Q4 2024 TaskUs Inc Earnings Call
Good afternoon, and welcome to the task of fourth quarter and full year 2024 earnings call. My name is Marvin and I'll be your conference facilitator.
Today.
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Introduce train crash senior Vice President of corporate development Investor Relations you may begin.
Good afternoon, and thank you for joining us for the task is fourth quarter and full year 2024 earnings call.
Joining me on today's call are bright spot up our co founder and Chief Executive Officer, <unk>, <unk>, our Chief Financial Officer.
Full details of our results and additional management commentary.
In our earnings release, which can be found on the Investor Relations section of the website at IR Dot <unk> Dot com.
We have also posted supplemental information on our website, including an investor presentation.
And excel based financial metrics file.
Please note this call is being simultaneously webcast on the Investor Relations section of our website.
Before we start I want to remind you that the following discussions contain 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.
These statements are neither promises or guarantees and involve risks and uncertainties.
It may cause actual results to differ materially from those discussed here.
Should not place undue reliance on any forward looking statements.
Factors that could cause actual results to differ from these forward looking statements can be found in our annual report on Form 10-K, which was filed with the SEC on March eight of 2024.
This filing is accessible on the Sec's website, and our Investor Relations website and may be supplemented with subsequent periodic reports, we file with the SEC.
We expect our 2024 10-K to be filed with the SEC No later than March 17th of 2025.
Any forward looking statements made on today's conference call, including responses to questions are based on current expectations as of today and task assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.
The following discussion contains non-GAAP financial measures.
A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP metric. Please see our earnings press release, which is available in the IR section of our website.
Now I will turn the call over to Brian <unk>.
Co founder and Chief Executive Officer Bryce.
Thank you Trent and good afternoon, everyone and thank you for joining us in the fourth quarter, we delivered $274 $2 million in revenue outperformed the top end of our guidance of $269 $3 million by $4 $9 million for nearly 2%.
This result marks the second consecutive quarter of record breaking revenue and reflect 17, 1% year over year revenue growth.
In 2024, we deliver on our goal of returning the company to growth.
In the back half of the year, we exceeded expectations by delivering accelerating double digit growth as.
As we look to 2025, we intend to continue this trend.
In terms of profitability, we delivered $53 8 million in adjusted EBITDA in the quarter for an adjusted EBITDA margin of 19, 6%, a 150 basis points below our guidance of 21, 1%.
Our top line revenue performance and outlook for 2025, again required higher than anticipated investments in operations facilities hiring and training, which impacted our margins.
Additionally, Q4 revenue and costs were negatively impacted by certain business disruptions biology will discuss these impacts in more detail later in the call.
For the full year 2024, we delivered $995 million in revenue and $209 9 million.
In adjusted EBITDA, representing an adjusted EBITDA margin of 21, 1%.
We also delivered 107 $4 million in adjusted free cash flow in 2024.
Likely below our guidance of approximately $110 million, primarily due to increased capital investments required by 2025 anticipated revenue growth.
On behalf of the entire task. This leadership team I want to express my gratitude for our teammates who show up to work every day to deliver for our clients. It is their operational excellence and execution has driven robust client demand.
This demand has positioned us for what we believe will be record breaking revenue and adjusted EBITDA in 2025.
While it's still early 2025 is off to a strong start we are increasing our investments to ensure that tasked us where meaningful service provider of choice. This includes investments in intrinsic AI technologies and generally the nice services sales and marketing talent and facility expansions in new and existing.
Countries. We believe this strategy will allow us to continue to drive revenue growth that is among the best in our industry.
We also aspire to deliver adjusted EBITDA margins that are among the industry's best in 2025, we plan to drive incremental efficiency into our business through further operational optimization and AI driven automation.
Under this plan, we expect our margins to expand over the course of the year.
Next I'll recap some of the highlights from our Q4 and full year 2024 performance before discussing our 2025 outlook.
Apology: Apology will then walk through our financials and 2025 guidance in greater detail.
Q4 revenues were $274 2 million a.
Apology: At 17, 1% increase on a year over year basis, and an acceleration from Q3's, 32% growth.
Our sales and client service teams once again delivered remarkable performance in Q4 positioning us for a solid start to 2025, approximately 55% of our signings were driven by wins from existing clients. This was down from 83% in Q3, we saw a significant uptick in new logo.
Apology: Signings in the quarter.
Additionally, our existing client signings, we're less weighted towards our largest client, resulting in overall sales being well balanced across our client portfolio and industry verticals.
In Q4, we again saw a year over year increase in clients utilizing more than one of our service lines.
Revenue from these clients grew approximately 29% year over year in Q4 again, demonstrating the success of our strategy of cross selling our suite of specialized services to our clients.
Turning to our service lines after returning to year over year revenue growth in all three service lines. In Q3, we performed even better in Q4, delivering accelerating year over year revenue growth in each service line.
Q4 digital customer experience revenue increased by eight 5% compared to Q4 of 2023, an improvement over the six 3% growth we delivered in Q3.
<unk> saw its strongest growth from new clients, primarily in our financial services and health care verticals again benefiting from our strategic focus to add new enterprise clients.
Given our 2020 for performance and client signing trends in Dcs, we're optimistic that ECS revenue growth can accelerate into the low double digits in Q1 of 2025.
I'm also pleased to report that task. This was recently named a major contender in Everest group's BBB sales services peak matrix assessment for 2024.
This industry recognition reflects task as strategic focus on expanding our suite of specialized DCF services, it's a more complex solutions, including sales revenue generation and customer success motions.
In terms of DCF signings in Q4, we signed a meaningful expansion with a provider of smart home security and automation solutions. This new work in Mexico will further solidify this top 20 client relationship.
Once fully ramped we will have approximately 1200 teammates supporting with clients across three different countries.
We signed multiple new statements of work with the financial services client that provides prepaid and debit cards cross border payments and loyalty solutions.
The trust we've earned from this client during our first year of operations is evidence of the best in class quality that our talented teammates consistently deliver.
Apology: Notably during Q4, we also signed an successfully ramp services with our first large U S based enterprise healthcare payer.
We now provide voice based services to this marquee clients from India and anticipate further expansion of this important relationship during 2025.
We also signed another contract with a healthcare client providing U S based work from home member support.
These and other Q4 healthcare wins are validation of our strategic decision to target clients in this regulated market.
Moving on to Trust and safety. This service line again delivered exceptional performance in Q4 with 34% year over year growth. This marked the fourth quarter in a row of more than 30% growth.
Apology: We continue to invest in our content moderation and financial crime and compliance solutions and believe it together the trust and safety service line <unk>.
Can you do to deliver solid double digit revenue growth in 2025.
Similar to Q3, we again signed multiple statements of work expanding the scope of the trust and safety solutions, we provide to our largest social media clients.
This again included AI safety solutions that integrate both trust and safety and AI services.
Apology: Combined with the ongoing ramp of new business signed earlier in 2024 across each of our service lines. We expect this client to represent an increasing percentage of our overall revenues.
Beyond our largest client we also signed a contract to support a German headquartered retail and e-commerce industry clients operations from India.
This win was an example of our cross selling strategy yielding results with a client originally acquired as a part of the <unk> acquisition.
Lastly, we signed a contract with a new client, providing financial crime and compliance investigation services from India to a provider of dispute and Chargeback management software.
Apology: Now turning to AI services revenue growth in this specialized service line accelerated further in Q4, reaching 31% on a year over year basis. We're pleased with the strong demand for AI services across nearly all of our verticals, which resulted in a further increase in the number of clients you.
<unk>, our AI services in the quarter.
Driven by 2020 for solid results in early 2025 successes, we anticipate AI services year over year revenue growth will accelerate significantly in 2025 likely making it the fastest growing of all of our service lines.
The quality and size of our Q4 AI service signings were strong and broad based across new and existing enterprise technology, social media and autonomous vehicle clients.
We also saw continued demand from developers of multimodal generative AI and large language models, including from our largest client and the worlds leading large language model.
Apology: I want to highlight a particular win from a new social media client that represented the culmination of nearly two years of effort by one of our dedicated sales leaders will.
We will be providing AI services from the Philippines, Malaysia increase in support of this client's global platform.
Given this win and early 2025 demand signals from this new client we anticipate they will quickly become a top 20 task this client during 2025.
Apology: Moving on from our service lines I want to take a moment to outline our strategy for 2025.
At the start of last year, I announced that we had a singular focus for 2024.
Turning the company to growth.
We accomplished that goal returning to year over year growth in Q2, and achieving accelerating double digit growth in Q3 and four.
We feel confident that we will sustain this growth in 2025. So for this year, our strategic focus will be re imagining our business for the AI era.
Over the next five years AI is likely to fundamentally reshape our world. There are considerable fears about what this means for the BPM industry.
Our view is that our industry will have both winners and losers.
<unk> remained focused on simple repeatable customer interactions and processes will be automated into oblivion, while those that provide more complex services and develop new revenue streams supporting the AI Revolution will have the opportunity to achieve durable double digit growth, while preserving our EBIT expands.
Our margins.
Apology: At task Us, we intend to be an AI winner.
In 2025, we're focused on three key initiatives to best position us for the AI H <unk>.
Apology: First we're increasing our investments in AI services.
These are the human services required to develop AI models.
Fastest growing area of the service line has been our work with generative AI products and foundation model developers.
Here, we collect create and curate the data needed to develop next generation models.
We also constantly evaluate these models, both pre and post deployment to ensure their quality and safety.
Finally, we're supporting the development and deployment of AI across a variety of service areas for all types of companies from autonomous vehicles to sales and customer service our investments and add service has already paid off as I. Just mentioned, we believe AI services will be our fastest growing service line for 2025.
Second we're deploying AI across our own internal operations to drive efficiency in.
In 2023, we launched our task GPT platform.
By the end of 2024.
The task of teammates were using tools built on cash GBT each day.
These tools improve the efficiency and quality, we deliver for our clients.
Apology: In 2025, we are rolling out a suite of tools aimed at making our internal support teams more productive.
From recruitment to training quality to business intelligence workforce management to human resources today task as employees thousands of people to ensure our frontline teammates successfully deliver for our clients.
By the end of the year all of our support functions will be using tools built on task CPT to improve their efficiency. We believe this will allow us to drive down support ratios and the cost of the support services as a percentage of our revenues, thus improving our margins.
Finally, we're proud to announce our Gen <unk> AI consulting practice. This group will Parker with leading <unk> AI companies focused on automating customer support interactions and business processes.
We will leverage task of his expertise to enhance our clients' workflows.
Militating the complex integration and model training required to realize the promise of these technologies across disparate data repositories and back office platforms.
By reselling implementing and maintaining these tools for our clients, while continuing to provide services for processes. They cannot be automated we will create an enduring revenue stream from the AI Revolution.
Apology: Over the next three quarters I will do a deep dive on one element of this three part strategy.
This quarter I want to focus on our investments in AI services.
Apology: Let me start by saying that demand for AG services has transformed faster than any service I have ever seen.
When we started this practice a decade ago, we were focused exclusively on autonomous vehicle development tagging images of streets to teach cars how to drive.
Over the past few years the development of foundation models has exploded leading to a transformation in demand for <unk> services companies are now seeking people, who can create right and rate LLM questions Enhancers. As these models are improve the complexity of this demand is also growing with many or.
Apology: Organizations looking to source Masters and Phd level expertise across nearly every subject matter area.
Is AI safety has become a critical concern the demand for AI Red team is also surged in this process are diverse and specialized teams rigorously test AI models probing for weaknesses biases and potential misuse. They use adversarial techniques to stress test the models attempting to.
Licit responses that violate terms of service or enable harmful behaviors.
Effective red teaming requires a unique combination of deep technical expertise and an understanding of cultural ethical and customer specific policy considerations with our years of experience in services and trust and safety task is particularly well positioned to provide effective renting services that help <unk>.
<unk> to develop more secure responsible and resilient ad models.
To date, we provide services focused on Jenny I safety to the worlds, leading large language model as well as the world's largest social media platform.
Apology: We recently launched our first <unk> AI client here, we're training agents to automatically solve simple customer challenges.
Apology: We've helped them different foundation model developer expand the languages that users can interact with we.
We support another of the world's largest social media platforms to improve their model's ability to automatically remove violating content.
And we helped ml comments and open the engineering consortium to develop a first of its kind of a benchmark to measure the safety of large language models in text to text AI interactions.
We expect year over year revenue growth from this service line to materially accelerate in the first half of this year, making add services, our fastest growing service offering.
We then add services. The work we are doing supporting regenerative AI is growing faster than any other solution. We provide in 2025. We expect this trend to continue with generative AI workflows growing at rates that are materially accretive to our consolidated revenue growth rate.
We are excited about this first element of our strategy to ensure that task is well positioned for bps AI centric future and look forward to providing more details about the other pillars of this strategy on future calls.
In addition to re imagining our services for the AI era. We are focused on three core initiatives to ensure <unk> remains the service provider of choice for clients with complex service needs in 2025.
First we will continue to take share from the competition through operational excellence. We made strong progress on this initiative in 2024 by successfully taking tens of millions of dollars of business from our direct competitors across 48 clients, including 13 of our top 20 clients.
And we're not done yet we have meaningful opportunities with new and existing clients. We're simply tired of mediocre Bto services. We're confident that we can continue to take share not by being the cheapest provider, but might be the best.
Apology: Next we will continue expanding our specialized services that are less likely to be automated we're moving up the value chain into services and industries that are AI resistant.
Or we can displace incumbent providers were slow or unwilling to embrace AI centric solutions. This includes combining innovative technology partnerships with our talented teammates to grow our trust and safety financial crime and compliance sales and customer success and complex customer.
Experienced solutions.
Lastly, we will continue to deepen our expertise and expand our reach with enterprise clients and regulated industries, such as financial services and healthcare the recent wins and rapid multimillion dollar expansions of the <unk>.
Health care relationships I discussed earlier in the call are emblematic of the impact this strategy is having on our growth.
We intend to maintain this momentum in 2025.
Before handing it over to biology for more details on our Q4 results I want to quickly outline our Q1 and full year 2025 revenue outlook.
In Q1, we expect to deliver revenues between $270 million and 200.
Apology: Third $72 million.
Representing year over year revenue growth of approximately 19% at the midpoint.
This reflects the continued acceleration of our growth rate on a year over year basis.
On a sequential basis Q1 will be impacted by two factors first we have an approximately $9 million negative revenue impact from two fewer working days in the quarter.
And second as we've experienced in past years, we have a decline in seasonal revenues of approximately $6 million.
Combined this is a total sequential impact of approximately $15 million compared to Q4 of 2024.
Apology: This will also impact our adjusted EBITDA margins, which we expect to be 20% for the first quarter.
We expect to deliver full year 2025 revenue of approximately $1. One 1 billion at the midpoint of our guidance range of 1.0 95 billion.
To 1.125 billion.
We expect margins to expand over the course of 2025, resulting in anticipated full year adjusted EBITDA margins of approximately 21% roughly flat with our full year 2024 results with that I'll hand, it over to biology to go through the Q4 financials and our 2020 guidance in <unk>.
More detail.
Thank you, Brian and good afternoon, everyone.
Apology: In the fourth quarter.
Total revenue was up $274 $2 million once again, beating our guidance range of $267 3 million to two.
$269 $3 million.
Revenue increased by 17, 1% compared to the previous year exceeding our expectation up 14, 5% growth at the midpoint the whole guidance.
Our performance reflected strong accelerating year over year growth across all three of our service lines and higher than expected volumes from both new and existing clients across a broad range of verticals.
Apology: Fortunately <unk> forward revenue.
Year over year by seven 6% to $995 million well above the top end of our guidance range of $919 million.
In Q4 of 'twenty 'twenty four we earned adjusted EBITDA of $53 $8 million.
19, 6% margin versus our guidance of $56 $6 million in.
21, 1% at the midpoint.
For the full year, we achieved $299 million in adjusted EBITDA and adjusted EBITDA margin of 21, 1% below our guidance of 21, 5%.
Apology: As previously mentioned.
Strong Q4 revenues.
Apology: Double digit 25 revenue growth forecast has necessitated increased investment in operations facilities hiding I'm framing, which impacted Q4 margins.
Additionally, this quarter's revenue and margins.
It really impacted by security incidents.
In response to one of event we saw.
<unk> already impacted operations are toughened, a victim of caution.
In order to take care of our people, we chose to retain and paid the impact could be made during the suspension period.
I am proud of our teams the fulfill action I'm happy to report that we have now fully or stored the suspended operations.
Apology: In response, we are hardening over defenses, but investing more in information and physical security.
Apology: We have included these investments in the guidance we are providing today.
Now moving on to service lines.
In the fourth quarter, although beauty offering generated harlan $64 $8 million for the year over year increase of eight 5%.
This service line growth was primarily attributable to new client revenue, which represented approximately 87% of growth this quarter.
Apology: Our strategic focus on clients in the financial services healthcare and professional services verticals again produced solid revenue results.
Apology: We also saw growth coming from existing clients, primarily in financial services and entertainment and gaming verticals.
Although 50 business.
The content moderation and financial crime and compliance services grew by 4% compared to Q4 of 2023, there are sort of thing and $70 million of revenue.
Sure Greg.
Predominantly driven by revenue from existing clients sure shouldn't media.
E Commerce and financial services vertical.
Victor and you have to be excited about the growth opportunities in the specialized service line, but our clients recognize the strong alignment between our trust and safety operational excellence I am good.
Do you think demand from developers of generative AI solutions looking for AI safety services.
But air service or service line growth further accelerated to 31% year over year in Q4, delivering $39 $4 million in revenue.
This was primarily a result of growth from new and existing social media and professional services clients requiring support for they are generating AI development training testing initiatives.
We expect our services growth rate.
Further and via our fastest growing service line in 2025, as a result of recent wins and ongoing demand.
We ended the year with approximately 200 total clients all of which more than 50 person generated revenue in excess of $1 million.
Apology: Continue to have a strong relationship with our largest client Richard.
85% of total revenues in Q4.
Two 3% in Q3 of 2024 and 19% in Q4 of 2023.
In Q4, our top 10, and top 20 clients accounted for 57% and 16, 9% of revenue it is activity compared to $55, 6% to 6% in the previous year.
We saw growth across all of our client cohorts for both Q4 under your clothing.
Good morning clients outside of our top three feet, which grew nearly 8% for the quarter.
Revenue for capability predict trading clients was stable compared with Q3 and approximated 4% of total revenue during Q4.
In the fourth quarter, we generated 54% of our revenues in the Philippines.
People put us above our revenues in the United States, 13% of our revenues from India, and 20% of our revenues from the rest of the board.
Q4, new business signings to be strongest in India, followed by the Philippines and Mexico.
From a dedicated vision perspective, we again saw strong growth in Latin America, which grew approximately 35% during Q4.
Europe, which grew in excess of 43%.
Although Asia Pacific region, primarily driven by India, and the Philippines grew approximately 15% year over year during Q4, continuing the improvement we saw in Q3.
Apology: As anticipated in our Q3 call.
Apology: Growth across all of our major delivery regions.
Including the United States, which grew 10% on a year over year basis in Q4.
So I'll stop service as a percentage of revenue was 61 ninth worsen in the fourth quarter compared to 58, 6% in the prior year.
Apology: The increase.
Apology: Increase was driven by a number of factors.
Including cost associated with the previously discussed security incidents.
We will wait and benefit cost inflation.
Apology: To make those hiring training and facilities cost.
Due to stronger growth.
These factors were partially offset by gains from the stronger dollar.
In the fourth quarter, SG&A expenses were $67 $8 million or 24, 7% of revenue compared to $48 $9 million or <unk>, 9% of revenue in the prior year.
But I believe driven by certain litigation costs.
The remaining increases include higher personnel costs, including all the investments in sales marketing and technology.
Apology: Bonus expense associated with higher revenue.
Adjusted net income for the quarter was $28 $5 million and adjusted EPS.
One.
By comparison in the year ago period.
Apology: Adjusted net income of 30.
$2 $2 million in it.
Apology: Adjusted EPS of 35.
Apology: But.
Sure Paul for Q4 2024.
Higher than Q4 of predict 'twenty three as a result of share repurchases during the year being more than offset by good evening, the diluted effect of shares issued under equity compensation plans.
Apology: For the full year adjusted net income.
Harlem $18 $7 million.
Apology: Adjusted EPS was $1 in 2009.
This compares to adjusted net income of <unk> $26 $5 million and one dollar in particular assays.
Apology: Adjusted EPS for full year 'twenty three.
Although adjusted EPS included the impact of our lower share count, resulting from our stock repurchase program.
Apology: The decrease in adjusted net income was primarily due to the increasing is G&A expenses that I explained earlier.
Now moving onto our balance sheet and cash flow.
Cash and cash equivalents were $92 2 million as of December 31, 2024, compared with the December 30, <unk> balance of $125 $8 million.
Adjusted net debt leverage ratio continues to be very healthy.
0.3 themes of adjusted EBITDA, I'd say end of Q4.
As a reminder, we calculate this ratio.
Apology: There is debt less cash divided by adjusted EBITDA for the trailing 12 month period.
Apology: At the end of 'twenty 'twenty four we had.
Approximately $39 $6 million of authorization left on our share repurchase plan.
Youre going to programmatic design with <unk>.
Purchased approximately $2 $2 million in Q4.
Average cost of $11 83 per share.
Apology: Cash generated from operations for the full year 2024 was <unk> $38 $9 million.
Compared to Heartland $43 $7 million at the end of Q3.
For the full year Capex was $39 $1 million.
<unk>, 9% of revenue.
Apology: Paired with $31 million.
Our two 4% of revenue in 2023.
This full year increase was driven largely by Scott fixed spend tied to revenue growth and facility expansions.
For the full year adjusted free cash flow.
Excluding payments for litigation related expenses, while its Harlan seven $4 million.
Slightly below our guidance of approximately $110 million.
This shortfall was primarily the result of working capital please.
Capital expenditures required to support our higher outlook for it could be 25 revenues.
Our Q4, adjusted EBITDA decrease compared to guidance.
Does that put us.
Conversion rate of 51, 2%.
EBITDA for the full year.
In terms of our financial outlook for the full year.
Apology: We anticipate full year. Despite total revenues to be the range of 1.0 95 to one $1 billion to $5 billion.
A mid point of 1110 $1 billion.
We expect to own.
Full year 2000.
Adjusted EBITDA margin of approximately 21%.
This margin captured the impact of current products.
Apology: The additional investments we had a meeting to embrace <unk> and.
And <unk> AD technologies.
Shifting infrastructure operational ramp costs supporting our expected revenue growth.
Typical wage inflation in excess of what would a political pop arcola clients.
We expect to achieve approximately $100 million.
Apology: Free cash flow for 2025.
Apology: We anticipate capital expenditures will increase significantly in 2025 due to the timing of payments for facility expansions that started in 2024.
Apology: New facility expansions in <unk>, five and <unk>.
Fresh off of technology assets.
For the first quarter of 2025.
Anticipate revenues to be in the range of $17 million.
$72 million.
And we expect an adjusted EBITDA margin of approximately 20%.
Okay.
Fourth quarter revenue and adjusted EBITDA margin will.
<unk> will be impacted by lower seasonal revenues and two fewer working days in the quarter compared to Q4 of 'twenty 'twenty four.
Combined negative impact of approximately $15 million, along with the investments in facilities and technology.
During Q3, 2024 fastest adopted hedge accounting with maturities beginning in 2025.
Apology: Awesome.
Gains and losses from hedges.
Apology: Included in our results of operation and calculations of non-GAAP metrics, including EBITDA and adjusted EBITDA.
Apology: Our guidance for the quarter and full year is based on current Forex rate estimate.
So in each stage took current fee rates due to the extended not hedged would impact our models.
As a reminder, the majority of our revenue is billed and collected in U S. Dollars. So if we do not see the impact of U S dollar fluctuation in our revenue.
I will now hand, it back to Brian.
Thank you apologies before we take questions I want to take a moment to highlight the incredible impact our teams made in our communities around the world last year at.
One of the most powerful ways. We do this is by fostering a culture of service.
We believe that when employees actively engage with their communities. They bring fresh perspectives deeper empathy and a stronger sense of purpose back into the workplace.
<unk> 2023, as part of our 15th anniversary celebration, we established together, we serve a companywide initiative that empowers employees to volunteer for causes theyre passionate about whether its community cleanups animal rescues social justice initiatives environmental campaigns or.
Full programs our employees are stepping up to create a positive change in.
In 2024, we set an ambitious goal of reaching 10000 volunteer hours across all task us locations.
But even macro was not ambitious enough.
By the end of the year, our employees collectively contributed over 26000 hours of volunteer work with nearly 5000 employees participating.
Together, we supported 373 nonprofit organizations around the world.
Apology: These numbers are real stories of tasks employees, who are making a meaningful impact in their communities.
In the Philippines, Vena public, Taiwan, Senior director Wellness, and resiliency dedicated 56 hours to providing free coaching for young people public school teachers local government officials and female leaders and professionals in her community.
In India <unk> senior manager of people strategy volunteered 100 hours, providing resources for local schools and supporting animal welfare initiatives should help to improve access to clean food and water for children.
Also ensuring the well being of straight commodity chemicals.
Here in the U S. Laurie Castle, our global editor in Chief contributed 64 hours to the <unk> Foundation, where she played a key role in planning a gala to benefit families finding pediatric cancer.
Together, we serve program has helped us better understand the diverse needs of the communities, we work fostered deeper empathy and creating more culturally aware workforce.
Apology: With that I'll ask the operator to open the line for a question and answer session operator.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby Bobby a composite Q&A roster.
And our first question comes from the line of Jim Snyder of Goldman Sachs. Your line is now open.
Good afternoon, and thanks for taking my question I was wondering if you could give us a bit of an update on your largest customer meta and.
Understanding that you do not participate in the stat checking work, which are what is the company good maybe give us a sense about.
The company revisit that checking and content moderation policies, how you were thinking about the potential risks to task.
<unk> existing business, how you plan to mitigate mitigate them.
Yes, Jim Thanks, so much for the question. So we continue have a very strong relationship with our largest client in 2024, we expanded global operations supporting this client adding operations in two new countries, while growing our operations and meet three existing countries.
Where we were doing business with them.
We're supporting this claims integrity operations financial crime and compliance workflows and obviously they are growing investments in generative AI.
So as you mentioned, we don't provide back checking services to our largest client or any other client for that matter generally our trust and safety business is focused on solutions to ensure content posted complies with client policies. So what does that mean, while we work to remove illegal content such as terrorism active.
And child Endangerment, we also tackled toxic content that could include bullying graphic violence and sexually explicit material. So we will continue to be a go to partner for our largest client on these most critical initiatives and I'll note that like the rest of our business, we expect to see significant growth in AI services from us.
Client in 2025.
Speaker Change: As far as the risk at this stage, we don't see any significant risk revenue from this client grew faster than the overall business in 2024, we expect that revenue with this client will grow even faster in 2025.
By the end of 2025, the relationship with our largest client will actually be about 70% larger than it was in 2023.
And with all that I'll just note that we continue to see an uptick in both new logo sales and sales to other existing customers, which we mentioned in Q4. So we expect ongoing healthy growth from across the rest of our business as well.
That's helpful. Thank you and then maybe as a follow up just on the margin front.
Maybe you can give us a sense of the shape or profile of margins as you head throughout the year, where might margins and the year in Q4, and maybe give us a sense about where margins could go prospectively beyond that thank you.
Yes, So hey, Brad Thanks for the question. So while we don't provide guidance on margins on a on a quarterly basis. What we are guiding to currency for Q1 is about 20% adjusted EBITDA and then what we are saying is for the full year, we will deliver adjusted EBITDA margins for 21% you would see that we'll continue to see.
Sequential improvement in the margin starting Q1 getting into Q3 and then in Q4, we might see some reduction sequentially because we typically incur some seasonal costs as an example, the holiday period.
So there'll be a small dip in Q4, but we would see increasing margins starting Q2, and then in terms of some of the key drivers from a margin perspective that I spoke about earlier.
This meant that we are going to be making so much energy perspective, the investments in security infrastructure and then we will continue to go the ramp costs that we saw in 2024 as we went through the <unk>.
Speaker Change: And we are calling for double digit growth rotates in preneed 95. So we expect to see continue with ramp cost in terms of facilities cost training and recruiting.
And then the guidance that we've provided today also factors in typical wage inflation that we see.
Okay.
One moment for our next question.
And our next question comes from the line of Cathy Chan of.
Business.
Bank of America Securities.
Hey, guys. Thanks for taking my question Bryce.
Bruce just wanted to ask about the first quarter revenue growth of 19% that's really strong.
Okay.
<unk> declined about 1% quarter over quarter. Despite some of the headwinds you mentioned from the fewer billable days and seasonality I. Just wanted to ask is that pull forward of revenue maybe something from the back half of the year and the math kind of implied.
Growth decelerating too is it fair to say high single digit or call it 10% exiting 2025.
That conservatism or are there other factors that we should take into account as we think about the shape of the rest of the year given the strong third quarter guidance, we gave yes.
Yes, thanks, Cathy so obviously its the start the new year, and we always want to provide guidance that we feel confident we can meet or beat.
So today, we're providing guidance for between 10 and 13% year over year growth.
2025, and I'll just note that to get to the top half of that range. We're contemplating a demand environment that doesn't change materially for 2024 and that means that things don't get worse, but it also means things don't get better. So we do think there is upside potential on these numbers to simply get to 12% to 13% growth.
As is <unk>.
Speaker Change: Very achievable in 2024, we saw both increased bookings and a reduction in churn when compared to 2023 and so far those trends have continued into 2025, we've got very good next quarter, but visibility in our results. Thus far in Q1 give us confidence that we will meet or beat our Q1 guidance you mentioned the headwind.
It's a significant headwind $15 million when compared to Q4, and even with that headwind. We're contemplating revenues that are nearly flat quarter over quarter. So clearly we feel like we're off to a pretty good start.
So for the remainder of 2025, if we keep our head down successfully recruit ramp and retain our large clients then.
Speaker Change: We feel we feel very confident in our ability to meet or beat the guidance, we're providing and to be clear. Our goal is enduring double digit revenue growth.
Speaker Change: Okay Super helpful. And then just a quick follow up you guys mentioned the security incident that impacted the fourth quarter is there any way you can quantify the impact on that on revenues at Morgan anything lingering.
Maybe first quarter.
And I guess you would.
<unk> talked about some reinvestments in the business as well any way to quantify how much it's going to bolster endo done internal security measures versus.
<unk> been building.
Building out the AI tools that you continue to see strong demand for teammate growth et cetera, those different buckets as well. Thank you.
Yes, so I'll start and apology if you want to add anything feel free I mean security has always been a top priority for task us and unfortunately, our industry has been targeted by an increasing number of these types of events. So what happened in Q4 was not at all unique to task us.
What is perhaps unique is how quickly our team responded I am incredibly proud of the response of our team.
Suspended operations out of an abundance of caution we continued to pay our employees during the suspension period and we've now fully restored those suspended operations.
We expect our relationship with the client in this case to grow in 2025, when we combine the impact of the security incident with the impact of increased investments to meet our growth targets for 2025, so those ramp costs that biology related had both of those.
Things not happened, we would have met our EBITDA guidance.
Speaker Change: So we were a few million dollars short on a dollar basis from our EBITDA guidance in Q4, so that can give you a sense of kind of what.
The size of that impact is as far as ongoing investments we are going to continue to invest millions of dollars in our AI initiatives.
And we will also be investing.
$2 in improving our security posture, we have done that historically, but given the experience. We had in Q4, we've set a goal of becoming the most secure provider in the industry and so we set out an investment agenda that will we think position us to accomplish that.
But all of those investments have been factored in the guidance as <unk> said, we expect EBITDA margins for the full year to be roughly flat with 2024, but we expect those margins to grow over the course of the year.
Thank you. Thank you.
Thank you Amit for next question.
<unk> time, please limit yourself to one question.
Our next question comes from the line of Jonathan Lee of Guggenheim Partners. Your line is now open.
Great. Thanks for taking our question how should we think about your market position in May our services, particularly around the new agenda KF consulting practice and what gives you confidence that clients would look to task for that type of service versus using perhaps an Australian or a competitor.
Yes. Thanks, so much for the question Jonathan So broadly based when we look at AI services, we're seeing significant increase in demand from generative AI and foundational models. We're also seeing a significant increase in demand for these services from large social media companies.
<unk> practice that we mentioned on the call, which were just kicking off is going to be a partnership with <unk>.
The leading agenda AI companies. These are companies that are using <unk> with a goal of automating certain aspects of customer support.
As we've said historically, we believe that simple and repeatable customer support interactions band to be automated we have got our own task GPT platform, which makes our team made significant significantly more productive when responding to customers, but there are contact types that we believe we can just completely automating partnerships with these.
Take AI technology providers.
And so as we're looking to this year. We are excited about partnerships. We have some partnerships that we'll be announcing publicly shortly.
And we expect to begin to deploy these tools across a number of our clients again. This is going to create an enduring revenue stream, because we'll be making money from the implementation and the ongoing automation.
We think we're very well positioned because we've got teammates who have been trained on these workflows and deeply understand the policies of our customers and we can use that knowledge to train and maintain mutagenic AI systems and then of course as we've said we think there is a huge portion of work that is not likely to be automated anytime.
Soon these are the more complex customer interactions.
Bulk sales revenue generation customer success tier two and tier three type support workflows and taxes will continue to be a vendor of choice for our clients for those workflows. So it's a multi pronged approach, but really that <unk> practice is going to primarily focus on the future of our customer experience business.
Thank you for our next question.
Our next question comes from the line of David Koning of Baird. Your line is now open.
Yes, Hey, guys nice job and I guess my question when we look at employee growth.
Speaker Change: This job big Big growth sequentially this quarter, but when we look at that it grew faster year over year than revenue.
Through the year and I'm sure that has to do with mix of offshore maybe investing for the future, but when will we see a time when you kind of get the efficiencies, we're actually disconnecting where revenue starts growing faster than employees.
Yes, I'll comment conceptually and then biology can.
Speaker Change: To be out a few more details clearly this year, we've seen a mix shift.
Really.
Speaker Change: <unk> that we got back to double digit growth in the U S. In Q4 that was not the case for most of the year for most of the year our revenue in the U S was declining and obviously the U S. As the region in which we drive the highest revenue per employee and so as we look at growth being driven in the Philippines, and India and increasingly in Europe.
<unk> like Colombian and even parts of Europe revenue per employee is just lower than it was.
Speaker Change: In the U S business, we think that.
This year, we will begin to see an increase in revenue per employee driven by stabilization in the geographic mix.
And by the fact that we're going to continue to automate large portions of our workflows that Egencia AI practice I was just talking about gives us an opportunity to take a teammate crews.
<unk> supporting customer support workflows and make them significantly more productive to handle more cases on an hourly basis than they were historically and that should drive up revenue per per employee while doing anything to quickly out there. Yes, just got a couple of things I'll add this.
David if I kind of look at the.
Revenue per employee, which is revenue divided by the end of the quarter head count compared to predict 'twenty three we don't see a reduction in particularly for next week, but it's been fairly stable in 2024, because the mix is kind of fairly stable in particular before when compared to 2023, because we started a digest the impact of this mix shift from from <unk>.
<unk> offshore so it's been fairly stable in particular devoted and like <unk> said as we start selling some of these specialized service line, we would start to see improvement from a unit perspective.
Thank you one moment for our next question.
Yes.
And our next question comes from the line of Maggie Nolan of William Blair. Your line is now open.
Thank you.
You made a comment in your prepared remarks that you were planning to expand specialized services that are less likely to be automated.
Speaker Change: Can you talk about maybe what service areas in particular youre investing in how the mix might change what.
That means in terms of your three.
Service types that you report and margin profiles associated with them.
Yes so.
Speaker Change: We are focused on both services and verticals, where we think.
There is an AI resistance and not air resistance, because people don't want to use AI, but air resistance because of either complexity or regulatory concerns. So on the service line side, we believe that trust and safety risk and response, certainly and somewhat ironically AI services themselves.
Speaker Change: Our more AI resistant.
We also think that the work we're doing in sales and lead Gen and more complex workflows and customer success.
More AI resistant.
The commoditized repeatable customer interactions that we think are going to be automated.
And we fully intend to lead the charge on that automation with our agenda.
<unk> practice as far as verticals, we're really focused on financial services and healthcare because we've continued to see strong growth rates in both of those verticals across the BPM industry and a lot of those services. We think are more resistant to automation. We also mentioned that we're going to go after enterprise clients, where we think our existing.
Our existing competitors are slow to attempt to automate and we will be taking the AIG first offering.
Try to disrupt those competitors.
Speaker Change: So it's a multi pronged approach, but I appreciate the question Maggie.
Thank you one moment for our next question.
Speaker Change: Okay.
Our next question comes from the line of James Faucette of Morgan Stanley. Your line is now open.
Thanks for the question guys. It's Antonio on for James I wanted to ask more on the pace of bookings to revenue conversion how has that trended and then how has demand trended as well. Thank you.
Speaker Change: Thanks for the question Antonio So as we mentioned on the call Q4 was a good.
Great quarter, both in that we saw a significant uptick in new logo sales.
And the existing client sales were.
Less concentrated with our largest customer as I mentioned, we've seen incredible growth with our largest customer and we anticipate to see sustained growth with them in 2025, but in Q4, we were able to drive even more growth outside of the largest customer and we think that will show up in revenue growth rates.
Speaker Change: Outside of our largest customer accelerating over the course of 2025.
Speaker Change: Thank you I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Okay.
[music].
Okay.