles across the country, and that's driving a return to growth at that customer as well. So it's really a multifaceted picture, but I would say that the biggest thing we're seeing is our clients have returned to an ace age.

Speaker Change: In AI services, we were really suffering for.

Speaker Change: For the better part of the year.

At a time in which both our largest autonomous vehicle client and our largest client hedge re prioritize some of their investment efforts and move some work offshore again, there our largest client is investing huge amounts of money in generative AI and so our AI services with them or growing our largest autonomous vehicle client is scaling.

Speaker Change: Rolling out autonomous vehicles across the country and Thats driving a return to growth.

Speaker Change: At that customer as well so it's really a multifaceted picture, but I would say that the biggest thing. We're seeing is our clients have returned to an.

Speaker Change: A.

Puneet Jain: phase of investing in growth rather than simply looking to cost reduce. And Taskus is really well positioned to provide the specialized services that these customers are. Got it.

Speaker Change: Phase of investing in growth rather than simply looking to cost cost reduce and task is really well positioned to provide the specialized services that these these customers are demanding.

Puneet Jain: No, thanks for the explanation.

Speaker Change: Okay.

Bryce Maddock: And then in trust and safety, specifically for what you provide to your largest customer, was there any election related benefit to that segment in 3Q, potentially in 4Q as well? Yeah, we do provide election-related trust and safety work at our largest customer, and this year has been a very busy year with a huge number of countries going to the polls. Fortunately, we don't expect that the end of the U.S. presidential election will impact revenues at that client. We are continuing to see a ramp up in trust and safety investments from them across the globe. Largely in response, I think, to regulatory pressure.

Speaker Change: Thanks for the explanation and then interestingly safety, specifically, but can you provide to your largest customers was there any election related benefit.

Speaker Change: To that segment.

Speaker Change: <unk> potentially in <unk>.

Speaker Change: Yes, we do provide election related trust and safety work at our largest customer in this year has been a very busy year with.

Speaker Change: A huge number of countries going to the polls. Fortunately, we don't expect that that the.

Speaker Change: And of the U S presidential election will impact revenues at that client we are continuing to see a ramp up in trust and safety investments from them across the globe.

Speaker Change: Largely in response I think to regulatory pressure. So we are going to continue to grow trust and safety revenue at our largest client into 2025.

Bryce Maddock: So, we are going to continue to grow trust and safety revenue at our largest client into 2025.

Maggie Nolan: Thank you. And our next question comes from Maggie Nolan with William Blair. Your line is open.

Speaker Change: Thank you.

Speaker Change: And our next question comes from Maggie Nolan with William Blair. Your line is open.

Bryce Maddock: Hi, are you prioritizing vertical diversification or growth outside the top account in particular as we enter 2025? And do you have any targets there that you can share with us? Yes, we have been focused on expanding our presence in the enterprise, particularly in Banking and Financial Services, and Health. And in 2024, we've successfully landed a Banking and Financial Service customer. And we just got verbally awarded and in Q4 expect to sign a contract with a very large healthcare payer. The reason we're doing this is our experience in 2022, in which almost all of our clients.

Speaker Change: Hi are you prioritizing vertical diversification our growth outside the top account in particular as we enter <unk>.

Speaker Change: 25, and do you have any targets there that you can share with us.

Speaker Change: Yes.

Speaker Change: We have been focused on expanding our presence in the enterprise, particularly in.

Speaker Change: Banking and financial services and healthcare and in 2024, we've successfully landed.

Speaker Change: The banking and financial service customer and we just.

Speaker Change: Got verbally awarded and in Q4 expect to sign a contract with a very large healthcare payer.

Speaker Change: The reason we're doing this is our experience in 2022 in which.

Speaker Change: Almost all of our clients.

Bryce Maddock: who were high growth technology clients began to focus on cost reduction. I think that really exposed us to how risky it can be to be so concentrated in one area.

Speaker Change: Who were high growth technology clients began to focus on cost reduction.

Speaker Change: That really exposed us to how risky it can be so concentrated in one area and.

Bryce Maddock: And so we sat down as a leadership team and strategically planned which areas we felt would be counter cyclical. And we see really nice trends in the growth of healthcare and more traditional banking and financial services. We also felt like our experience with FinTech and health tech customers would give us the credibility to call upon these larger enterprises. And so that strategy is paying off, it's beginning to work. been in a longer sales cycle than we're used to because you're dealing with larger enterprise clients versus kind of the fast growing, fast decision-making startups that we've dealt with in the past.

Speaker Change: So we sat down as a leadership team and strategically planned which areas we felt would be countercyclical.

Speaker Change: We see really nice trends in the growth of health care and more traditional banking and financial services. We also felt like our experience with Fintech and health Tech customers would give us the credibility to call. Upon these larger enterprises and so that strategy is.

Speaker Change: Paying off it's beginning to work it has.

Speaker Change: Bidding a longer sales cycle than we're used to because youre dealing with larger enterprise clients versus kind of the fast growing fast decision, making startups that we've dealt with in the past.

Bryce Maddock: But we feel very confident that the strategy will continue to work and we should see growth in both of those verticals in 2021.

Speaker Change: But we feel very confident that the strategy will continue to work and we should see growth in both of those verticals in 2025.

Bryce Maddock: Thank you. And the pricing commentary, I know you said it wasn't necessarily incrementally worse or better or different this quarter, but could you give a little bit of color on how that was across the different segments. Yeah, we, we, so, so if we're, if we're talking about service lines, um, We have seen a willingness to invest in specialized expertise in AI services.

Speaker Change: Thank you and the pricing commentary I know you said it wasn't necessarily incrementally.

Speaker Change: Or better or different this quarter, but could you give a little bit of.

Speaker Change: Color on how that was across the different segments.

Speaker Change: Yes.

Speaker Change: So if we're talking about service lines.

Speaker Change: We have seen a willingness to invest.

In specialized expertise and AI services.

Bryce Maddock: and Ian. the mission-critical trust and safety workflows that our clients rely on Taskus for. Also, I think inside digital customer experience, we're really seeing a bifurcation of the business. On the one side, you have simple tier one support that is likely to be very easily automated. There, the pricing pressure is significant. But the vast majority of work we do at Taskus is more complex, white-glove interactions, customer success, customer acquisition and sales. And there, interestingly, as clients are beginning their automation journey, they're actually all talking about how they want to invest more in the premium side of support.

Speaker Change: In the.

The mission critical trust and safety workflows that our clients.

Speaker Change: Rely on task is for.

Speaker Change: Also I think inside digital customer experience, we're really seeing a bifurcation of the business on the one side you have simple tier one support that is likely to be very easily automated there the pricing pressure is significant.

Speaker Change: But the vast majority of work we do at task US is more complex.

Speaker Change: White glove interactions customer success customer acquisition and sales.

Speaker Change: And there interestingly as clients are beginning their automation journey, they're actually all talking about how they want to invest more in the premium side of support and so I think we stand to benefit from that as well.

Bryce Maddock: And so I think we stand to benefit from that.

Jim Schneider: Thank you. And the next question comes from Jim Schneider with Goldman Sachs. Your line is open. Good afternoon. Thanks for taking my question.

Speaker Change: Thank you.

Speaker Change: And the next question comes from Jim Schneider with Goldman Sachs. Your line is open.

Speaker Change: Good afternoon, and thanks for taking my question, maybe just sort of stepping back a little bit thinking about your philosophy in terms of the investments as you grow and clearly you've highlighted that as you're ruling now youre investing for that growth and investing ahead of that growth.

Bryce Maddock: Maybe sort of stepping back a little bit, thinking about your philosophy in terms of investments as you grow. And clearly, you've highlighted that as you're growing now, you're investing for that growth and investing ahead of that growth. I'm sort of wondering, as we think about heading into 2025, do you expect those investments to sort of continue apace as you continue to grow? In other words, margins might be under a little bit of pressure as that happens. And is there a point at which you feel that you sort of put in enough investment dollars on an absolute basis that you can sort of stabilize the amount on either the cost of revenue line or the SG&A line that you invest?

Speaker Change: I'm wondering as we think about heading into 2025 do you expect those investments to sort of continue.

Speaker Change: <unk> as you continue to grow in other words margins might be under a little bit of pressure as that happens.

Speaker Change: Is there a point at which you feel that you're sort of putting enough investment dollars on an absolute basis. They can sort of stabilize the amount on either the cost of revenue line or the SG&A line that you invest.

Bryce Maddock: Yeah, it's a great question. So as we look at 2025, our focus is on sustaining the accelerating double-digit growth rates we've been able to achieve this year. And in order to do that, we do plan to continue to expand our investments in operational excellence, sales and marketing, and the specialized service line expertise that we think will continue to drive growth.

Speaker Change: Yes, it's a great question. So as we look at 2025, our focus is on sustaining the accelerating double digit growth rates, we've been able to achieve this year and in order to do that we do plan to continue to expand our investments in <unk>.

Speaker Change: Operational excellence sales and marketing and the specialized service line expertise that we think will continue to drive growth.

Bryce Maddock: With that being said, we recognize that our North Star has to be our adjusted EBITDA dollar growth. And so our focus is on making sure that we're driving significant adjusted EBITDA dollar growth in 2025, which we expect to do.

Speaker Change: With that being said we recognize that.

Speaker Change: Our north star has to be our adjusted EBITDA dollar growth.

Speaker Change: And.

Speaker Change: And so our focus is on making sure that we're driving significant adjusted EBITDA dollar growth in 2025, which we expect to do.

Bryce Maddock: I think that the real key for our business over the next few years is going to be to continue to get better leverage over our SG&A. And that will simply come by growing top line revenue faster than we're growing SG&A.

Speaker Change: I think that the.

Speaker Change: The real key for our business over the next few years is going to continue to get better leverage over our SG&A and that will simply come by growing topline revenue faster than we're growing SG&A.

Bryce Maddock: Whether that is going to happen in 2025 or 2026, I'm not going to be able to say right now, but I will say that we expect to continue to invest heavily into 2025. We expect that the growth rates that we've seen this quarter will be sustained into 2025 based on those investments. And we will absolutely look to get better leverage over our SG&A in the next few years and make sure we're getting back to the adjusted EBITDA margin.

Speaker Change: Whether whether that is going to happen.

Speaker Change: In 2025 or 2026.

Speaker Change: And to be able to say right now, but I will say that.

Speaker Change: We expect to continue to invest heavily into 2025, we expect that the growth rates that we've seen this quarter.

Speaker Change: Will be sustained into 2025 based on those investments.

Speaker Change: And we will absolutely look to get better leverage of our SG&A in the next few years and make sure we're getting back to.

Speaker Change: The adjusted EBITDA margins, we've seen historically.

Bryce Maddock: That's helpful, thanks. And then, you know, relative to the large healthcare payer win that you cited in the quarter, good to see the diversification, but to follow up on the earlier question, I wanted to sort of ask, what are the ambitions for your scale, either with that customer or with that vertical in the future? Basically, another way of asking it is, you know, could that customer over time represent something, you know, sort of in your sort of top 10 or top 20 customers by size? Yeah, there's certainly the potential for that customer to become one of our top customers.

Speaker Change: That's helpful. Thanks, and then relative to the large healthcare payer when that you cited in the quarter good to see the diversification, but to follow up on the earlier question wanted to sort of ask what are the ambitions for your scale, either with that customer or what's that vertical in the future.

Speaker Change: Basically another way of asking it is.

Speaker Change: Could that customer over time represent something sort of in Europe sort of top 10 or top 20 customers by size.

Speaker Change: Yes, there is certainly the potential for that customer to become one of our top customers. They arent now.

Bryce Maddock: They aren't now, but if we're successful in our operational execution, and I expect we will be, they certainly have the potential to become one of our largest customers.

Speaker Change: But if we are successful in our operational execution and I expect we will be they certainly have the potential to become one of our largest clients.

Bryce Maddock: I think healthcare is a massive opportunity. It's a heavily regulated industry that will grow materially in the years to come. And we've got really great credentials working with a number of leading health tech clients. And so we're using those credentials to go and speak to traditional enterprise healthcare companies about how we can help them to redesign their customer journey and apply some of the best practices that we've been successful in deploying for our health tech clients. That offering seems to be resonating and I'm excited to see what healthcare, enterprise healthcare in particular, can become for Taskus in the next few years.

Speaker Change: Health care is a massive opportunity.

Speaker Change: A heavily regulated industry.

Speaker Change: We will grow materially in the years to come.

Speaker Change: And we've got really great credentials working with.

Speaker Change: A number of leading health tech clients and so we're using those credentials to go and speak to traditional enterprise health care companies about how we can help them to redesign their customer journey.

Speaker Change: Apply some of the best practices that we have been successful in deploying for our health tech clients that offering seems to be resonating and I'm excited.

Speaker Change: To see what health care Enterprise health care in particular can become per tasked us in the next few years.

Jacob Hagerty: Thank you. And our next question comes from Jacob Hagerty with Baird. Your line is now open. Hey guys, congrats on a great quarter here. So just a question on margins again. So kind of like what, like what levers do you guys have to pull to increase margins or at least keep them level in 2025? You know, you talked about pricing pressure and the shift to offshore, you know, could potentially be be done here with the US being pretty much as low as you guys have said it's going to get. So I'm just kind of wondering like what levers you have to pull as we go into the new year here.

Speaker Change: Thank you.

Speaker Change: And our next question comes from Jacob Haggerty with Baird. Your line is now open.

Speaker Change: Hey, guys congrats on a great quarter here. So just a question on margins again so.

Speaker Change: Kind of like what.

Speaker Change: What leverage do you guys have to pull to increase margins or at least keep them level in 2025, you talked about pricing pressure.

Speaker Change: The shift to offshore.

Speaker Change: <unk> could potentially be done here with the U S being pretty much as low as you guys have said, it's going to get so I'm just kind of wondering what levers you have to pull as we go into the new year here.

Bryce Maddock: Well, the biggest leverage we have to pull is continuing to move up the value chain in the service offerings we deliver to our clients. Ultimately, clients are going to pay based on the sophistication and reliability of the service that we provide them. And so our investments in specialized services are directly aimed at continuing to sustain our growth rate and be able to expand the margin profile of the work that we're doing. Over the last few years, we have been helped by an onshore to offshore shift of work outside of the U.S. It's also important to note, though, that we've seen significant growth in Europe and Latin America.

Speaker Change: Well the biggest levers we have to pull is continuing to move up the value chain and the service offerings, we deliver to our clients ultimately clients are going to pay based on the sophistication.

Speaker Change: Reliability of the service that we provide them and so our investments in specialized services are directly.

Speaker Change: Aimed at continuing to sustain our growth rate and be able to expand the margin profile of the work that we're doing.

Speaker Change: Over the last few years.

Speaker Change: We have been helped by our onshore to offshore shift.

Speaker Change: Work outside of the U S. It's also important to note that we have seen significant growth in Europe.

Bryce Maddock: And in those geographies, you tend to have margins that are slightly higher than U.S. delivery, but significantly lower than the margins that we've seen in places like India and the Philippines over the history of the business, which are our largest geographies.

In Latin America and in those geographies you tend to have margins that are slightly higher than U S delivery, but significantly lower than the margins that we've seen in places like India and the Philippines.

Speaker Change: Over the history of the business, which are our largest geographies.

Bryce Maddock: I think on the topic of margin, I want to have a few items called out for consideration as we head into 2025.

Speaker Change: I think on the topic of margin.

Speaker Change: To have a few items called out for consideration as we head into 2025.

Balaji Sekar: And I'll hand it over to Balaji to just outline a couple of those items that I want everyone to be aware of, particularly as we look at Q1 of 2020. Awesome. Hey, Pat, thanks, Bryce. So like Bryce mentioned, as we kind of, while we're not providing guidance for 2025 right now, but as we kind of look at Q1, consistent with last year, Q4 has about $6 million in seasonal revenues, which predominantly comes from our healthcare and retail clients, that will not recur in Q1 of 2020. So that is consistent with what we what we saw in 2024, too.

Speaker Change: And I'll hand, it over to biology to just outline a couple of those items that I want everyone to be aware of particularly as we look at Q1 of 2025.

Speaker Change: Hey, Thanks, Brian So like Bryce mentioned as we kind of why we're not providing guidance for 2025.

Speaker Change: Right now, but is it going to look at the Q1.

Speaker Change: Consistent with last year Q.

Speaker Change: Q4 has about $6 million in seasonal revenues.

Speaker Change: It's predominantly comes from our healthcare and retail clients.

Speaker Change: We will not recur in Q1 off could you quantify.

Speaker Change: So that is consistent with what we what we saw and particularly for <unk> and then the second item, which is little bit different unlike last year.

Balaji Sekar: And then the second item, which is a little bit different, unlike last year, is compared to Q4 of 2024. Q1 of 2025 has two fewer working days. So while Q4 revenue was driven by about 66 working days, Q1 will be driven by about 64 days. And given that much of our costs are fixed, which, as an example, if you look at salaries, we pay monthly or on a periodic basis. But we often bill our clients on a per hour basis. So this will have a negative impact on our reported revenues and margins in Q1. And to be clear, the negative impact of working day on revenues and margins is isolated to Q1 up to Gotcha, that's very helpful.

Speaker Change: Compared to Q4 of <unk> will be put before Q1 of <unk> 35.

Speaker Change: Sure working days so.

Speaker Change: Q4 revenue was driven by about 66 working days Q1 will be driven by what 64 days.

Speaker Change: Given that much of what we are also fixed which as an example, if you look at Saturdays, we paid monthly.

Speaker Change: Auto on a periodic basis, so, but we often below our clients on a quarterly basis. So this will have a negative impact on our reported revenues and margins in Q1.

Speaker Change: And the negative impact of working day.

Speaker Change: On revenues and margins as isolated to Q1 of 30 35.

Speaker Change: Okay.

Bryce Maddock: And then just kind of thinking about sequentials as well. Obviously, when you're saying that about 2025, that implies maybe some, a lower sequential revenue growth rate in Q1. But should we expect that to maybe ramp throughout the year, just kind of thinking on like a quarter to quarter basis here, because obviously, year over year, you hit a tougher comp in the second half. Yeah, so on that point, you know, at this stage, our sales in Q3, and into the beginning of Q4 have been very strong.

Speaker Change: Got you that's very helpful. And then just kind of thinking about sequential as well obviously when you say not about 2025 it implies maybe some.

Speaker Change: A lower sequential revenue growth rate in Q1, but should we expect that to maybe ramp throughout the year, just kind of thinking on like a quarter to quarter basis here, because obviously year over year, you had a tougher comp in the second half.

Speaker Change: Yes.

Speaker Change: On that point.

Speaker Change: At this stage.

Speaker Change: Our sales in Q3 and into the beginning of Q4 have been very strong and so I don't want want Paul as you said to be read as Rev.

Bryce Maddock: And so I don't want what Balaji said to be read as revenue is going to decline from Q4 to Q1, necessarily. While we're not providing formal guidance, we just want everyone to know that there's this really 3% drag that you're going to see from having two fewer working days and $6 million in seasonal revenue that won't recur. So, in order to continue to grow sequentially, we're going to have to sell over both of those things. And our team is hard at work to make that happen.

Speaker Change: Revenue is going to decline from Q4 to Q1 necessarily while we're not providing formal guidance. We just want everyone to know that there is this.

Speaker Change: Really 3% drag that youre going to see from having two fewer working days and.

Speaker Change: $6 million from seasonal revenue that won't recur. So in order to to continue to grow sequentially, we're going to have to sell over both of those things and.

Speaker Change: And our team is hard at work to make that happen.

Bryce Maddock: As we look to the rest of 2025, there definitely are more challenging comps in the back half of 2025, given the success we've had in 2024. We do feel very confident about our ability to continue to sustain our growth into 2025.

Speaker Change: As we look to the rest of 2025, there definitely are more challenging comps in the back half of 2025, given the success we've had in 2024.

Speaker Change: We do feel very confident about our ability to continue to sustain our growth into 2025.

Operator: And what that means for the back half of the year, it's a little hard to say with precision at the moment, but the trends that we're seeing have us feeling very I show no further questions at this time.

Speaker Change: And.

Speaker Change: And what that means for the back half of the year, it's a little hard to say with precision at the moment, but.

Speaker Change: But the trends that we're seeing have us feeling very confident.

Speaker Change: I show no further questions at this time.

Operator: This will conclude today's conference call. Thank you so much for participating, and you may now disconnect.

This will conclude today's conference call. Thank you so much for participating and you may now disconnect.

Operator: Thanks for watching!

Speaker Change: Okay.

Speaker Change: [music].