Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-Q
_______________________
FORM
10-Q
(Mark One)
☒
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021March 31, 2024
or
☐
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
from_____________to______________
to
Commission File Number:
001-40482
_______________________
TaskUs, Inc.
(Exact name of registrant as specified in its charter)
_______________________
Delaware83-1586636
Delaware
83-1586636
(State or other jurisdiction of
incorporation or organization
organization)
(I.R.S. Employer
Identification No.
)
1650 Independence Drive, Suite 100
New Braunfels, Texas
78132
(Address of principal executive offices
offices)
(Zip Code
Code)
(888)
400-8275
(Registrant’s telephone number, including area codecode)
N/A
(Former name, former address and former fiscal year, if changed since last report
report)
_______________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Trading
s
ymbol(s)
Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share
TASK
TASK
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. xYes ☐o No  ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T
(§  (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). xYes ☒o No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
Large accelerated filero☐Accelerated filer☐x
Non-accelerated
filer		o☒Smaller reporting company☐o
Emerging growth company☒x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
oYes ☐x No  ☒
As of August
5
,
 2021,May 2, 2024, the number of shares outstanding of the registrant’s common stock was as follows: Class A common stock, par value $0.01 per share: 15,180,000;18,033,657; Class B common stock, par value $0.01 per share: 82,110,174.
70,032,694.

TASKUS, INC.
Quarterly Report on Form 10-Q
QUARTERLY REPORT ON FORM
10-Q
For Quarterly Period Ended March 31, 2024
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021
Table of Contents
TABLE OF CONTENTS
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Item 6.
Signatures
Exhibits31
43
Signatures
44

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
10-Q
(this “Quarterly Report” (this "Quarterly Report") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements may also be contained in our other reports filed under Section 27A of the Securities Act of 1933, as amended (the “Securities Act”"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act"), which involve certain known and unknown risks and uncertainties. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “predicts,” “intends,” “trends,” “plans,” “estimates,” “anticipates”"outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "predicts," "intends," "trends," "plans," "estimates," "anticipates," "position us," or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Our actual results or outcomes may differ materially from those anticipated. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Our actual results may differ significantly from any results expressed or implied by any forward-looking statements. A summary of the principal risk factors that might cause our actual results to differ from our forward-looking statements is set forth below. The following is only a summary of the principal risks that may materially adversely affect our business, financial condition and results of operations. This summary should be read in conjunction with the more complete discussion of the risk factors we face, which are set forth under “Risk Factors”Part I, Item 1A, "Risk Factors" in our prospectus dated June 10, 2021 (the “prospectus”Annual Report on Form 10-K for the year ended December 31, 2023 (our "Annual Report"), as filed with the Securities and Exchange Commission (the “SEC”"SEC") on June 14, 2021 pursuant to Rule 424(b)(4) under the Securities Act, and in this Quarterly Report,, as such risk factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Such risks and uncertainties include, but are not limited to, the following:
our•Our business is dependent on key clients, and the loss of a key client could have an adverse effect on our business and results of operations;
operations.
•Our clients may terminate contracts before completion or choose not to renew contracts and a loss of business or
non-payment
from significant clients could materially affect our results of operations;
operations.
we•We may fail to cost-effectively acquire and retain new high-growth clients, which would adversely affect our business, financial condition and results of operations;
operations.
if•If we provide inadequate service or cause disruptions in our clients’ businesses or fail to comply with the quality standards required by our clients under our agreements, it could result in significant costs to us, the loss of our clients and damage to our corporate reputation;
reputation.
•Utilization of artificial intelligence by our clients or our failure to incorporate artificial intelligence into our operations could adversely affect our business, reputation, or financial results.
•Our business prospects will suffer if we are unable to continue to anticipate our clients’ needs by adapting to market and technology trends, investing in technology as it develops, and adapting our services and solutions to changes in technology and client expectations.
unauthorized•Unauthorized or improper disclosure of personal or other sensitive information, or security breaches and incidents, whether inadvertent or purposeful, including as the result of a cyber-attack, could result in liability and harm our reputation, each of which could adversely affect our business, financial condition, results of operations and prospects;
prospects.
because•Trust and Safety, including content monitoring and moderation services, is a large portion of our businessbusiness. The long term impacts on the mental health and well-being of our employees doing this work are unknown. This work may lead to stress disorders and may create liabilities for us. This work is also subject to significant press and regulatory scrutiny. As a result, we may be subject to negative publicity or liability, or face difficulties retainingrecruiting and recruitingretaining employees, any of which could have an adverse effect on our reputation, business, financial condition and results of operations;
operations.
our•Our failure to detect and deter criminal or fraudulent activities or other misconduct by our employees, or third parties such as contractors and consultants that may have access to our data, could result in loss of trust from our clients and negative publicity, which would have an adverse effect on our business and results of operations;
operations.
global•Global economic and political conditions, especially in the social media and meal delivery and transport industries from which we generate most of oursignificant revenue, could adversely affect our business, results of operations, financial condition and prospects;
prospects.
our•Our business is heavily dependent upon our international operations, particularly in the Philippines and India, and any disruption to those operations would adversely affect us;
us.
our•Our business is subject to a variety of U.S. federal and state, as well as international laws and regulations, including those regarding data privacy and data security, and we or our clients may be subject to regulations related to the handling and transferprocessing of certain types of sensitive and confidential information; anyinformation. Any failure to comply with applicable data privacy and data security laws and regulations could harm our business, results of operations and financial condition;
condition.
our business depends in part on our capacity to invest in technology as it develops, and substantial increases in the costs of technology and telecommunications services or our inability to attract and retain the necessary technologists could have a material adverse effect on our business, financial condition, results of operations and prospects;
Table of Contents
our results of operations and ability to grow could be materially affected if we cannot adapt our services and solutions to changes in technology and client expectations;
fluctuations•Fluctuations against the U.S. dollar in the local currencies in the countries in which we operate could have a material effect on our results of operations;
operations.
our•Our business depends on a strong brand and corporate reputation, and if we are not able to maintain and enhance our brand, our ability to expand our client base will be impaired and our business and operating results will be adversely affected;
affected.
competitive pricing•Pricing pressure may reduce our revenue or gross profits and adversely affect our financial results;
results.
•Our results of operations have been, and could in the future be, adversely affected by volatile, unfavorable or uncertain economic and political conditions, particularly in the markets in which our clients and operations are concentrated, and the effects of these conditions on our clients’ businesses.
the•The success of our business depends on our senior management and key employees;
employees.
•Increases in employee expenses as well as changes to labor laws could reduce our profit margin.
•We may fail to attract, hire, train and retain sufficient numbers of skilled employees in a timely fashion at our management team has limited experience managingsites to support our operations, which could have a public company;
the ongoing
COVID-19
pandemic, including the resulting global economic uncertainty and measures taken in response to the pandemic, has adversely impactedmaterial adverse effect on our business, financial condition, and results of operations and prospects.
•We may continueface difficulties as we expand our operations into countries or industries in which we have no prior operating experience and in which we may be subject to do so;
increased business, economic and regulatory risks that could impact our results of operations.
•Our business relies heavily on owned and third-party technology and computer systems, which subjects us to various uncertainties.
•Our profitability will suffer if we are not able to maintain asset utilization levels, price appropriately and control our costs.
affiliates of The Blackstone Group Inc.•Our Sponsor and our
Co-Founders
Bryce Maddock and Jaspar Weir control us and their interests may conflict with ours or yours in the future; and
future.
the•The dual class structure of our common stock will havehas the effect of concentrating voting control with those stockholders who held our common stock prior to the completion of our June 2021 initial public offering (“IPO”), and it may depress the trading price of our Class A common stock.
•The market price of shares of our Class A common stock has been, and may continue to be, volatile and may decline regardless of our operating performance, which could cause the value of your investment to decline.
We urge you to carefully consider the foregoing summary together with the risks discussed under “Risk Factors”"Risk Factors" in the prospectusAnnual Report, and in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report.
1
WEBSITE AND SOCIAL MEDIA DISCLOSURE
We use our website (www.taskus.com) and our social media outlets, such as Facebook, Instagram, Youtube, LinkedIn, TikTok, YouTube, X (formerly known as Twitter) and TwitterThreads as channels of distribution of Company information. The information we post through these channels may be deemed material. Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s website at ir.taskus.com, its Facebook page at facebook.com/TaskUs/, its Instagram page at instagram.com/taskus/, its LinkedIn page at linkedin.com/company/taskus/, its YouTube account at youtube.com/c/Taskus/, and its TwitterX account at twitter.com/taskus. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” section at of our investor relations website at ir.taskus.com. The contents of our website and social media channels are not, however, a part of this Quarterly Report.
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
Statements
TASKUS, INC.
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share data)
March 31,
2024		December 31,
2023
Assets
Current assets:
Cash and cash equivalents$165,350 $125,776 
Accounts receivable, net of allowance for credit losses of $1,658 and $1,978, respectively165,494 176,812 
Income tax receivable1,042 2,021 
Prepaid expenses and other current assets24,170 23,909 
Total current assets356,056 328,518 
Noncurrent assets:
Property and equipment, net61,777 68,893 
Operating lease right-of-use assets39,144 44,326 
Deferred tax assets5,915 4,857 
Intangibles187,771 192,958 
Goodwill217,613 218,108 
Other noncurrent assets6,235 6,542 
Total noncurrent assets518,455 535,684 
Total assets$874,511 $864,202 
Liabilities and Shareholders’ Equity
Liabilities:
Current liabilities:
Accounts payable and accrued liabilities$24,684 $26,054 
Accrued payroll and employee-related liabilities40,346 40,291 
Current portion of debt9,747 8,059 
Current portion of operating lease liabilities15,107 15,872 
Current portion of income tax payable12,035 7,451 
Deferred revenue4,120 4,077 
Total current liabilities106,039 101,804 
Noncurrent liabilities:
Income tax payable4,620 4,621 
Long-term debt252,885 256,166 
Operating lease liabilities26,605 31,475 
Accrued payroll and employee-related liabilities4,354 3,978 
Deferred tax liabilities25,184 25,214 
Other noncurrent liabilities230 233 
Total noncurrent liabilities313,878 321,687 
Total liabilities419,917 423,491 
Commitments and Contingencies (See Note 10)
Shareholders’ equity:
Class A common stock, $0.01 par value. Authorized 2,500,000,000; 31,020,925 issued and 18,938,691 outstanding and 30,522,570 issued and 18,725,947 outstanding, respectively310 305 
Class B convertible common stock, $0.01 par value. Authorized 250,000,000; 70,032,694 and 70,032,694 shares issued and outstanding, respectively700 700 
Additional paid-in capital691,968 683,117 
Accumulated deficit(78,270)(89,984)
Accumulated other comprehensive loss(12,859)(9,551)
Treasury stock, at cost. 12,082,234 and 11,796,623 shares, respectively(147,255)(143,876)
Total shareholders’ equity454,594 440,711 
Total liabilities and shareholders’ equity$874,511 $864,202 
Assets
  
June 30,
2021
  
December 31,
2020
 
Current assets:
         
Cash
  $195,927  $107,728 
Accounts receivable, net of allowance for doubtful accounts of $2,691 and $2,294, respectively
   127,867   87,782 
Other receivables
   439   105 
Prepaid expenses
   9,667   13,032 
Income tax receivable
   
—
 
 
   1,606 
Other current assets
   2,471   1,051 
   
 
 
  
 
 
 
Total current assets
   336,371   211,304 
   
 
 
  
 
 
 
Noncurrent assets:
         
Property and equipment, net
   63,060   56,957 
Deferred tax assets
   575   585 
Intangibles
   230,871   240,295 
Goodwill
   195,735   195,735 
Other noncurrent assets
   3,006   2,630 
   
 
 
  
 
 
 
Total noncurrent assets
   493,247   496,202 
   
 
 
  
 
 
 
Total assets
  $829,618  $707,506 
   
 
 
  
 
 
 
Liabilities and Shareholders’ Equity
         
Liabilities:
         
Current liabilities:
         
Accounts payable and accrued liabilities
  $43,494  $41,935 
Accrued payroll and employee-related liabilities
   171,690   21,994 
Current portion of debt
   48,510   45,984 
Current portion of income tax payabl
e
  
 
1,586
   
—  
 
Deferred revenue
   5,810   4,711 
Deferred rent
   303   218 
   
 
 
  
 
 
 
Total current liabilities
   271,393   114,842 
   
 
 
  
 
 
 
Noncurrent liabilities:
         
Income tax payable
   2,988   2,988 
Long-term debt
   193,525   198,768 
Deferred rent
   2,573   2,194 
Accrued payroll and employee-related liabilities
   2,640   2,641 
Deferred tax liabilities
   40,474   50,936 
   
 
 
  
 
 
 
Total noncurrent liabilities
   242,200   257,527 
   
 
 
  
 
 
 
Total liabilities
   513,593   372,369 
   
 
 
  
 
 
 
Commitments and Contingencies (See Note 8)
0    0  
Shareholders’ equity:
         
Class A Common stock, $0.01 par value. Authorized 2,500,000,000; 15,180,000
and 0 shares
 issued and
outstanding as of June 30, 2021
 
and December 31, 2020, respectively
   152   —   
Class B Convertible Common stock, $0.01 par value. Authorized 250,000,000; 82,110,174
and 91,737,020 shares

issued and
 
outstanding as of June 30, 2021
 
and December 31, 2020, respectively
   821   917 
Additional
paid-in
capital
   519,817   398,202 
Accumulated deficit
   (206,834)
 
  (67,398) 
Accumulated other comprehensive income
   2,069   3,416 
   
 
 
  
 
 
 
Total shareholders’ equity
   316,025   335,137 
   
 
 
  
 
 
 
Total liabilities and shareholders’ equity
  $829,618  $707,506 
   
 
 
  
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.
3
TASKUS, INC.
Unaudited Condensed Consolidated Statements of OperationsIncome
(in thousands, except share and per share data)
Three months ended March 31,
20242023
Service revenue$227,470 $235,306 
Operating expenses:
Cost of services135,411 137,762 
Selling, general, and administrative expense52,904 64,294 
Depreciation10,789 9,661 
Amortization of intangible assets4,985 5,124 
Loss (gain) on disposal of assets(177)65 
Total operating expenses203,912 216,906 
Operating income23,558 18,400 
Other income, net(202)(2,177)
Financing expenses5,538 5,099 
Income before income taxes18,222 15,478 
Provision for income taxes6,508 5,969 
Net income$11,714 $9,509 
Net income per common share:
Basic$0.13 $0.10 
Diluted$0.13 $0.09 
Weighted-average number of common shares outstanding:
Basic88,795,211 97,561,650 
Diluted91,849,886 100,952,573 
   
Three months ended
 
June 30,
  
Six months ended June 30,
 
   
2021
  
2020
  
2021
  
2020
 
Service revenue
  $180,022  $114,400  $332,893  $216,829 
Operating expenses:
                 
Cost of services
   103,798   64,135   191,828   125,918 
Selling, general, and administrative expense
   177,810   25,709   209,308   51,440 
Depreciation
   6,729   5,815   12,932   10,529 
Amortization of intangible assets
   4,712   4,712   9,424   9,424 
Loss (gain) on disposal of assets
   1   —     28   (5)
Contingent consideration
   —     3,570   —     3,570 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total operating expenses
   293,050   103,941   423,520   200,876 
     
Operating (loss) income
   (113,028)  10,459   (90,627)  15,953 
Other (income) expense
   (1,659)  (1,137)  (905)  260 
Financing expenses
   1,594   1,959   3,175   4,202 
   
 
 
  
 
 
  
 
 
  
 
 
 
(Loss) income before taxes
   (112,963)  9,637   (92,897)  11,491 
(Benefit from) provision for income taxes
   (7,020)  1,629   (3,461)  1,968 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net (loss) income
  $(105,943) $8,008  $(89,436) $9,523 
   
 
 
  
 
 
  
 
 
  
 
 
 
     
Net (loss) income per common share, basic and diluted
  $(1.14) $0.09  $(0.97) $0.10 
   
 
 
  
 
 
  
 
 
  
 
 
 
     
Weighted-average number of common shares outstanding, basic and diluted
    92,957,493    91,737,020    92,347,257   91,737,020 
   
 
 
  
 
 
  
 
 
  
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.
4
TASKUS, INC.
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income
(in thousands)
Three months ended March 31,
20242023
Net income$11,714 $9,509 
Retirement benefit reserves5 8 
Foreign currency translation adjustments(3,313)3,583 
Comprehensive income$8,406 $13,100 
   
Three months ended June 30,
   
Six months ended June 30,
 
   
2021
  
2020
   
2021
  
2020
 
Net (loss) income
  $(105,943) $8,008   $(89,436) $9,523 
Retirement benefit reserves
   (3)   3    (8)   2 
Foreign currency translation adjustments
   (489)  1,230    (1,339)  1,007 
   
 
 
  
 
 
   
 
 
  
 
 
 
Comprehensive (loss) income
  $(106,435) $9,241   $(90,783) $10,532 
   
 
 
  
 
 
   
 
 
  
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.
5
TASKUS, INC.
Unaudited Condensed Consolidated Statements of Shareholders’ Equity
(in thousands, except share data)
Capital stock and additional paid-in capitalAccumulated
deficit		Accumulated
other
comprehensive
loss		Total
shareholders’
equity
Class A common stockClass B convertible common stockAdditional
paid-in
capital		Treasury stock
SharesAmountSharesAmountSharesAmount
Balance as of December 31, 202229,257,651 $293 70,032,694 $700 $631,908 $(135,674)$(10,647)1,649,931 $(30,967)$455,613 
Issuance of common stock for settlement of equity awards246,537 2 — — 207 — — — — 209 
Shares withheld related to net share settlement(14,293)— — — (257)— — — — (257)
Repurchase of common stock— — — — — — — 389,801 (6,374)(6,374)
Stock-based compensation expense— — — — 13,464 — — — — 13,464 
Net income— — — — — 9,509 — — — 9,509 
Other comprehensive income— — — — — — 3,591 — — 3,591 
Balance as of March 31, 202329,489,895 $295 70,032,694 $700 $645,322 $(126,165)$(7,056)2,039,732 $(37,341)$475,755 

Capital stock and additional paid-in capitalAccumulated
deficit		Accumulated
other
comprehensive
loss		Total
shareholders’
equity
Class A common stockClass B convertible common stockAdditional
paid-in
capital		Treasury stock
SharesAmountSharesAmountSharesAmount
Balance as of December 31, 202330,522,570 $305 70,032,694 $700 $683,117 $(89,984)$(9,551)11,796,623 $(143,876)$440,711 
Issuance of common stock for settlement of equity awards620,835 6 — — 189 — — — — 195 
Shares withheld related to net share settlement(122,480)(1)— — (1,573)— — — — (1,574)
Repurchase of common stock— — — — — — — 285,611 (3,379)(3,379)
Stock-based compensation expense— — — — 10,235 — — — — 10,235 
Net income— — — — — 11,714 — — — 11,714 
Other comprehensive loss— — — — — — (3,308)— — (3,308)
Balance as of March 31, 202431,020,925 $310 70,032,694 $700 $691,968 $(78,270)$(12,859)12,082,234 $(147,255)$454,594 
   
Capital stock and additional
paid-in
capital
           
   
Class A Common stock
   
Class B Common stock
  
Additional

paid-in

capital
   
Accumulated

Deficit
  
Accumulated
other
comprehensive

income
  
Total
shareholders’
equity
 
   
Shares
   
Amount
   
Shares
  
Amount
 
Balance as of December 31, 2019
   —     $—      91,737,020  $917  $398,202   $(101,931)  $312  $297,500 
Net income
   —      —      —     —     
— 
 
    1,515   
—
 
 
   1,515 
Other comprehensive
loss
   —      —      —     
—
 
 
   
— 
 
    
— 
 
   (224)   (224) 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Balance as of March 31, 2020
   —     $—      91,737,020  $917  $398,202   $(100,416)  $88  $298,791 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Net income
   —      —      
— 
 
   
— 
 
   
—
 
 
    8,008   
— 
 
   8,008 
Other comprehensive income
   —      —      —     —     —      —     1,233   1,233 
                                 
Balance as of June 30, 2020
  
—
 
 
  
$
— 
 
   
 
91,737,020
  
$
917
  
$
398,202
  
$
(92,408
)
 
 
$
1,321
  
$
308,032
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
   
Capital stock and additional
paid-in
capital
           
   
Class A Common stock
   
Class B Common stock
  
Additional

paid-in

capital
   
Accumulated

Deficit
  
Accumulated
other
comprehensive

income
  
Total
shareholders’
equity
 
Balance as of December 31, 2020
   —     $—      91,737,020  $917  $398,202   $(67,398)  $3,416  $335,137 
Net income
   —      —      —    
—
 
 
   —     16,507   —    16,507 
Other comprehensive
loss
   —      —      —     —     —      —     (855)   (855) 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Balance as of March 31, 2021
   —     $—      91,737,020  $917  $398,202   $(50,891)  $2,561  $350,789 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Issuance on Class A Common stock in the
initial public offering primary offering,
net of underwriters’ fees and offering
costs
   5,553,154    56    —     —     115,844    —     —     115,900 
Conversion
 
of
 
Class
 
B
 
Common
 
s
tock
   9,626,846    96    (9,626,846)   (96)   —      —     —     —   
Stock-based compensation expense
   —      —      —     —     5,771    —     —     5,771 
Distribution of dividends ($0.55 per
share)
   —      —      —     —     —      (50,000)   —     (50,000) 
Net loss
   —      —      —     —     —      (105,943)   —     (105,943) 
Other comprehensive loss
   —      —      —     —     —      —     (492)   (492) 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Balance as of June 30, 2021
   15,180,000   $152    82,110,174  $821  $519,817   $(206,834)  $2,069  $316,025 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.
6
Table of Contents
TASKUS, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three months ended March 31,
20242023
Cash flows from operating activities:
Net income$11,714 $9,509 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation10,789 9,661 
Amortization of intangibles4,985 5,124 
Amortization of debt financing fees149 149 
Loss (gain) on disposal of assets(177)65 
Benefit from credit losses(258)— 
Unrealized foreign exchange losses (gains) on forward contracts1,497 (6,336)
Deferred taxes(1,094)(90)
Stock-based compensation expense10,235 13,464 
Changes in operating assets and liabilities:
Accounts receivable11,296 8,070 
Prepaid expenses and other current assets(331)(16)
Operating lease right-of-use assets3,941 3,825 
Other noncurrent assets207 34 
Accounts payable and accrued liabilities(3,866)(5,356)
Accrued payroll and employee-related liabilities805 3,520 
Operating lease liabilities(4,374)(3,310)
Income tax payable5,614 5,789 
Deferred revenue47 (417)
Other noncurrent liabilities(2)(2)
Net cash provided by operating activities51,177 43,683 
Cash flows from investing activities:
Purchase of property and equipment(3,572)(5,244)
Investment in loan receivable— (1,000)
Net cash used in investing activities(3,572)(6,244)
Cash flows from financing activities:
Payments on long-term debt(1,688)(675)
Proceeds from employee stock plans195 209 
Payments for taxes related to net share settlement(1,574)(257)
Payments for stock repurchases(2,597)(6,374)
Net cash used in financing activities(5,664)(7,097)
Increase in cash and cash equivalents41,941 30,342 
Effect of exchange rate changes on cash(2,367)2,677 
Cash and cash equivalents at beginning of period125,776 133,992 
Cash and cash equivalents at end of period$165,350 $167,011 
   
Six months ended June 30,
 
   
2021
  
2020
 
Cash flows from operating activities:
   
Net (loss) incom
e
$
(89,436
)		 
 $
9,523
 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
         
Depreciation
   12,932   10,510 
Amortization of intangibles
   9,424   9,424 
Amortization of debt financing fees
   247   228 
Loss (gain)
o
n disposal of assets
   28   (5) 
Provision for losses on accounts receivable
   465   1,297 
Unrealized foreign exchange losses for forward contracts   1,730   178 
Deferred taxes
   (10,462)  (2,157) 
Stock-based compensation expense
   5,771   —   
Changes in operating assets and liabilities:
         
Accounts receivable
s
  
(41,195
)		  
(22,007
)
Other receivables, prepaid expenses, and other current assets   (4,398)  (430) 
Other noncurrent assets
   (415)  (343) 
Accounts payable and accrued liabilities
   5,537   7,976 
Accrued payroll and employee-related liabilities
   150,543   4,003 
Income tax payable
   3,304   2,896 
Deferred revenue
   1,100   970 
Deferred rent
   502   540 
   
 
 
  
 
 
 
Net cash provided by operating activities   45,677   22,603 
   
 
 
  
 
 
 
Cash flows from investing activities:
         
Purchase of property and equipmen
t
  
(23,453
)  
(18,815
)
Net cash used in investing activities  
(23,453
)		  
(18,815
)
Cash flows from financing activities:
         
Proceeds from borrowing, Revolving credit facility
   —     39,878 
Payments on long-term debt
   (2,625)  (525) 
Payments for debt financing fees
  
(340
)  
—  
 
Issuance of common stock,
net of underwriters’ fees
   120,698   —   
Distribution of dividends
   (50,000)  —   
   
 
 
  
 
 
 
Net cash provided by financing activities
   67,733   39,353 
   
 
 
  
 
 
 
Increase in cash and cash equivalents
   89,957   43,141 
Effect of exchange rate changes on cash
   (1,758)  1,429 
Cash and cash equivalents at beginning of period
   107,728   37,541 
   
 
 
  
 
 
 
Cash and cash equivalents at end of period
  $195,927  $82,111 
   
 
 
  
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.
7
TASKUS, INC.
Notes to Unaudited Condensed Consolidated
Financial Statements
(1)1. Description of Business and Organization
TaskUs, Inc. (formerly known as TU TopCo, Inc.) (“TaskUs” and, ("TaskUs," together with its subsidiaries, the “Company,” “we,” “us”"Company," "we," "us" or “our”"our") was formed by investment funds affiliated with The Blackstone Group Inc. (formerly known as The Blackstone Group L.P.) (“Blackstone”) as a vehicle for the acquisition of TaskUs Holdings, Inc. (formerly known as ("TaskUs Inc.) (“TaskUs Holdings”Holdings") on October 1, 2018 (the “Blackstone Acquisition”"Blackstone Acquisition"). Prior to the Blackstone Acquisition, TaskUs had no operations and TaskUs Holdings operated as a standalone entity.
TaskUs, Inc. was incorporated in Delaware in July 2018, and is headquartered in New Braunfels, Texas.
In connection withThe Company is a provider of outsourced digital services and next-generation customer experience to the Company’s June 2021 initial public offering (“IPO”), on June 10, 2021, the Company amended and restatedworld’s most innovative companies, helping its certificate of incorporation to effect
 a
10
-for-one
forward stock split of its outstanding common stock and authorized two classes of ownership interests. See Note 11, “Shareholders’ Equity” for additional information.
We are a digital outsourcer focused on serving high-growth technology companies toclients represent, protect and grow their brands. OurThe Company’s global, omni-channel delivery model is focused on providing its clients three key services - Digital Customer Experience, Content SecurityTrust and
artificial intelligence (“AI” Safety and Artificial Intelligence ("AI")
 Operations. We have Services. The Company has designed ourits platform to enable usit to rapidly scale and benefit from ourits clients’ growth. Through ourits agile and responsive operational model, we deliverthe Company delivers services from multiple delivery sites that span globally from the United States, the Philippines, India and other parts of the world.
The Company’s major service offerings are described in more detail below:
•Digital Customer Experience
: Principally consists of omni-channel customer care services, primarily delivered through digital
(non-voice)
channels.
Content Security
•Trust and Safety: Principally consists of review and disposition of user and advertiser generated visual, text and audio content for purposes which include removal or labeling of policy violating, offensive or misleading content.
Also included in this area are our offerings for risk management, compliance, identity management and fraud.
•AI Operation
s:Services: Principally consists of high-quality data labeling services, annotation, context relevance and transcription services performed for the purpose of training and tuning machine learning algorithms, enabling them to develop cutting-edge AI algorithms through the process of machine learning.
systems.
(2)2. Summary of Significant Accounting Policies
(a)
(a) Basis of Presentation
The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America (“("US GAAP”GAAP"). Our prospectus dated June 10, 2021Annual Report on Form 10-K for the year ended December 31, 2023 (the “prospectus”"Annual Report"), as filed with the Securities and Exchange Commission (the “SEC”"SEC") on June 14, 2021,, includes a discussion of the significant accounting policies used in the preparation of our consolidated financial statements. There werehave been no material changes to ourthe Company’s significant accounting policies duringdescribed in the six months ended June 30, 2021.Annual Report that have had a material impact on the Company’s condensed consolidated financial statements and related notes.
These unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with US GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X.
Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 20202023 included in our prospectus.the Annual Report. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of June 30, 2021March 31, 2024 and its results of operations, comprehensive (loss) income, and shareholders’ equity for the three and six months ended June 30, 2021 and 2020, and cash flows for the sixthree months ended June 30, 2021March 31, 2024 and 2020.2023. The condensed consolidated balance sheet atas of December 31, 2020,2023, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.
(b) Use of Estimates
The accompanying financial statements and related notes to the financial statements give retroactive effect to the stock split for all periods presented. See Note 11, “ Shareholders’ Equity” for additional information.
8
Table of Contents
(b)
Use of Estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the determination of useful lives and impairment of fixed assets; allowances for doubtful accounts and other receivables;credit losses; the valuation of deferred tax assets; the measurement of lease liabilities and right-of-use assets; valuation of forward contracts receivable;contracts; valuation of equity basedstock-based compensation; valuation and impairment of intangiblesacquired intangible assets and goodwill, as well as related impairment assessments; and reserves for income tax uncertainties and other contingencies. As
8
(c) Principles of the novel coronavirus
(“COVID-19”)Consolidation
pandemic, including as a result of new strains and variants of the virus, continues to unfold. As a result, many of our estimates and assumptions required increased judgement and carry a higher degree of variability and volatility. We continue to closely monitor the outbreak and the impact on our operations and liquidity. As events continue to evolve and additional information becomes available, our estimates may change materially in the future.
(c)
Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company has no involvement with variable interest entities.
entities in its corporate structure.
(d)
(d) Concentration Risk
Most of the Company’s customers are located in the United States. CustomersClients outside of the United States are concentrated in
Europe and Canada. Europe.
9
Table of Contents
For the three and six months ended June 30, 2021March 31, 2024 and 2020,2023, the following customersclient represented
greater than 10% of the Company’s service revenue:
ClientService revenue percentage
Three months ended March 31,
20242023
A19 %20 %
   
Service revenue percentage
 
   
Three months ended June 30,
  
Six months ended June 30,
 
Customer
  
2021
  
2020
  
2021
  
2020
 
A
   27%   33%   28%   32% 
B
   12%   16%   12%   14% 
As of June 30, 2021March 31, 2024 and December 31, 2020,2023, the following customersclients represented greater than 10% of the Company’s accounts receivable:
Accounts receivable percentage
ClientMarch 31, 2024December 31, 2023
A15 %16 %
B11 %12 %
   
Accounts receivable percentage
 
Customer
  
June 30, 2021
  
December 31, 2020
 
A
   14%   22% 
B
   16%   16% 
The Company’s principal operations, including the majority of its employees and the fixed assets owned by its wholly owned subsidiaries, are located in the Philippines.
10
Table of Contents
(e)
(e) Recent Accounting Pronouncements
The Company currently qualifies as an “emerging"emerging growth company”company" under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Accordingly, the Company is provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to
non-emerging
growth companies or (ii) within the same time periods as private companies. The Company has elected to adopt new or revised accounting guidance within the same time period as private companies.
Recently adoptedissued accounting pronouncements
In December 2019,November 2023, the Financial Accounting Standards Board (the “FASB”)FASB issued Accounting Standards Update (“ASU”)
2019-12,
Income TaxesASU 2023-07, Segment Reporting (Topic 740)280): SimplifyingImprovements to Reportable Segment Disclosures. This standard requires enhanced disclosure of significant segment expenses, and other segment items, on an annual and interim basis. This ASU will be effective for the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 was issued as a means to reduce the complexity of accounting for income taxes for those entities that fall within the scope of the accounting standard. The guidance is to be applied using a prospective method, excluding amendments related to franchise taxes, which should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. ASU
2019-12
is effectiveCompany for fiscal years beginning after December 15, 2020, with early2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. This ASU will be applied retrospectively to all periods presented in the financial statements. The Company adopted this standard in the first quarter of 2021;does not expect the adoption did notof this ASU to have a material impact on its consolidated financial statements.
11
Table of Contents
Recently issued accounting pronouncements
In February 2016,December 2023, the FASB issued ASU
2016-02,
Leases 2023-09, Income Taxes (Topic 842), which supersedes FASB Accounting Standards Codification (ASC), Leases (Topic 840).740): Improvements to Income Tax Disclosures. This standard improves the transparency of rate reconciliation and income taxes paid disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The standard is intended to increasealso improves the transparencyeffectiveness and comparability among organizationsof disclosures by recognizing lease assets(1) adding disclosures of pretax income (loss) and lease liabilities on the balance sheetsincome tax expense (benefit) and disclosing key information about leasing arrangements. In June 2020, the FASB postponed the effective date for ASC 842 for private companies.(2) removing disclosures that no longer are considered cost beneficial or relevant. This ASU will be effective for the Company for fiscal years beginning in fiscal year 2022, with earlyafter December 15, 2025. Early adoption permitted. The Company is currently evaluating the impact of adopting ASU
2016-02
on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU
2016-13,
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The revised standard relates to measurement of credit losses on financial instruments, and requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The guidance replaces the incurred loss model with an expected loss model referred to as current expected credit loss (CECL). The CECL model requires us to measure lifetime expected credit losses for financial instruments held at the reporting date using historical experience, current conditions and reasonable supportable forecasts. The guidance expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating credit losses and requires new disclosures of the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination.permitted. This ASU will be effective for the Company beginning in fiscal year 2023applied prospectively, with early adoption isretrospective application permitted. The Company is currently evaluatingdoes not expect the adoption of this ASU to have a material impact of adopting ASU
2016-13
on the Company’sits consolidated financial statements.
(3) Revenue9
3. Business Combination
On April 15, 2022 (the "Closing Date"), the Company completed the acquisition of 100% of the equity interests of Parsec d.o.o. and Q Experience d.o.o. (collectively, "heloo") for $35.4 million. The former shareholders of heloo are also eligible to receive contingent earn-out payments not to exceed €20 million, based on performance compared to prescribed EBITDA targets outlined in the purchase agreement during each of the one year periods ending April 30, 2023 and 2024, respectively. The total fair value of remaining contingent earn-out payments was determined to be $0.0 million as of March 31, 2024 and December 31, 2023, respectively, based on probabilities of achieving the prescribed targets. Since these payments were contingent on future service conditions, they were recognized as compensation expense ratably over the required service period. Since the service conditions have been met, future changes will be based only on updates to the expected achievement. For the three months ended March 31, 2024 and 2023, the Company recognized $0.0 million and $6.6 million, respectively, in compensation expense related to the contingent earn-out payments included in selling, general, and administrative expenses.
4. Revenue from Contracts with Customers
Disaggregation of Revenue
OurThe Company's revenues are derived from contracts with customers related to business outsourcing services that we provide.it provides. The following table presents the breakdown of the Company’s revenues by service offering:
Three months ended March 31,
(in thousands)20242023
Digital Customer Experience$143,491 $157,136 
Trust and Safety55,272 40,598 
AI Services28,707 37,572 
Service revenue$227,470 $235,306 
   
Three months ended June 30,
   
Six months ended June 30,
 
(in thousands)
  
2021
   
2020
   
2021
   
2020
 
Digital Customer Experience
  $113,566   $71,345   $213,277   $136,562 
Content Security
   42,995    31,076    79,122    57,614 
AI Operations
   23,461    11,979    40,494    22,653 
   
 
 
   
 
 
   
 
 
   
 
 
 
Service Revenue
  $ 180,022   $ 114,400   $ 332,893   $ 216,829 
   
 
 
   
 
 
   
 
 
   
 
 
 
The majority of the Company’s revenues are derived from contracts with customers who are located in the United States. However, we deliver ourthe Company delivers its services from geographies outside of the United States. The following table presents the breakdown of the Company’s revenues by geographical location, based on where the services are provided from:
Three months ended March 31,
(in thousands)20242023
Philippines$131,213 $126,859 
United States25,590 46,662 
India28,909 28,243 
Rest of World41,758 33,542 
Service revenue$227,470 $235,306 
   
Three months ended June 30,
   
Six months ended June 30,
 
(in thousands)
  
2021
   
2020
   
2021
   
2020
 
Philippines
  $95,681   $62,842   $180,259   $118,716 
United States
   58,930    43,429    109,687    84,074 
Rest of World
   25,411    8,129    42,947    14,039 
   
 
 
   
 
 
   
 
 
   
 
 
 
Service Revenue
  $ 180,022   $ 114,400   $ 332,893   $ 216,829 
   
 
 
   
 
 
   
 
 
   
 
 
 
12
Table of Contents
Contract Balances
Accounts receivable, net of allowancesallowance for credit losses includes $71.7$76.7 million and $47.4$77.2 million of unbilled revenuesrevenue as of June 30, 2021March 31, 2024 and December 31, 2020,2023, respectively.
(4)5. Forward Contract Receivable
Contracts
The Company transacts business in various foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency exchange rate risk. During 20212024 and 2020,2023, the Company entered into foreign currency exchange rate forward contracts, with athree commercial bankbanks as the counterparty,counterparties, with maturities of generally 12 months or less, to reduce the volatility of cash flows primarily related to forecasted costs denominated in Philippine pesos. pesos and Indian rupees. In addition, the Company utilizes foreign currency exchange rate contracts to mitigate foreign currency exchange rate risk associated with foreign currency-denominated assets and liabilities, primarily intercompany balances. The Company does not use foreign currency exchange rate contracts for trading purposes. The exchange rate forward contracts entered into by the Company are not designated as hedging instruments. Any gains or losses resulting from changes in the fair value of these contracts are recognized in other (income) expenseincome, net in the consolidated statements of operations.
For the three months ended June 30, 2021 and 2020 the Company settled forward contracts with total notional amounts of approximately $22.8 million, and $18.0 million, respectively and for the six months ended June 30, 2021 and 2020 the Company settled forward contracts with total notional amounts of approximately $45.6 million, and $36.0 million, respectively.
For the three months ended June 30, 2021 and 2020,
realized gains of approximately $0.6 million and $0.9 million, respectively, resulting from the settlement of forward contracts were included within other (income) expense.
For the six months ended June 30, 2021
and 2020,
realized gains of approximately $1.4 million and $1.6 million, respectively, resulting from the settlement of forward contracts were included within other (income) expense.
As of June 30, 2021 and December 31, 2020, the Company had outstanding forward contracts with notional amounts of approximately
$116.6 million and $109.2 million, respectively. income. The forward contract receivable (payable) resulting from changechanges in fair value was recorded under prepaid expenses and other current assets (accounts payable and accrued liabilities).
10
current assets. ForThe following table presents the three months ended June 30, 2021 and 2020, the unrealized gains on theCompany's settled forward contracts of $0.1 million and $1.3 million, respectively, were included within other (income) expense. For the six months ended June 30, 2021realized and 2020, the unrealized losses on(gains) associated with derivative contracts:
Three months ended March 31,
(in thousands)20242023
Notional amount of settled forward contracts in Philippine pesos$45,964 $59,425 
Notional amount of settled forward contracts in Indian rupees12,405 — 
Total notional amount of settled forward contracts$58,369 $59,425 
Realized losses from settlement of forward contracts$693 $1,618 
Unrealized losses (gains) on forward contracts$1,497 $(6,336)
The following table presents the Company's outstanding forward contracts of $1.7 million and $0.2 million, respectively, were included within other (income) expense.contracts:
(in thousands)March 31,
2024		December 31,
2023
Notional amount of outstanding forward contracts in Philippine pesos$123,065 $169,029 
Notional amount of outstanding forward contracts in Indian rupees32,788 45,193 
Total notional amount of outstanding forward contracts$155,853 $214,222 
By entering into derivative contracts, the Company is exposed to counterparty credit risk, or the failure of the counterparty to perform under the terms of the derivative contract. For the periods presented, the
non-performance
risk of the Company and the counterparties did not have a material impact on the fair value of the derivative instrumentsinstruments.
The Company has implemented the fair value accounting standard for those assets and liabilities that are
re-measured
and reported at fair value at each reporting period. This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value based on inputs used, and requires additional disclosures about fair value measurements. This standard applies to fair value measurements already required or permitted by existing standards.
In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset and include situations where there is little, if any, market activity for the asset.
11
For financial statement presentation purposes, the Company offsets assets and liabilities for forward contracts with the same counterparty that it has the right and intent to net settle upon maturity; however, it does not offset assets and liabilities under master netting arrangements that it does not intend to net settle. The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis, at June 30, 2021 and December 31, 2020 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.
value, at March 31, 2024 and December 31, 2023:
March 31, 2024
Fair value measurements usingTotal Gross Fair ValueEffect of Counter-party NettingNet Amounts on Balance SheetEffect of Master Netting ArrangementsNet Amounts
(in thousands)Level 1
inputs		Level 2
inputs		Level 3
inputs
Assets
Forward contracts receivable$— $103 $— $103 $— $103 $(31)$72 
Liabilities
Forward contracts payable$— $2,289 $— $2,289 $— $2,289 $(31)$2,258 
December 31, 2023
Fair value measurements usingTotal Gross Fair ValueEffect of Counter-party NettingNet Amounts on Balance SheetEffect of Master Netting ArrangementsNet Amounts
(in thousands)Level 1 inputsLevel 2 inputsLevel 3 inputs 
Assets
Forward contracts receivable$— $95 $— $95 $— $95 $(95)$— 
Liabilities
Forward contracts payable$— $784 $— $784 $— $784 $(95)$689 

Table of Contents
   
Fair value measurements using
 
   
June 30,

2021
   
Level 1

inputs
   
Level 2

inputs
   
Level 3

inputs
 
(in thousands)
                
Forward contract receivable
  $50   $—     $50   $—   
  
   
Fair value measurements using
 
   
December 31,

2020
   
Level 1

inputs
   
Level 2

inputs
   
Level 3

inputs
 
(in thousands)
                
Forward contract receivable
  $1,780   $—     $1,780   $—   
The Company’s derivatives are carried at fair value using various pricing models that incorporate observable market inputs, such as interest rate yield curves and currency rates, which are Level 2 inputs. Derivative valuations incorporate credit risk adjustments that are necessary to reflect the probability of default by the counterparty or by the Company.
(5)6. Property and Equipment, net
The components of Propertyproperty and equipment, net at June 30, 2021as of March 31, 2024 and December 31, 20202023 were as follows:
(in thousands)March 31,
2024		December 31,
2023
Leasehold improvements$67,932 $67,552 
Technology and computers106,123 105,375 
Furniture and fixtures7,499 7,392 
Construction in process1,677 1,140 
Other property and equipment14,231 14,238 
Property and equipment, gross197,462 195,697 
Accumulated depreciation(135,685)(126,804)
Property and equipment, net$61,777 $68,893 
   
June 30,
2021
   
December 31,
2020
 
(in thousands)
        
Leasehold improvements
  $30,972   $31,654 
Technology and computers
   62,678    47,572 
Furniture and fixtures
   4,023    4,203 
Construction in process
   8,724    5,194 
Other property and equipment
   6,309    5,995 
   
 
 
   
 
 
 
Property and equipment, gross
   112,706    94,618 
Accumulated depreciation
   (49,646)    (37,661) 
   
 
 
   
 
 
 
Property and equipment, net
  $63,060   $56,957 
   
 
 
   
 
 
 
The Company’s principal operations are in the Philippines where the majority of property and equipment resides under its wholly owned subsidiaries. The table below presents the Company’s total property and equipment by the geographic location as of June 30, 2021March 31, 2024 and December 31, 2020:
2023:
   
June 30,
2021
   
December 31,
2020
 
(in thousands)
        
Philippines
  $39,825   $37,823 
United States
   10,019    8,983 
Rest of World
   13,216    10,151 
   
 
 
   
 
 
 
Total Property and equipment, net
  $63,060   $ 56,957 
   
 
 
   
 
 
 
(in thousands)March 31,
2024		December 31,
2023
Philippines$25,738 $29,765 
United States6,171 7,308 
India15,032 17,452 
Rest of World14,836 14,368 
Property and equipment, net$61,777 $68,893 
1412
(6)7. Goodwill and Intangibles
The changes in the carrying amount of goodwill during the period were as of June 30, 2021 and December 31, 2020 was $195.7 million.
follows:
(in thousands)
Balance as of December 31, 2023$218,108 
Foreign currency translation(495)
Balance as of March 31, 2024$217,613 
Intangible assets consisted of the following as of June 30, 2021March 31, 2024 and December 31, 2020:
2023:
March 31, 2024December 31, 2023
(in thousands)Intangibles,
Gross		Accumulated
Amortization		Intangibles,
Net		Intangibles,
Gross		Accumulated
Amortization		Intangibles,
Net
Customer relationships$251,653 $(90,419)$161,234 $251,899 $(86,176)$165,723 
Trade names41,900 (15,363)26,537 41,900 (14,665)27,235 
Other intangibles206 (206)— 236 (236)— 
Total$293,759 $(105,988)$187,771 $294,035 $(101,077)$192,958 
   
Intangibles,
Gross
   
Life
(Years)
   
Accumulated
Amortization
   
Intangibles,
Net
 
(in thousands)
                
Customer relationships
  $240,800    15   $(44,148)   $196,652 
Trade name
   41,900    15    (7,681)    34,219 
Balance as of June 30, 2021
  
$
282,700
 
  
 
 
 
  
$
(51,829
) 
  
$
230,871
 
   
Intangibles,
Gross
   
Life
(Years)
   
Accumulated
Amortization
   
Intangibles,
Net
 
(in thousands)
                
Customer relationships
  $240,800    15   $(36,121)   $204,679 
Trade name
   41,900    15    (6,284)    35,616 
   
 
 
        
 
 
   
 
 
 
Balance as of December 31, 2020
  
$
282,700
 
       
$
(42,405
) 
  
$
240,295
 
   
 
 
        
 
 
   
 
 
 
(7)8. Long-Term Debt
The balances of current and
non-current
noncurrent portions of debt consistconsisted of the following as of June 30, 2021:March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
(in thousands)CurrentNoncurrentTotalCurrentNoncurrentTotal
Term Loan$10,125 $253,800 $263,925 $8,438 $257,175 $265,613 
Less: Debt financing fees(378)(915)(1,293)(379)(1,009)(1,388)
Total$9,747 $252,885 $262,632 $8,059 $256,166 $264,225 
(in thousands)
  
Current
   
Noncurrent
   
Total
 
Term Loan
  $9,188   $194,775   $203,963 
Revolver
   39,878    —      39,878 
Less: Debt financing fees
   (556)    (1,250)    (1,806) 
   
 
 
   
 
 
   
 
 
 
Total
  
$
48,510
 
  
$
193,525
 
  
$
242,035
 
   
 
 
   
 
 
   
 
 
 
20192022 Credit Agreement
On September 25, 2019,7, 2022, the Company entered into aamended and restated its prior credit agreement (the “2019(as amended and restated the "2022 Credit Agreement”Agreement") that included, which includes a
$210.0 
$270.0 million term loan (the “Term"2022 Term Loan Facility”Facility") and a
$40.0 
$190.0 million revolving credit facility (the “Revolving"2022 Revolving Credit Facility”Facility" and, together with the 2022 Term Loan Facility, the “2019"2022 Credit Facilities”Facilities"). On April 30, 2021, the Company entered into Amendment No. 1 to our 2019 Credit Agreement with the existing lenders providing for
$50.0 million incremental revolving credit commitments on the same terms as our existing revolving credit
 facility. We accounted for this amendment as a debt modification and recorded $0.3 million of debt financing fees which will be amortized, along with previously deferred fees, over the
remaining term of the Revolving Credit Facility.
Principal payments on theThe 2022 Term Loan Facility are due quarterly in arrears
 equalmatures on September 7, 2027. We have elected to installments in an aggregate annual amount equal to (i) 1.0% per annum ofpay interest on borrowings under the original principal amount in2022 Term Loan Facility based on the first year, (ii) 2.5% per annum of the original principal amount in the second year, (iii) 5.0% per annum of the original principal amount in the third year, (iv) 7.5% per annum of the original principal amount
in the fourth year and (v) 10.0% per annum of the original principal amount in the fifth year, with the remaining principal due in a lump sum at the maturity date of September 25, 2024.SOFR rate. The interest rate in effect with respect to
for the 2022 Term Loan Facility as
of June 30, 2021March 31, 2024 was 2.345%.
7.680% per annum. Due to its variable interest rates, the carrying amount of debt approximates fair value based on the present value of future cash flows using Level 2 inputs.
The 2022 Revolving Credit Facility providesterminates on September 7, 2027. As of March 31, 2024, the Company with access to a
$15.0 million letter of credit facilityhad no balance outstanding and a $5.0 
million swing line facility, each of which, to the extent used, reduces borrowing availability under the Revolving Credit Facility. The Revolving Credit Facility expires
on
September 25, 2024
,
and requires a commitment fee of
 0.4%
on undrawn commitments paid
 quarterly
in arrears. As of June 30, 2021, the interest rate in effect was 2.345% on outstanding borrowings under the Revolving Credit Facility. As of June 30, 2021, we had $50.1$190.0 million of borrowing availability under the 2022 Revolving Credit Facility.
We were in compliance with all debt covenants as of March 31, 2024.
15
13
9. Leases
The following table presents operating lease costs recorded to cost of services:
Three months ended March 31,
(in thousands)20242023
Operating lease costs - Cost of services$4,477 $4,397 
Operating lease costs recorded to selling, general, and administrative expenses were immaterial.
The following table presents the weighted average remaining lease term and weighted average discount rate for the Company's operating leases as of March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
Weighted average remaining lease term3.3 years3.5 years
Weighted average discount rate6.4 %6.3 %
The following table presents supplemental cash flow information related to the Company's operating leases:
Three months ended March 31,
(in thousands)20242023
Cash paid for amounts included in the measurement of operating lease liabilities$4,831 $4,259 
ROU assets obtained in exchange for operating lease liabilities812 2,628 
The future lease payments on the Company's operating lease liabilities as of March 31, 2024 were as follows:
(in thousands)
2024-remainder of year$13,205 
202515,003 
20269,681 
20275,184 
20281,705 
Thereafter1,657 
     Total lease payments46,435 
Less: imputed interest(4,723)
     Total lease liabilities$41,712 
14
The 2019 Credit Agreement contains certain restrictive financial covenants and also limits additional borrowings, capital expenditures, and distributions. The Company was in compliance with these covenants asTable of June 30, 2021. Substantially all assets of TU Midco, Inc. and its material domestic subsidiaries are pledged as collateral under this agreement, subject to certain customary exceptions.
Contents
(8)10. Commitments and Contingencies
(a)
Legal Proceedings
From timeThe Company is subject to time, the Company may become subject tovarious legal proceedings, claims, and litigation arising in the ordinary course of business. The Company is not currently a party to any material legal proceedings, nor isAlthough the outcomes of such matters cannot be predicted with certainty, the Company awarebelieves that resolution of anyall such pending matters will not, either individually or threatened litigation that wouldin the aggregate, have a material adverse effect on the Company’sits business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably.
(b)
Contingent Consideratio
n
On October 1, 2018, Bidco acquired 100%. However, given the inherent unpredictability of the outstanding shares of TaskUs Holdings, Inc. at a purchase price of $429.4 million (the “Transaction”). As a part of the Transaction, the Company entered into a Stock Purchase Agreement, which provides that the sellers of TaskUs, Inc. are entitled to receive cash payments for certain tax benefits, if any, realized as a result of the Blackstone Acquisition that are received by the Company for a specified period after the closing date. The Company recorded a liability of $3.6 million for the expected payment to the sellers, 
which is included within accounts payablelitigations, arbitrations, claims, inquiries, investigations and accrued liabilities in the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020. The Company received payment for the tax benefits in the six months ended June 30, 2021. 
(9) Employee Compensation
Phantom Stock Plan
On June 19, 2015, TaskUs Holdings’ board of directors officially adopted a companywide phantom stock plan and related phantom share agreements.
The number of outstanding phantom shares at June 30, 2021 and December 31, 2020 were 511,489 and 651,436, respectively. There were 139,947 phantom shares forfeited during the six months ended June 30, 2021. Because the change in control became probable upon the IPO, the Company
recognized expense in the amount of the expected cash
 settlement
totaling 
$127.5 
million recorded in selling, general, and administrative expense on the condensed consolidated statements of operations for the three and six months ended June 30, 2021. The associated liability was recorded in accrued payroll and employee-related liabilities on the condensed consolidated balance sheets as of June 30, 2021. Pursuant to the terms of the plan, payment to the phantom shareholders in settlement of their vested phantom shares must occur within 30 days following the close of the IPO, or no later than July 15, 2021, at which point there will be
0
 phantom shares outstanding. 
2019 Stock Incentive Plan
On April 16, 2019, the Company established an equity incentive plan pursuant to which the Company has granted option awards to selected executives and other key employees
(the “2019 Plan”).
 The option awards contain service, market and performance conditions. Stock options under this plan contingently vest over a period of two years in the event of a change in control and over a period of three years in the event of an IPO (each as defined in such plan), with the vesting period beginning on the date of the performance event so long as the holder remains employed. The amount of options eligible for vesting is contingent upon Blackstone’s return on invested capital in the Company. These options have contractual lives of 10 years. Following the IPO and establishment of the 2021 Omnibus Incentive Plan
(the “2021 Plan”) 
as further discussed below,proceedings, it is possible that an adverse outcome in certain matters could have a material adverse effect on our business, operating results, cash flows, or financial condition in any future period. In addition, there can be no assurance that material losses will not expected
that any additional awards will be issued under the 2019 Plan. 
16
Table of Contents
At the date of the IPO, the Company concluded that the public offering represents a qualifying liquidity event that would cause the stock option’s performance conditionincurred from claims where potential losses have not yet been determined to be probable or possible and reasonably estimable.
On February 23, 2022, a purported class action lawsuit captioned Lozada v. TaskUs, Inc. et al., No. 22-cv-1479-JPC, was filed in the United States District Court for the Southern District of occurring. As such,New York against the Company, has begun to recognize compensation expense in relation toour Chief Executive Officer, our President, and our Chief Financial Officer. The complaint alleges that the stock options.
2021 Omnibus Incentive Plan
In connection with the IPO, the Company adopted the 2021 Plan, 
which provides for the issuance of
non-qualified
stock options, incentive stock options, stock appreciation rights (“SARs”), restricted shares of Class A common stock, restricted stock units (“RSUs”), or other equity-based or cash-based awards. A total of 12,160,929 shares of Class A common stock were initially reserved for issuance under the 2021 Plan, subject to automatic annual evergreen increases. On June 10, 2021registration statement filed in connection with the Company’s IPO and the Company’s second and third quarter 2021 earnings calls contained materially false and misleading information in violation of the federal securities laws. On October 20, 2022, the Court entered an order appointing Humberto Lozada as lead plaintiff in the lawsuit. On December 16, 2022, lead plaintiff filed an amended complaint, alleging additional misstatements in certain of the Company’s 2021 earnings releases filed on Form 8-K and at an investor conference, and asserting additional securities claims, including against members of TaskUs’s board of directors as well as BCP FC Aggregator L.P. The complaint seeks unspecified damages and an award of costs and expenses, including reasonable attorneys’ fees, as well as equitable relief. We believe that the lawsuit is without merit and intend to defend the lawsuit vigorously. On February 17, 2023, TaskUs and the other named defendants filed a motion to dismiss. On October 16, 2023, the plaintiffs voluntarily dismissed with prejudice certain claims based on certain theories of liability. On January 5, 2024, the Court granted in part and denied in part the defendants' motion to dismiss. Defendants filed an answer to the complaint on February 9, 2024, and an initial pretrial conference was held on February 16, 2024 after which a Case Management Plan and Scheduling Order was entered by the Court on February 20, 2024. The Company cannot predict at this point the length of time that this action will be ongoing or the liability, if any, which may arise therefrom.
The Company is currently defending three lawsuits that present in large degree the same legal or factual issues, with allegations that are similar in nature. We believe that these three lawsuits are without merit and intend to defend each vigorously. The Company cannot predict at this point the length of time that these actions will be ongoing or the liability, if any, which may arise therefrom. As these actions are still in preliminary phases, any potential loss or impact on financial position or results of operations cannot yet be estimated.
On April 1, 2022, a purported class action lawsuit captioned Gregory Forsberg, Christopher Gunter, Samuel Kissinger, and Scott Sipprell vs. TaskUs, Inc. and Shopify, Inc., Shopify Holdings (USA), Inc., Shopify (USA) Inc., No. 1:22-cv-00436-UNA, was filed in the United States District Court for the District of Delaware. The complaint alleges the named defendants failed to exercise reasonable care in securing and safeguarding consumer information in connection with a 2020 data breach impacting Ledger SAS cryptocurrency hardware wallets, resulting in the unauthorized public release of approximately 272,000 pieces of detailed personally identifiable information, including Plaintiffs’ and class members’ full names, email addresses, postal addresses, and telephone numbers. The four named plaintiffs allege aggregate losses of approximately $140,000, and allege that the damages exceed $5 million for purposes of class action jurisdiction. On April 8, 2022, the Company granted time-based RSUs, performance-basedfiled a motion to dismiss, which is currently pending. This case is currently stayed.
On September 16, 2022, a lawsuit captioned My Choice Software, LLC vs. TaskUs, Inc., Tassilo Heinrich, Shopify, Inc., Shopify Holdings (USA) Inc., Shopify (USA) Inc., Does 1-50, No. 22-cv-1710 was filed in the United States District Court, Central District of California. The complaint alleges the defendants profited off of the plaintiff's information. The complaint seeks unspecified damages and an award of costs and expenses, including reasonable attorneys’ fees, as well as equitable and injunctive relief. On February 13, 2023, we filed a motion to dismiss the amended complaint. In May 2023, the Court issued an Order dismissing certain parties, staying the case as to the Company and denying as moot the Company's previously filed motion to dismiss. This case is currently stayed.
15
On November 22, 2023, TaskUs was added as an additional defendant in a lawsuit captioned Naeem Seirafi, Edward Baton, Anthony Comilla, Brett Deeney, and Abraham Vilinger, individually and on behalf of all others similarly situated v. Ledger SAS, Shopify (USA) Inc., Shopify Inc., and TaskUs, Inc., No. 21-cv-02470 pending in the United States District Court, Northern District of California. The complaint alleges defendants failed to exercise reasonable care in securing and safeguarding consumer information in connection with a 2020 data breach impacting Ledger cryptocurrency hardware wallets, resulting in the unauthorized public release of approximately 272,000 pieces of detailed personally identifiable information, including Plaintiffs’ and “Class” members’ full names, email addresses, postal addresses, and telephone numbers. The complaint asserts claims against TaskUs for negligence, negligence per se, declaratory and injunctive relief, and for violations of the New York Deceptive Trade Practices Act. The named plaintiffs’ alleged damages of approximately $557,000 and an award of costs and expenses, including reasonable attorneys’ fees, as well as declaratory and injunctive relief, and other damages. On February 5, 2024, TaskUs filed a motion to dismiss, which is currently pending.
Indemnification
In addition, in the ordinary course of business, the Company enters into agreements of varying scope and terms pursuant to which it agrees to indemnify clients, vendors and other business partners with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, cybersecurity breach, services to be provided by the Company or from intellectual property infringement claims made by third parties. Historically, the Company has not experienced significant losses on these types of indemnification obligations.
11. Stock-Based Compensation
The following table summarizes the stock option and restricted stock unit ("RSU") activity for the three months ended March 31, 2024:
OptionsRSUs
Number of
options		Weighted -
average
exercise price		Number of
RSUs		Weighted -
average
grant date fair value
Outstanding at January 1, 20247,523,971 $14.19 3,864,319 $23.60 
Granted— $— 2,125,048 $12.35 
Exercised or released(52,452)$3.72 (568,383)$20.42 
Forfeited, cancelled or expired(35,712)$19.74 (87,232)$26.08 
Outstanding at March 31, 20247,435,807 $14.23 5,333,752 $19.42 
In addition to the Options and RSUs presented in the table above, there were 3,373,417 performance stock units (“PSUs”("PSUs"), outstanding at January 1, 2024 and time-based stock options to its founders and certain other officers and employees underMarch 31, 2024.
The following table summarizes the 2021 Plan.components of stock-based compensation expense recognized for the periods presented:
Stock Options
Three months ended March 31,
(in thousands)20242023
Cost of services$680 $877 
Selling, general, and administrative expense9,555 12,587 
Total$10,235 $13,464 
On June 10, 2021, the Company granted 1,565,398 of stock options to its founders and certain officers and employees with a weighted-average grant date fair value of $8.15. The stock options issued to such officers and employees (including founders) generally vest quarterly or annually over four years and expire ten years from the date of the grant. The grant date fair value of the stock options
was
estimated using the Black-Scholes option pricing method with the following assumptions:
Dividend yield (%)
0.0% 
Expected volatility (%)
35% 
Risk-free interest rate (%)
0.8-1.1% 
Expected term (years)
5.1-7.0
As of June 30, 2021, there were 9,139,456 options outstanding with a weighted-average exercise price of $8.23 per share. As of June 30, 2021,March 31, 2024, there was $17.3$5.7 million, $49.9 million and $1.9 million of unrecognized compensation expense related to the Company’s unvested stock options, RSUs and PSUs, respectively, that is expected to be recognized over a weighted-average period of 2.3 years.
RSUs
On June 10, 2021, the Company granted 2,528,621
 RSUs to
its founders1.1 years, 1.4 years and certain officers and employees with a weighted-average grant date fair value of $23.00. The RSUs are typically subject to service-based vesting conditions and will vest in equal quarterly or annual installments over four years. The related stock-based compensation expense is recognized using a graded vesting method.
As of June 30, 2021, there was $55.6 million of unrecognized compensation expense related to the Company’s unvested RSUs that is expected to be recognized over a weighted-average period of 2.2 years.
PSUs
On June 10, 2021, the Company granted 3,307,060 of PSUs to its founders with a weighted-average grant date fair value of $3.98. The PSUs contain three tranches and service and market conditions. The PSUs vest
17
0.9 years, respectively.
contingently in annual installments over four years. The amount of PSUs eligible for vesting is contingent upon the achievement of certain enterprise value CAGR targets. The Company will recognize the related stock-based compensation expense using a graded vesting method. The grant date fair value of the PSUs were estimated using the Monte Carlo simulation method with the following assumptions:
Dividend yield (%)
0% 
Expected volatility (%)
40% 
Risk-free interest rate (%)0.1-0.5% 
As of June 30, 2021, there was $12.8 million of unrecognized compensation expense related to the Company’s unvested PSUs that is expected to be recognized over a weighted-average period of 2.8 years.
The following table summarizes the components of stock-based compensation expense recognized in the Company’s condensed c
o
nsolidated statements of operations for the periods presented:
   
Three months ended
June 30,
   
Six months ended
June 30,
 
   2021   2020   2021   2020 
(in thousands)
                
Cost of services
  $51   $—     $51   $—   
Selling, general
,
and administrative expense
   133,216    —      133,216    —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $133,267   $0     $133,267   $0   
   
 
 
   
 
 
   
 
 
   
 
 
 
(10)12. Income Taxes
In determining its interim provision for income taxes, the Company used an estimated annual effective tax rate, which is based on expected income before taxes, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the period in which they occur and can be a source of variability in the effective tax rate from quarter to quarter.
16
The Company recorded (benefit from) provision for income taxes of $
(7.0)$6.5 million and $1.6$6.0 million in the three months ended June, 2021March 31, 2024 and 2020,2023, respectively.
The effective tax rate was 6.2%35.7% and 16.9%38.6% for the three months ended June 30, 2021March 31, 2024 and 2020,2023, respectively.
The Company recorded (benefit from) provision for income taxes 
of 
$(3.5) million and $2.0
million in the six months ended June, 2021 and 2020, respectively
t
he effective tax rate was 3.7% and 17.1% for the six months ended June 30, 2021 and 2020. The difference between the effective tax ratesrate and the 21% federal statutory rate in the sixthree months ended June 30, 2021March 31, 2024 was primarily due to global intangible low-taxed income (“GILTI”) inclusion, tax benefits of income tax holidays in foreign jurisdiction, and nondeductible compensation of officers.officers and Global Intangible Low-Taxed Income ("GILTI") inclusion. The difference between the effective tax ratesrate and the 21% federal statutory rate in the sixthree months ended June 30, 2020March 31, 2023 was primarily due to nondeductible earn-out consideration, as well as GILTI inclusion, FDII deductionBase Erosion Anti-avoidance Tax ("BEAT") and tax benefitsnondeductible compensation of income tax holidays in foreign jurisdiction.
The Company is subject to income tax in the United States federal, state and various foreign jurisdictions. Federal income tax returns of the Company are subject to IRS examination for the 2017 through 2019 tax years. State income tax returns are subject to examination for the 2016 through 2019 tax years.
The Company’s practice and intention are to indefinitely reinvest the earnings of its
non-U.S.
subsidiaries. Determination of the amount of any unrecognized deferred income tax liability on the temporary difference is not practicable because of the complexities of the hypothetical calculation.
officers.
(11) Shareholders’ Equity
Dividend Distribution
On April 9, 2021, prior to the IPO, the board of directors declared a cash dividend in the aggregate amount of $50.0 million to holders of our common stock. The cash dividend was paid on April 16, 2021.
Amendment and Restatement of Certificate of Incorporation
On June 10, 2021, the Company amended and restated its certificate of incorporation to effect a
10-for-one
forward stock split of its outstanding common stock and authorized three classes of ownership interests:
18
Table of Contents
(i) 250,000,000 shares of Preferred Stock, par value $0.01 per share, (ii) 2,500,000,000 shares of Class A common stock, par value $0.01 per share, and (iii) 250,000,000 shares of Class B common stock, par value $0.01 per share. After giving effect to the
ten-for-one
stock split, all outstanding shares of common stock were reclassified into an equal number of shares of Class B common stock (the “Class B Reclassification”) and the selling shareholders participated equally in the Class B Reclassification.
The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting, transfer and conversion rights. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to 10 votes per share and is convertible into one share of Class A common stock at any time or automatically upon certain conditions but no later than 7 years following the filing and effectiveness of the amendment on June 10, 2021.
Initial Public Offering
On June 15, 2021, the Company closed its IPO of 5,553,154 shares of Class A common stock (the “primary” offering) and selling stockholders sold 9,626,846
shares (the “secondary” offering), including shares sold by the selling stockholders pursuant to the underwriters’ full exercise of their option to purchase additional shares, at a public offering price of
 $23
per share. The Company received net proceeds of 
$120.7 
million after deducting underwriting discounts and commissions, but before deducting offering expenses. The Company used the proceeds from the primary offering, together with cash on hand, to satisfy payments of approximately
 $127.5 
million in respect of vested phantom shares in the third quarter of 2021.
(12) (Loss)13. Earnings Per Share
Following the effectiveness of the amended and restated certificate of incorporation, the Class B Reclassification and the IPO, theThe Company has Class A common stock and Class B common stock outstanding. Because the only difference between the two classes of common stock are related to voting, transfer and conversion rights, the Company has not presented earnings per share under the
two-class
method, as earnings per share are the same for both Class A common stock and Class B common stock. The accompanying financial statements and related notes to the financial statements give retroactive effect to the stock split for all periods presented. See Note 11, “Shareholders’ Equity” for additional information.
The computation of basic net (loss) income per share (“EPS”) is based on the weighted-average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common stock equivalents. Common stock equivalents consist of shares issuable upon the exercise of stock options and vesting of RSUs and PSUs.
The following table summarizes the computation of basic and diluted EPSearnings per share for the three and six months ended June 30, 2021March 31, 2024 and 2020:
2023:
Three months ended March 31,
(in thousands, except share and per share data)20242023
Numerator:
Net income$11,714 $9,509 
Denominator:
Weighted-average common shares outstanding – basic88,795,211 97,561,650 
Effect of dilutive securities3,054,675 3,390,923 
Weighted-average common shares outstanding – diluted91,849,886 100,952,573 
Net income per common share:
Basic$0.13 $0.10 
Diluted$0.13 $0.09 
   
Three months ended June 30,
   
Six months ended June 30,
 
(in thousands,
except share and per share data
)
  
2021
   
2020
   
2021
   
2020
 
Numerator:
                    
Net (loss) income Available to Common Shareholders
  $(105,943)  $8,008   $(89,436)  $9,523 
   
 
 
   
 
 
   
 
 
   
 
 
 
Denominator:
                    
Weighted-average common stock outstanding –
basic and diluted		   92,957,493    91,737,020    92,347,257    91,737,020 
     
Net (loss) income per share:
                    
Basic
 and diluted
  $(1.14)  $0.09   $(0.97)  $0.10 
   
 
 
   
 
 
   
 
 
   
 
 
 
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Since we were in a net loss position for the threeThe Company excluded 3,414,870 and six months ended June 30, 2021, diluted EPS is equal to basic EPS for such periods as the inclusion of potential common stock equivalents would have been anti-dilutive. We excluded
58,513
and 29,256
3,778,307 potential common stock equivalents from the computation of diluted EPS for the three and six months ended June 30, 2021,March 31, 2024 and 2023, respectively, because the effect would have been anti-dilutive. In addition, we excluded
4,599,736
and
2,299,868
potential common stock equivalents from the computation of diluted EPS for the threeThere were 4,672,564 and six months ended June 30, 2021, respectively, since we were in a net loss position; however, these awards would have been dilutive if we were in a net income position. As of June 30, 2021, there were
 5,352,056
4,819,894 potential common stock equivalents outstanding as of March 31, 2024 and 2023, respectively, with market conditions which were not met at thatthe relevant date, that were excluded from the calculatio
n
calculation of diluted EPS.
(13) Related Party
From time to time, the Company does business with a number of other companies affiliated with Blackstone, which cannot be presumed to be carried out at an arm’s-length basis. During the periods presented, Blackstone had an interest in Alight, Inc. (“Alight”), Custom Ink and Mphasis Limited (“Mphasis”), entities that supply TaskUs with certain consulting services and promotional items. During the three months and six months ended June 30, 2021, the Company made payments of 
$0.1 million and $0.4 million, respectively to Alight. During the six months ended June 30, 2021, the Company made payments of
$
0.2
million to Custom Ink. During the six months ended June 30, 2020, the Company made payments of $0.2 million to Mphasis. 
During the periods presented,
Blackstone had an interest in Vivint Smart Home, Inc. (“Vivint”),
 North American Bancard, and Custom Ink, entities that are TaskUs customers. During the three months ended June 30, 2021,
t
he Company received payments of $0.5 million, $0.5 million, and $0.5 million from Vivint, North American Bancard and Custom Ink, respectively. During the six months ended June 30, 2021,
t
he Company received payments of $0.8 million, $0.6 million, and $0.7 million from Vivint, North American Bancard and Custom Ink, respectively.17
Underwriting of IPO
Blackstone Securities Partners
L.P
., an affiliate of Blackstone, served as underwriter of
 1,380,000 
of the
 15,180,000 
million shares of Class A common stock sold in the IPO, with underwriting discounts and commissions of
$1.265
per share paid by the Company and selling stockholders.
(14) Subsequent Events
Employee Compensation
On August 5, 2021, the Company granted
 895,820
equity awards under the 2021 Omnibus Incentive Plan to certain officers. On that date, the Board also authorized management to make grants and awards of cash or options or other equity securities to non-executive officers of the Company under the 2021 Omnibus Incentive Plan in compliance with the plan, of which
 1,357,838
equity awards were granted on August 9, 2021.
Phantom shares
In the third quarter of 2021, the Company used the net proceeds received by it from the IPO, together with cash on hand, to satisfy payments relating to vested phantom shareholders that became due upon the completion of the IPO. See Note 9, “Employee Compensation” for additional information.
Contingent consideration
On July 
9
,
2021
, the Company made payments of $
3.6
 million to the sellers of TaskUs Holdings, Inc, in relation to the contingent consideration arising from certain tax benefits realized as a result of the Blackstone Acquisition. See Note 8(b), “Commitments and Contingencies” for additional information. 
20
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”"Quarterly Report"), the financial statements and related notes included in our prospectus dated June 10, 2021Annual Report on Form 10-K for the year ended December 31, 2023 (the “prospectus”"Annual Report"), as filed with the Securities and Exchange Commission (the “SEC”) on June 14, 2021 (the “prospectus”"SEC") and the information included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the prospectus.Annual Report. In addition to historical data, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in our forward-looking statements as a result of various factors, including but not limited to those discussed under “Cautionary Statement"Cautionary Note Regarding Forward-Looking Statements”Statements" in this Quarterly Report and under “Risk Factors”Part I, Item 1A, "Risk Factors" in the Annual Report.
This Quarterly Report includes certain historical consolidated financial and other data for TaskUs, Inc. ("we," "us," "our" or the prospectus.
This
Quarterly
Report
includes
certain
historical
consol
i
dated
financial
and
other
data
for
Tas
k
Us, Inc.
(“we,”
“us,” “our”
or
the
“Company”"Company"). The
following
discussion
provides
a
narrative
of
our
results
of op
e
rations
our results of operations and
financial
condition
for
the
three
months ended March 31, 2024 and
six
months
ended
June
30,
2021
and
2
0
20.
21
2023.
Table of Contents
Overview
We are a provider of outsourced digital outsourcer, focused on serving high-growth technologyservices and next-generation customer experience to the world's most innovative companies, tohelping our clients represent, protect and grow their brands. We serve our clients to support some of the world’s most disruptive brands such as Zoom, Netflix, Uber, Coinbasetheir end customers’ urgent needs, navigate an increasingly-complex compliance landscape, handle sensitive tasks, including online content moderation and Oscar
.enable artificial intelligence technology and automation.
Our global, omni-channel delivery model is focused on providing our clients three key services – Digital Customer Experience Content Security("Digital CX"), Trust and artificial intelligence (“AI”Safety and Artificial Intelligence ("AI") Operations.
Services. We have designed our platform to enable us to rapidly scale and benefit from our clients’ growth. We believe our ability to deliver “ridiculously good” outsourcing will enable us to continue to grow our client base. We use our strong reputation and expertise serving the digital economy to attract new innovators and enterprise-class brands looking to transform.
At TaskUs, culture is at the heart of everything we do. Many of the companies operating in the Digital Economy are well-known for their obsession with creating a world-class employee experience. We believe clients choose TaskUs in part because they view our company culture as aligned with their own, which enables us to act as a natural extension of their brands and gives us an advantage in the recruitment of highly engaged frontline teammates who produce better results.
Recent Financial Highlights
For the three months ended June 30, 2021,March 31, 2024, we recorded service revenuesrevenue of $180.0$227.5 million, or a 57.4% increase3.3% decrease from $114.4$235.3 million for the three months ended June 30, 2020. For the six months ended June 30, 2021, we recorded service revenues of $332.9 million, or a 53.5% increase from $216.8 million for the six months ended June 30, 2020.
March 31, 2023.

Net (loss) income for the three months ended June 30, 2021 decreasedMarch 31, 2024 increased to $(105.9)$11.7 million from $8.0$9.5 million for the three months ended June 30, 2020.March 31, 2023. This decrease included expenses relatedincrease is due primarily to lower earn-out consideration and stock-based compensation expense, partially offset by lower revenue and the one-time phantom shares bonusesimpact of foreign currency exchange rate changes and non-recurring teammate bonuses associated with the IPO of $133.7 million.forward contracts. Adjusted Net Income for the three months ended June 30, 2021 increased 84.9%March 31, 2024 decreased 16.1% to $31.4$27.3 million from $17.0$32.5 million for the three months ended June 30, 2020.March 31, 2023. Adjusted EBITDA for the three months ended June 30, 2021 increased 67.3%March 31, 2024 decreased 8.0% to $44.1$50.6 million from $26.4$55.0 million for the three months ended June 30, 2020.
Net (loss) income for the six months ended June 30, 2021 decreased to $(89.4) million from $9.5 million for the six months ended June 30, 2020. This decrease included expenses related to the one-time phantom shares bonuses and non-recurring teammate bonuses associated with the IPO of $133.7 million.March 31, 2023. Adjusted Net Income for the six months ended June 30, 2021 increased 119.6% to $59.6 million from $27.1 million for the six months ended June 30, 2020.and Adjusted EBITDA forare non-GAAP financial measures. For definitions and reconciliations to net income, the six months ended June 30, 2021 increased 90.9% to $83.7 million from $43.8 million for the six months ended June 30, 2020.
most directly comparable measure in accordance with GAAP, see "Non-GAAP Financial Measures."
22
Table of Contents
TheOur operating results in any period are not necessarily indicative of the results that may be expected for any future period.
2021 Developments
Initial Public Offering
On June 10, 2021, our registration statement on Form
S-1
relating to our initial public offering (“IPO”) was declared effective by the U.S. Securities and Exchange Commission, and our Class A common stock began trading on the NASDAQ on June 11, 2021. Our IPO closed on June 15, 2021.
TaskUs, Inc. issued and sold 5,553,154 shares of Class A common stock (the “primary” offering) and selling stockholders sold 9,626,846 shares (the “secondary” offering), including shares sold by the selling stockholders pursuant to the underwriters’ full exercise of their option to purchase additional shares, at a public offering price of $23 per share. The Company received net proceeds of $120.7 million after deducting underwriting discounts and commissions, but before deducting offering expenses. The Company used the proceeds from the issuance, together with cash on hand, to satisfy payments of approximately $127.5 million in respect of vested phantom shares.
As a result of becoming a public company, we expect to incur additional costs related to audit, legal, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with being a public company.
Amendment and Restatement of Certificate of Incorporation
Prior to the completion of the IPO, we amended and restated our certificate of incorporation to effect a
ten-for-one
forward stock split of our outstanding common stock and authorized three classes of ownership interests: (i) 250,000,000 shares of Preferred Stock, par value $0.01 per share, (ii) 2,500,000,000 shares of Class A common stock, par value $0.01 per share, and (iii) 250,000,000 shares of Class B common stock, par value $0.01 per share. After giving effect to the
ten-for-one
stock split, all then outstanding shares of common stock were reclassified into an equal number of shares of Class B common stock (the “Class B Reclassification”).
Equity Incentive Plans
At the IPO date, we concluded that our public offering represents a qualifying liquidity event that would cause the performance conditions of stock options issued under our 2019 Stock Incentive Plan to be probable of occurring. As such, we started to recognize stock-based compensation expense in relation to the stock options issued under the 2019 Stock Incentive Plan.
In connection with the IPO, we adopted the 2021 Omnibus Incentive Plan, which became effective on the date our registration statement was declared effective. Under the 2021 Omnibus Incentive Plan, we granted time-based restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), and time-based stock options, in each case relating to shares of our Class A common stock.
For additional information, see Note 9, “Employee Compensation” in the Notes to Unaudited Condensed Consolidated Financial Statements of this Quarterly Report.
COVID-19
During the first quarter of 2020, there was a global outbreak of
COVID-19,
which has spread to over 200 countries and territories, including all states in the United States. The global impact of the outbreak has been rapidly evolving and many countries have reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading, and limiting operations of
non-essential
businesses. Such actions created disruption in global supply chains, increased rates of unemployment and adversely impacted many industries.
23
18
The outbreak could have a continued adverse impact on economic and market conditions, and the full extent of the impact and effects of the
COVID-19
pandemic will depend on future developments, including, among other factors, the duration and spread of the outbreak, including new strains and variants of the virus, and the success of vaccination programs, along with related travel advisories, quarantines and restrictions, the recovery time of the disrupted supply chains and industries, the impact of labor market interruptions, the impact of government interventions, and uncertainty with respect to the duration of the global economic slowdown. We continue to closely monitor the outbreak and the impact on our operations and liquidity. As events continue to evolve and additional information becomes available, our estimates may change materially in the future.
As a result of the unpredictable and evolving impact of the pandemic and measures being taken around the world to combat its spread, the timing and trajectory of the recovery remain unclear at this time, and the adverse impact of the pandemic on our operations could be material. See “Risk Factors—Risks Related to Our Business and Industry—The ongoing COVID-19 pandemic, including the resulting global economic uncertainty and measures taken in response to the pandemic, has adversely impacted our business, financial condition and results of operations, especially in the first half of 2020, and may continue to do so” in our prospectus.
Operational Enablement
In early March 2020, in response to the COVID-19 pandemic, we implemented a virtual operating model to protect the health and safety of our employees, and ensure continued service for our clients. As part of the transition to working virtually, we made additional investments in our employees in the form of internet and Wi-Fi connectivity to their homes as well as hotel and shuttle costs for employees who were displaced by the pandemic.
In February 2021, we announced the continuation of our company-wide work from home policy through October 2021. However, where there have been specific client requirements to return to our facilities and, where it has been safe to do so, we have begun transitioning some of our employees back to the office. We continued to incur operational enablement costs, however, during the three and six months ended June 30, 2021.
Revenue and Sales Generation
While we initially saw a reduction in spend from some clients, including ride sharing, live event ticketing, movie ticketing, travel and retail companies, our business performance rebounded in the second half of 2020 despite the uncertainty and initial impact of the pandemic. Our strong market position within our industry verticals as well as our operational agility enabled us to act as a key partner to clients in industry segments such as social media, e-commerce, streaming media, gaming, food delivery and FinTech, which saw an increase in demand driven by a surge in online commerce and content consumption. This trend has continued through the first half of 2021.
Cash and Cost Management
Throughout 2020 and the first half of 2021 we were able to meet our liquidity needs with cash generated from operations and we do not have significant liquidity or operational concerns. We continue to closely monitor the outbreak and the impact on our operations and liquidity.
Subsequent Events
For a description of subsequent events, see Note 14, “Subsequent Events” in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report.
Results of Operations
Comparison of the Three Months Ended June 30, 2021March 31, 2024 and 20202023
The following tables set forth certain historical consolidated financial information for the three months ended June 30, 2021March 31, 2024 and 2020.
2023:
  
Three
months
ended

June 30,

2021
   
Three
months
ended

June 30,

2020
   
Period over

Period

Change ($)
   
Period
Over

Period

Change
(%)
 
Three months ended March 31,Three months ended March 31,Period over Period Change
(in thousands, except %)(in thousands, except %)20242023($)(%)
Service revenue
  $180,022   $114,400   $65,622    57.4% Service revenue$227,470 $$235,306 $$(7,836)(3.3)(3.3)%
Operating expenses:
            
Cost of services
Cost of services
Cost of services
   103,798    64,135    39,663    61.8% 135,411 137,762 137,762 (2,351)(2,351)(1.7)(1.7)%
Selling, general, and administrative expense
   177,810    25,709    152,101    591.6% Selling, general, and administrative expense52,904 64,294 64,294 (11,390)(11,390)(17.7)(17.7)%
Depreciation
   6,729    5,815    914    15.7% Depreciation10,789 9,661 9,661 1,128 1,128 11.7 11.7 %
Amortization of intangible assets
   4,712    4,712    —      —   Amortization of intangible assets4,985 5,124 5,124 (139)(139)(2.7)(2.7)%
Loss on disposal of assets
   1    —      1    100.0% 
Contingent consideration
   —      3,570    (3,570)    (100.0)% 
Loss (gain) on disposal of assetsLoss (gain) on disposal of assets(177)65 (242)NM
  
 
   
 
   
 
   
 
 
Total operating expenses
   293,050    103,941    189,109    181.9% 
 
Operating (loss) income
   (113,028)    10,459    (123,487)    (1,180.7)% 
Other income
   (1,659)    (1,137)    (522)    45.9% 
Total operating expenses
Total operating expenses203,912 216,906 (12,994)(6.0)%
Operating incomeOperating income23,558 18,400 5,158 28.0 %
Other income, netOther income, net(202)(2,177)1,975 (90.7)%
Financing expenses
   1,594    1,959    (365)    (18.6)% Financing expenses5,538 5,099 5,099 439 439 8.6 8.6 %
  
 
   
 
   
 
   
 
 
(Loss) income before taxes
   (112,963)    9,637    (122,600)    (1,272.2)% 
(Benefit from) provision for income taxes
   (7,020)    1,629    (8,649)    (530.9)% 
  
 
   
 
   
 
   
 
 
Net (loss) income
  $(105,943)   $8,008   $(113,951)    (1,423.0)% 
  
 
   
 
   
 
   
 
 
Income before income taxesIncome before income taxes18,222 15,478 2,744 17.7 %
Provision for income taxesProvision for income taxes6,508 5,969 539 9.0 %
Net incomeNet income$11,714 $9,509 $2,205 23.2 %
NM = not meaningful
Service revenue
Service revenue by service offering
The following table presents the breakdown of our service revenue by service offering for the three months ended June 30, 2021 and 2020 was $180.0 million and $114.4 million, respectively. Service revenue for the three months ended June 30, 2021 increased by $65.6 million or 57.4% when compared to the three months ended June 30, 2020. The period over period growth in each period:
Three months ended March 31,Period over Period Change
(in thousands, except %)20242023($)(%)
Digital Customer Experience$143,491 $157,136 $(13,645)(8.7)%
Trust and Safety55,272 40,598 14,674 36.1 %
AI Services28,707 37,572 (8,865)(23.6)%
Service revenue$227,470 $235,306 $(7,836)(3.3)%
Digital Customer Experience Content Security was primarily driven by a decrease from existing clients in On Demand Travel + Transportation, Entertainment + Gaming, Social Media and AI Operations contributed 37.0%, 10.4%,HealthTech. These decreases were partially offset by an increase from existing clients in Technology and 10.0%, respectively, of the total increase of 57.4% for the three months ended June 30, 2021. The 59.2% growthnew clients in Digital Customer ExperienceRetail + E-Commerce, HealthTech, FinTech and On Demand Travel + Transportation.
Trust and Safety was primarily driven by an increase from existing clients in volume of services to our existing customersSocial Media, On Demand Travel + Transportation and FinTech, as well as new customer wins. The 38.4% growthclients in Content SecurityFinTech.
AI Services was primarily driven by an increasea decrease from existing clients in the volume of services to our existing customers. Our AI Operations service offering experienced year over year growth of 95.9% during the three months ended June 30, 2021 which was driven by an increase in the volume of services to our existing customersSocial Media and new customer wins.On Demand Travel + Transportation.
24
Table of Contents
The following table shows service revenues by service offering for each period.
(in thousands)
  
Three Months
Ended
June 30, 2021
   
Three Months
Ended
June 30, 2020
   
Period over
Period

Change ($)
   
Period over
Period

Change (%)
 
Digital Customer Experience
  $113,566   $71,345   $42,221    59.2% 
Content Security
   42,995    31,076    11,919    38.4% 
AI Operations
   23,461    11,979    11,482    95.9% 
   
 
 
   
 
 
   
 
 
   
 
 
 
Service revenue
  $180,022   $114,400   $65,622    57.4% 
   
 
 
   
 
 
   
 
 
   
 
 
 
Service revenuesrevenue by delivery geography
TheWe deliver our services from multiple locations around the world; however, the majority of our service revenues are derived from contracts withthat require payment in United States dollars, regardless of whether the clients who are either located in the United States, or with clients who are located outsideStates.
19
The following table presents the breakdown of our service revenuesrevenue by geographical location, based on where the services are provided.
provided, for each period:
(in thousands)
  
Three Months
Ended
June 30, 2021
   
Three Months
Ended
June 30, 2020
   
Period over
Period
Change ($)
   
Period over
Period
Change
(%)
 
Three months ended March 31,Three months ended March 31,Period over Period Change
(in thousands, except %)(in thousands, except %)20242023($)(%)
Philippines
  $95,681   $62,842   $32,839    52.3% Philippines$131,213 $$126,859 $$4,354 3.4 3.4 %
United States
   58,930    43,429    15,501    35.7% United States25,590 46,662 46,662 (21,072)(21,072)(45.2)(45.2)%
IndiaIndia28,909 28,243 666 2.4 %
Rest of World
   25,411    8,129    17,282    212.6% Rest of World41,758 33,542 33,542 8,216 8,216 24.5 24.5 %
  
 
   
 
   
 
   
 
 
Service revenue
  $180,022   $114,400   $65,622    57.4% Service revenue$227,470 $$235,306 $$(7,836)(3.3)(3.3)%
  
 
   
 
   
 
   
 
 
Revenues generated from services provided from our delivery sites in the Philippines grew from expansion in all three of our service offerings, Digital Customer Experience, Content SecurityPhilippines: Trust and AI Operations, whichSafety contributed 32.0%, 14.7%, and 5.6%6.4% of the total increase of 52.3%primarily driven by clients in the Philippines, respectively.
Social Media and FinTech. The increase was partially offset by a 2.9% decrease contributed by AI Services, primarily driven by clients in Social Media, and a 0.1% decrease contributed by Digital Customer Experience.
Revenues generated from services provided from the United States grew primarily from expansion in two of our service offerings,States: Digital Customer Experience contributed 34.1% of the total decrease primarily driven by clients in On Demand Travel + Transportation, Social Media, Entertainment + Gaming and FinTech. AI Operations, whichServices contributed 28.8%10.0% of the total decrease primarily driven by clients in On Demand Travel + Transportation and 13.6%Social Media. Trust and Safety contributed 1.1% of the total decrease.
India: Trust and Safety contributed 19.3% of the total increase of 35.7%primarily driven by clients in the United States, respectively,On Demand Travel + Transportation and Social Media. The increase was partially offset by a 6.7%14.9% decrease contributed by Content Security due to the shiftDigital Customer Experience, primarily driven by clients in revenues to the PhilippinesOn Demand Travel + Transportation, partially offset by clients in Technology and Retail + E Commerce, and a 2.0% decrease contributed by AI Services primarily driven by clients in Social Media, partially offset by clients in On Demand Travel + Transportation.
Rest of World.
Revenues generated from services provided fromWorld: Digital Customer Experience contributed 19.5% of the total increase primarily driven by clients in FinTech, Retail + E-Commerce and On Demand Travel + Transportation. Trust and Safety contributed 4.7% of the total increase, primarily driven by clients in FinTech, and AI Services contributed 0.3% of the total increase. Growth in the Rest of World grew primarily from expansion in all three of our service offerings in India and Mexico.was led by Latin America.
Operating expenses
Cost of services
Cost of services for the three months ended June 30, 2021 and 2020 was $103.8 million and $64.1 million, respectively. Cost of services for the three months ended June 30, 2021 increased by $39.7 million, or 61.8%, when compared to the three months ended June 30, 2020. The changedecrease was primarily driven by an increase inlower personnel costs of $35.7$2.7 million, relateddue primarily to an increase in headcount to meetlower salaries and wages which were partially offset by the demand in services from our customers. The remaining increase included operational enablement costs incurred in response to the COVID pandemic.impact of higher employee welfare costs.
Selling, general, and administrative expense
Selling, general, and administrative expense for the three months ended June 30, 2021 and 2020 was $177.8 million and $25.7 million, respectively. Selling, general, and administrative expense for the three
25
Table of Contents
months ended June 30, 2021 increased by $152.1 million, or 591.6%, when compared to the three months ended June 30, 2020. The increasedecrease was primarily driven by higherlower personnel costs of $146.3$10.0 million, due primarily to expenses related to the one-time phantom shares bonuses and non-recurring teammate bonuses associated with the IPO of $133.7 million, as well as increased costs across functionsa reduction in support of our growth in revenueearn-out compensation and stock-based compensation expense for equity-classified awards of $5.8 million.expense. The remaining increasedecrease included professional fees of $2.8 million primarily relatedlower insurance expense based on renegotiated rates. These decreases may be at least partially offset by certain litigation costs which we expect to third parties who were engaged to assist with preparation for the IPO. We expect our stock-based compensation expense for equity-classified awards to increaseaccelerate in future periods as we recognize expense for the full periods, as well as future grants.periods.
Depreciation
Depreciation for the three months ended June 30, 2021 and 2020 was $6.7 million and $5.8 million, respectively. The increase in depreciation is a result of capital expenditures for additional technology and computers in support of our company-wide work-from-home policy.
Amortization of intangible assets
Amortization of intangible assets for the three months ended June 30, 2021 and 2020 was $4.7 million. Amortization can be attributed to the recognition of client relationship and trade name intangible assets recognized in connectionleasehold improvements associated with the October 2018 transaction in which we were formed by affiliates of Blackstone as a vehicle for the acquisition of TaskUs Holdings, Inc. (the “Blackstone Acquisition”) that are being amortized on a straight-line basis.site expansions.
Contingent consideration
We recognized expense related to the increase in the value of a contingent consideration liability of $3.6 million for cash payments due to the sellers in the Blackstone Acquisition as a result of tax benefits that became receivable by the Company during the three months ended June 30, 2020. See Note 8(b), “Contingent Consideration” in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report for additional information.
Other income
Other income, for the three months ended June 30, 2021 and 2020 was $1.7 million and $1.1 million, respectively. net
Changes in other income are driven by our exposure to foreign currency exchange risk resulting from our operations in foreign geographies, primarily the Philippines, offset by economic hedges using foreign currency exchange rate forward contracts. These changes were partially offset by higher interest income. See Part I, Item 3., "Quantitative and Qualitative Disclosures About Market Risk" in this Quarterly Report for additional information on how foreign currency impacts our financial results.
Financing expense
expenses
Financing expense for the three months ended June 30, 2021 and 2020 was $1.6 million and $2.0 million, respectively. The decreaseChanges in financing expense isare primarily driven by the decrease in the rate of LIBORSOFR used to calculate the interest rate of the term loan. See “—Liquidity and Capital Resources—Indebtedness—2019 Credit Agreement” for additional discussion on term loan.
our debt.
(Benefit from) provision20
Provision for income taxes
(Benefit from) provision for income taxes for the three months ended June 30, 2021 and 2020 was $(7.0) million and $1.6 million, respectively. The effective tax rate for the three months ended June 30, 2021March 31, 2024 and 20202023 was 6.2%35.7% and 16.9%38.6%, respectively. There are certain items included within the (benefit from) provision for income taxes calculation which are directly related to the IPO and not expected to r
ecur in future periods, including certain phantom s
hares bonuses and equity awards made to officers which are not deductible under Section 162(m) of the Internal Revenue Code. Additionally, there are costsCosts related to the issuance of stock-based compensation, includedthe acquisition of heloo, severance and litigation costs within the (benefit from) provision for income taxes calculation.calculation are adjusted for Non-GAAP purposes. If those costs directly related to the IPO and stock-based compensation are removed, the provision for income taxes would have been $4.4$8.1 million and the effective tax rate would have been 19.5% for the three months ended June 30, 2021.
26
Table of Contents
The effective tax rate in the future will depend upon the proportion of income before provision for income taxes earned in the United states and in jurisdictions with a tax rate lower than the U.S. statutory rate, as well as a number of other factors, including the impact of new legislation.
Comparison of the Six Months Ended June 30, 2021 and 2020
The following tables set forth certain historical consolidated financial information for the six months ended June 30, 2021 and 2020.
   
Six
months
ended

June 30,

2021
   
Six months
ended

June 30,

2020
   
Period over

Period

Change ($)
   
Period Over

Period

Change (%)
 
Service revenue
  $332,893   $216,829   $116,064    53.5% 
Operating expenses:
                    
Cost of services
   191,828    125,918    65,910    52.3% 
Selling, general, and administrative expense
   209,308    51,440    157,868    306.9% 
Depreciation
   12,932    10,529    2,403    22.8% 
Amortization of intangible assets
   9,424    9,424    —      —   
Loss (gain) on disposal of assets
   28    (5)    33    (660.0)% 
Contingent consideration
   —      3,570    (3,570)    (100.0)% 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
   423,520    200,876    222,644    110.8% 
     
Operating (loss) income
   (90,627)    15,953    (106,580)    (668.1)% 
Other (income) expense
   (905)    260    (1,165)    (448.1)% 
Financing expenses
   3,175    4,202    (1,027)    (24.4)% 
   
 
 
   
 
 
   
 
 
   
 
 
 
(Loss) income before taxes
   (92,897)    11,491    (104,388)    (908.4)% 
(Benefit from) provision for income taxes
   (3,461)    1,968    (5,429)    (275.9)% 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net (loss) income
  $(89,436)   $9,523   $(98,959)    (1,039.2)% 
   
 
 
   
 
 
   
 
 
   
 
 
 
Service revenue
Service revenue for the six months ended June 30, 2021 and 2020 was $332.9 million and $216.8 million, respectively. Service revenue for the six months ended June 30, 2021 increased by $116.1 million or 53.5% when compared to the six months ended June 30, 2020. The year over year growth in Digital Customer Experience, Content Security and AI Operations contributed 35.4%, 9.9%, and 8.2%, respectively, of the total increase of 53.5% for the six months ended June 30, 2021. The 56.2% growth in Digital Customer Experience was primarily driven by an increase in volume of services to our existing customers and new customer wins. The 37.3% growth in Content Security was primarily driven by an increase in volume of services to our existing customers. Our AI Operations service offering experienced growth of 78.8% during the six months ended June 30, 2021 which was driven by an increase in volume of services to our existing customers and new customer wins.
The following table shows service revenues by service offering for each period.
(in thousands)
  
Six Months
Ended
June 30,
2021
   
Six Months
Ended
June 30,
2020
   
Period over
Period
Change ($)
   
Period over
Period
Change (%)
 
Digital Customer Experience
  $213,277   $136,562   $76,715    56.2% 
Content Security
   79,122    57,614    21,508    37.3% 
AI Operations
   40,494    22,653    17,841    78.8% 
   
 
 
   
 
 
   
 
 
   
 
 
 
Service revenue
  $332,893   $216,829   $116,064    53.5% 
   
 
 
   
 
 
   
 
 
   
 
 
 
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Service revenues by delivery geography
The majority of our service revenues are derived from contracts with clients who are either located in the United States, or with clients who are located outside of the United States but whereby the contract specifies payment in United States dollars. However, we deliver our services from multiple locations around the world.
The following table presents the breakdown of our service revenues by geographical location, based on where the services are provided.
(in thousands)
  
Six Months
Ended June 30,
2021
   
Six Months
Ended June 30,
2020
   
Period over
Period
Change ($)
   
Period over
Period
Change (%)
 
Philippines
  $180,259   $118,716   $61,543    51.8% 
United States
   109,687    84,074    25,613    30.5% 
Rest of World
   42,947    14,039    28,908    205.9% 
   
 
 
   
 
 
   
 
 
   
 
 
 
Service revenue
  $332,893   $216,829   $116,064    53.5% 
   
 
 
   
 
 
   
 
 
   
 
 
 
Revenues generated from services provided from our delivery sites in the Philippines grew from expansion in all three of our service offerings, Digital Customer Experience, Content Security and AI Operations, which contributed 30.2%, 15.2%, and 6.4% of the total increase of 51.8% in the Philippines, respectively.
Revenues generated from services provided from the United States growth resulted primarily from expansion in two of our service offerings, Digital Customer Experience and AI Operations, which contributed 26.0% and 9.3% of the total increase of 30.5% in the United States, respectively, partially offset by a 4.8% decrease contributed by Content Security due to the shift in revenues to the Philippines.
Revenues generated from services provided from the Rest of World growth was primarily driven by expansion in all three of our service offerings in India and Mexico.
Operating expenses
Cost of services
Cost of services for the six months ended June 30, 2021 and 2020 was $191.8 million and $125.9 million, respectively. Cost of services for the six months ended June 30, 2021 increased by $65.9 million, or 52.3%, when compared to the six months ended June 30, 2020. The change was primarily driven by an increase in personnel costs of $60.0 million related to an increase in headcount to meet the demand in services from our customers. The remaining increase included operational enablement costs incurred in response to the COVID pandemic.
Selling, general, and administrative expense
Selling, general, and administrative expense for the six months ended June 30, 2021 and 2020 was $209.3 million and $51.4 million, respectively. Selling, general, and administrative expense for the six months ended June 30, 2021 increased by $157.9 million, or 306.9%, when compared to the six months ended June 30, 2020. The increase was primarily driven by higher personnel costs of $148.5 million due primarily to expenses related to the one-time phantom shares bonuses and non-recurring teammate bonuses associated with the IPO of $133.7 million, as well as increased costs across functions in support of our growth in revenue and stock-based compensation expense for equity-classified awards of $5.8 million. The remaining increase included professional fees of $6.7 million due primarily to third parties who were engaged to assist with preparation for the IPO. We expect our stock-based compensation expense for equity-classified awards to increase in future periods as we recognize expense for the full periods, as well as any future grants.
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Table of Contents
Depreciation
Depreciation for the six months ended June 30, 2021 and 2020 was $12.9 million and $10.5 million, respectively. The increase in depreciation is a result of capital expenditures for additional technology and computers in support of our company-wide work-from-home policy.
Amortization of intangible assets
Amortization of intangible assets for the six months ended June 30, 2021 and 2020 was $9.4 million. Amortization can be attributed to the recognition of client relationship and trade name intangible assets recognized in connection with the Blackstone Acquisition that are being amortized on a straight-line basis.
Contingent consideration
We recognized expense related to the increase in the value of a contingent consideration liability of $3.6 million for cash payments due to the sellers in the Blackstone Acquisition as a result of tax benefits that became receivable by the Company during the six months ended June 30, 2020. See Note 8(b), “Contingent Consideration” in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report for additional information.
Other (income) expense
Other (income) expense for the six months ended June 30, 2021 and 2020 was $(0.9) million and $0.3 million, respectively. Changes in other income are driven by our exposure to foreign currency exchange risk resulting from our operations in foreign geographies, primarily the Philippines, offset by economic hedges using foreign currency exchange rate forward contracts.
Financing expense
Financing expense for the six months ended June 30, 2021 and 2020 was $3.2 million and $4.2 million, respectively. The decrease in financing expense is primarily driven by the decrease in the rate of LIBOR used to calculate the interest rate of the term loan. See “—Liquidity and Capital Resources—Indebtedness—2019 Credit Agreement” for additional discussion on term loan.
(Benefit from) provision for income taxes
(Benefit from) provision for income taxes for the six months ended June 30, 2021 and 2020 was $(3.5) million and $2.0 million, respectively. Our effective tax rate for the six months ended June 30, 2021 and 2020 was 3.7% and 17.1%, respectively. There are certain items included within the provision for income taxes calculation which are directly related to the IPO and not expected to r
ecur in future periods, including certain phantom s
hares bonuses and equity awards made to officers which are not deductible under Section 162(m) of the Internal Revenue Code. Additionally, there are costs related to the issuance of stock-based compensation included within the (benefit from) provision for income taxes calculation. If those costs directly related to the IPO and stock-based compensation expense are removed, the provision for income taxes would have been $8.0 million and the effective tax rate would have been 18.7%27.5% and 21.6% for the sixthree months ended June 30, 2021.
29
March 31, 2024 and 2023, respectively.
Table of Contents
Revenue by Top Clients
The table below sets forth the percentage of our total service revenuesrevenue derived from our largest clients for the three months ended March 31, 2024 and six months ended June 30, 2021 and 2020:
2023:
Three months ended March 31,
20242023
Top ten clients56 %58 %
Top twenty clients67 %71 %
   
Percentage of Total Service Revenue
 
   
Three Months
Ended June 30,
2021
  
Three Months
Ended June 30,
2020
  
Six Months
Ended June 30,
2021
  
Six Months
Ended June 30,
2020
 
Top ten clients
   63%   73%   64%   74% 
Top twenty clients
   77%   85%   78%   84% 
Our clients are part of the rapidly growing Digital Economy and they rely on our suite of digital solutions to drive their continued success. For our existing clients, we benefit from our ability to grow as they grow and to cross sell new solutions, further deepening our entrenchment.
For the three months ended June 30, 2021March 31, 2024 and 2020,2023, we generated 27%19% and 33%, respectively, of our service revenue from Facebook, our largest client, and we generated 12% and 16%20%, respectively, of our service revenue from our second largest client, DoorDash. For the six months ended June 30, 2021 and 2020, we generated 28% and 32%, respectively, of our service revenue from Facebook, our largest client, and we generated 12% and 14%, respectively, of our service revenue from our second largest client, DoorDash.client.
We continue to identify and target high growth industry verticals and clients. Our strategy is to acquire new clients and further grow with our existing ones in order to achieve meaningful client and revenue diversification over time.
Foreign Currency
As a global company, we face exposure to movements in foreign currency exchange rates. Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenue, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. See “QuantitativePart I, Item 3., "Quantitative and Qualitative Disclosures About Market Risk”Risk" in this Quarterly Report for additional information on how foreign currency impacts our financial results.
Non-GAAP
Financial Measures
We use Adjusted Net Income, Adjusted Earnings Per Share (“EPS”("EPS"), EBITDA, Adjusted EBITDA, Free Cash Flow and Conversion of Adjusted EBITDA, as key profitability measures to assess the performance of our business.
Each of the profitability measures described below are not recognized under GAAPaccounting principles generally accepted in the United States of America ("GAAP") and do not purport to be an alternative to net income or cash flow as a measure of our performance. Such measures have limitations as analytical tools, and you should not consider any of such measures in isolation or as substitutes for our results as reported under GAAP. Additionally, Adjusted Net Income, Adjusted EPS, EBITDA, and Adjusted EBITDA exclude items that can have a significant effect on our profit or loss and should, therefore, be used in conjunction with profit or loss for the period. Our management compensates for the limitations of using
non-GAAP
financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, these measures may not be comparable to other similarly titled measures of other companies.
21
Adjusted Net Income
Adjusted Net Income is a
non-GAAP
profitability measure that represents net income or loss for the period before the impact of amortization of intangible assets and certain items that are considered to hinder comparison of the performance of our businesses on a period-over-period basis or with other businesses. During the periods presented, we excludeexcluded from Adjusted Net Income amortization of intangible assets offering, transaction costs, earn-out consideration, the effect of foreign currency gains and losses, gains and losses on disposals of assets,
COVID-19
related expenses, non-recurring severance costs, natural disastercertain non-recurring litigation costs, contingent consideration,
one-time
payments associated with the IPO, stock-based compensation expense and associated with equity-classified awardsemployer payroll tax and the related effect on income taxes of certain pre-tax adjustments, which include costs that are required to be expensed in accordance with GAAP.
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Table of Contents
Our management believes that the inclusion of supplementary adjustments to net income applied in presenting Adjusted Net Income are appropriate to provide additional information to investors about certain material
non-cash
items and about unusual items that we do not expect to continue at the same level in the future.
The following table reconciles net income, the most directly comparable GAAP measure, to Adjusted Net Income for the three months ended June 30, 2021March 31, 2024 and 2020:
2023:
   
Three months
ended June 30,
2021
  
Three months
ended June 30,
2020
  
Period over
Period Change

($)
   
Period over
Period Change

(%)
 
(in thousands, except margin amounts)
              
Net (loss) income
  $(105,943)  $8,008  $(113,951)    (1,423.0)% 
Amortization of intangible assets
   4,712   4,712   —      —   
Offering costs
(1)
   2,432   —     2,432    100.0% 
Foreign currency gains
(2)
   (1,595)   (1,114)   (481)    43.2% 
Loss on disposal of assets
   1   —     1    100.0% 
COVID-19
related expenses
(3)
   3,711   1,320   2,391    181.1% 
Severance costs
(4)
   —     472   (472)    (100.0)% 
Contingent consideration
   —     3,570   (3,570)    (100.0)% 
Phantom shares bonus
(5)
   129,362   —     129,362    100.0% 
Teammate IPO bonus
(6)
   4,361   —     4,361    100.0% 
Stock-based compensation expense
(7)
   5,771   —     5,771    100.0% 
Tax impacts of adjustments
(8)
   (11,440)   —     (11,440)    (100.0)% 
   
 
 
  
 
 
  
 
 
   
 
 
 
Adjusted Net Income
  $31,372  $16,968  $14,404    84.9% 
   
 
 
  
 
 
  
 
 
   
 
 
 
Net (Loss) Income Margin
(9)
   (58.9)%   7.0%          
   
 
 
  
 
 
          
Adjusted Net Income Margin
(9)
   17.4%   14.8%          
   
 
 
  
 
 
          
Three months ended March 31,Period over Period Change
(in thousands, except %)20242023($)(%)
Net income$11,714 $9,509 $2,205 23.2 %
Amortization of intangible assets4,985 5,124 (139)(2.7)%
Transaction costs(1)
— 245 (245)(100.0)%
Earn-out consideration(2)
— 6,648 (6,648)(100.0)%
Foreign currency losses (gains)(3)
1,014 (1,982)2,996 NM
Loss (gain) on disposal of assets(177)65 (242)NM
Severance costs(4)
487 1,218 (731)(60.0)%
Litigation costs(5)
300 — 300 100.0 %
Stock-based compensation expense(6)
10,564 13,672 (3,108)(22.7)%
Tax impacts of adjustments(7)
(1,615)(1,988)373 (18.8)%
Adjusted Net Income$27,272 $32,511 $(5,239)(16.1)%
Net Income Margin(8)
5.1 %4.0 %
Adjusted Net Income Margin(8)
12.0 %13.8 %
NM = not meaningful
(1) Represents professional service fees related to non-recurring transactions.
(2) Represents earn-out consideration recognized as compensation expense related to the acquisition of heloo.
(1)
Represents
one-time
professional service fees related to the preparation for the IPO that have been expensed during the period.
(3) Realized and unrealized foreign currency losses (gains) include the effect of fair market value changes of forward contracts and remeasurement of U.S. dollar-denominated accounts to foreign currency.
(2)
Realized and unrealized foreign currency gains include the effect of fair market value changes of forward contracts and remeasurement of U.S. dollar-denominated accounts to foreign currency.
(4) Represents severance payments as a result of certain cost optimization measures we undertook during the period to restructure support roles.
(3)
Represents incremental expenses incurred that relate to the transition to a virtual operating model and incentive and leave pay granted to employees that are directly attributable to the
COVID-19
pandemic.
(5) Represents only those litigation costs that are considered non-recurring and outside of the ordinary course of business.
(4)
Represents severance payments as a result of certain cost optimization measures we undertook during the period.
(6) Represents stock-based compensation expense, as well as associated payroll tax.
(5)
Represents expense for
one-time
non-recurring
payments of $127.5 million to vested phantom shareholders in connection with the completion of the IPO, as well as associated payroll tax and 401(k) contributions.
(7) Represents tax impacts of adjustments to net income which resulted in a tax benefit during the period, including stock-based compensation expense and earn-out consideration.
(6)
Represents expense for non-recurring bonus payments to certain employees in connection with the completion of the IPO.
(7)
Represents stock-based compensation expense associated with equity-classified awards.
(8)
Represents tax impacts of adjustments to net (loss) income which resulted in a tax benefit during the period. These adjustments include phantom shares bonus related to the IPO and stock-based compensation expense after the IPO.
(9)
(8) Net (Loss) Income Margin represents net (loss) income divided by service revenue and Adjusted Net Income Margin represents Adjusted Net Income divided by service revenue.
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Table of Contents
The following table reconciles net income, the most directly comparable GAAP measure, to Adjusted Net Income for the six months ended June 30, 2021 and 2020:
Margin represents Adjusted Net Income divided by service revenue.
   
Six months
ended June 30,
2021
  
Six months
ended June 30,
2020
  
Period over
Period Change

($)
   
Period over
Period Change
(%)
 
(in thousands, except margin amounts)
              
Net (loss) income
  $(89,436)  $9,523  $(98,959)    (1,039.2)% 
Amortization of intangible assets
   9,424   9,424   —      —   
Offering costs
(1)
   5,761   —     5,761    100.0% 
Foreign currency (gains) losses
(2)
   (808)   290   (1,098)    (378.6)% 
Loss (gain) on disposal of assets
   28   (5)   33    (660.0)% 
COVID-19
related expenses
(3)
   6,105   3,759   2,346    62.4% 
Severance costs
(4)
   —     570   (570)    (100.0)% 
Natural disaster costs
(5)
   442   —     442    100.0% 
Contingent consideration
   —     3,570   (3,570)    (100.0)% 
Phantom shares bonus
(6)
   129,362   —     129,362    100.0% 
Teammate IPO bonus
(7)
   4,361   —     4,361    100.0% 
Stock-based compensation expense
(8)
   5,771   —     5,771    100.0% 
Tax impacts of adjustments
(9)
   (11,440)   —     (11,440)    (100.0)% 
   
 
 
  
 
 
  
 
 
   
 
 
 
Adjusted Net Income
  $59,570  $27,131  $32,439    119.6% 
   
 
 
  
 
 
  
 
 
   
 
 
 
Net (Loss) Income Margin
(10)
   (26.9)%   4.4%          
   
 
 
  
 
 
          
Adjusted Net Income Margin
(10)
   17.9%   12.5%          
   
 
 
  
 
 
          
(1)
Represents
one-time
professional service fees related to the preparation for the IPO that have been expensed during the period.
(2)
Realized and unrealized foreign currency (gains) losses include the effect of fair market value changes of forward contracts and remeasurement of U.S. dollar-denominated accounts to foreign currency.
(3)
Represents incremental expenses incurred that relate to the transition to a virtual operating model and incentive and leave pay granted to employees that are directly attributable to the
COVID-19
pandemic.
(4)
Represents severance payments as a result of certain cost optimization measures we undertook during the year.
(5)
Represents
one-time
costs associated with emergency housing, transportation costs and bonuses for our employees in connection with the natural disaster related to the severe winter storm in Texas in February 2021.
(6)
Represents expense for
one-time
non-recurring
payments of $127.5 million to vested phantom shareholders in connection with the completion of the IPO, as well as associated payroll tax and 401(k) contributions.
(7)
Represents expense for non-recurring bonus payments to certain employees in connection with the completion of the IPO.
(8)
Represents stock-based compensation expense associated with equity-classified awards.
(9)
Represents tax impacts of adjustments to net (loss) income which resulted in a tax benefit during the period. These adjustments include phantom shares bonus related to the IPO and stock-based compensation expense after the IPO.
(10)
Net (Loss) Income Margin represents net (loss) income divided by service revenue and Adjusted Net Income Margin represents Adjusted Net Income divided by service revenue.
Adjusted
EPS
Adjusted EPS is a non-GAAP profitability measure that represents earnings available to shareholders excluding the impact of certain items that are considered to hinder comparison of the performance of our business on a period-over-period basis or with other businesses. Adjusted EPS is calculated as Adjusted Net incomeIncome divided by our diluted weighted-average number of shares outstanding, including the impact of any potentially dilutive common stock equivalents that are anti-dilutive to GAAP net (loss) income per share – diluted (“GAAP diluted EPS”) but dilutive to Adjusted EPS.outstanding. Our management believes that the inclusion of supplementary adjustments to earnings per share applied in presenting Adjusted EPS are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future.
22
The following table reconciles GAAP diluted EPS, the most directly comparable GAAP measure, to Adjusted EPS for the three and six months ended June 30, 2021March 31, 2024 and 2020:
2023:
   
Three months
ended June 30,
2021
   
Three months
ended June 30,
2020
   
Six months
ended June 30,
2021
   
Six months
ended June 30,
2020
 
GAAP diluted EPS
  $(1.14)   $0.09   $(0.97)   $0.10 
Per share adjustments to net (loss) income
(1)
   1.48    0.09    1.61    0.20 
Per share adjustments for GAAP anti-dilutive shares
(2)
   (0.02)    —      (0.01)    —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Adjusted EPS
  $0.32   $0.18   $0.63   $0.30 
     
Weighted-average common stock outstanding – Diluted
   92,957,493    91,737,020    92,347,257    91,737,020 
GAAP anti-dilutive shares
(2)
   4,599,736    —      2,299,868    —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Adjusted weighted-average shares outstanding
   97,557,229    91,737,020    94,647,125    91,737,020 
   
 
 
   
 
 
   
 
 
   
 
 
 
Three months ended March 31,
20242023
GAAP diluted EPS$0.13 $0.09 
Per share adjustments to net income(1)
0.17 0.23 
Adjusted EPS$0.30 $0.32 
Weighted-average common shares outstanding – diluted91,849,886 100,952,573 
(1)
Reflects the aggregate adjustments made to reconcile Net (loss)(1) Reflects the aggregate adjustments made to reconcile net income to Adjusted Net Income, as noted in the above table, divided by the GAAP diluted weighted-average number of shares outstanding for the relevant period.
(2)
Reflects the impact of awards that were anti-dilutive to GAAP diluted EPS since we were in a net loss position, and therefore not included in the calculation, but would be dilutive to Adjusted EPS and are therefore included in the calculation.
EBITDA and Adjusted EBITDA
EBITDA is a
non-GAAP
profitability measure that represents net income or loss for the period before the impact of the benefit from or provision for income taxes, financing expenses, depreciation, and amortization of intangible assets. EBITDA eliminates potential differences in performance caused by variations in capital structures (affecting financing expenses), tax positions (such as the availability of net operating losses against which to relieve taxable profits), the cost and age of tangible assets (affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization expense).
Adjusted EBITDA is a
non-GAAP
profitability measure that represents EBITDA before certain items that are considered to hinder comparison of the performance of our businesses on a period-over-period basis or with other businesses. During the periods presented, we excludeexcluded from Adjusted EBITDA offeringtransaction costs, earn-out consideration, the effect of foreign currency gains and losses, gains and losses on disposals of assets,
COVID-19
related expenses, non-recurring severance costs, natural disastercertain non-recurring litigation costs, contingent consideration, one-time payments associated with the IPO and stock-based compensation expense and associated with equity-classified awards,employer payroll tax and interest income, which include costs that are required to be expensed in accordance with GAAP. Our management believes that the
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Table of Contents
inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain material
non-cash
items and about unusual items that we do not expect to continue at the same level in the future.
23
The following table reconciles net income, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the three months ended June 30, 2021March 31, 2024 and 2020:
2023:
   
Three months
ended June 30,
2021
  
Three months
ended June 30,
2020
  
Period over
Period Change
($)
   
Period over
Period Change
(%)
 
(in thousands, except margin amounts)
              
Net (loss) income
  $(105,943)  $8,008  $(113,951)    (1,423.0)% 
(Benefit from) provision for income taxes
   (7,020)   1,629   (8,649)    (530.9)% 
Financing expenses
   1,594   1,959   (365)    (18.6)% 
Depreciation
   6,729   5,815   914    15.7% 
Amortization of intangible assets
   4,712   4,712   —      —   
   
 
 
  
 
 
  
 
 
   
 
 
 
EBITDA
  $(99,928)  $22,123  $(122,051)    (551.7)% 
Offering costs
(1)
   2,432   —     2,432    100.0% 
Foreign currency gains
(2)
   (1,595)   (1,114)   (481)    43.2% 
Loss on disposal of assets
   1   —     1    100.0% 
COVID-19
related expenses
(3)
   3,711   1,320   2,391    181.1% 
Severance costs
(4)
   —     472   (472)    (100.0)% 
Contingent consideration
   —     3,570   (3,570)    (100.0)% 
Phantom shares bonus
(5)
   129,362   —     129,362    100.0% 
Teammate IPO bonus
(6)
   4,361   —     4,361    100.0% 
Stock-based compensation expense
(7)
   5,771   —     5,771    100.0% 
   
 
 
  
 
 
  
 
 
   
 
 
 
Adjusted EBITDA
  $44,115  $26,371  $17,744    67.3% 
   
 
 
  
 
 
          
Net (Loss) Income Margin
(8)
   (58.9)%   7.0%          
   
 
 
  
 
 
          
Adjusted EBITDA Margin
(8)
   24.5%   23.1%          
   
 
 
  
 
 
          
Three months ended March 31,Period over Period Change
(in thousands, except %)20242023($)(%)
Net income$11,714 $9,509 $2,205 23.2 %
Provision for income taxes6,508 5,969 539 9.0 %
Financing expenses5,538 5,099 439 8.6 %
Depreciation10,789 9,661 1,128 11.7 %
Amortization of intangible assets4,985 5,124 (139)(2.7)%
EBITDA$39,534 $35,362 $4,172 11.8 %
Transaction costs(1)
— 245 (245)(100.0)%
Earn-out consideration(2)
— 6,648 (6,648)(100.0)%
Foreign currency losses (gains)(3)
1,014 (1,982)2,996 NM
Loss (gain) on disposal of assets(177)65 (242)NM
Severance costs(4)
487 1,218 (731)(60.0)%
Litigation costs(5)
300 — 300 100.0 %
Stock-based compensation expense(6)
10,564 13,672 (3,108)(22.7)%
Interest income(7)
(1,117)(195)(922)472.8 %
Adjusted EBITDA$50,605 $55,033 $(4,428)(8.0)%
Net Income Margin(8)
5.1 %4.0 %
Adjusted EBITDA Margin(8)
22.2 %23.4 %
(1)
Represents
one-time
professional service fees related to the preparation for the IPO that have been expensed during the period.
(2)
Realized and unrealized foreign currency gains include the effect of fair market value changes of forward contracts and remeasurement of U.S. dollar-denominated accounts to foreign currency.
(3)
Represents incremental expenses incurred that relate to the transition to a virtual operating model and incentive and leave pay granted to employees that are directly attributable to the
COVID-19
pandemic.
(4)
Represents severance payments as a result of certain cost optimization measures we undertook during the period.
(5)
Represents expense for
one-time
non-recurring
payments of $127.5 million to vested phantom shareholders in connection with the completion of the IPO, as well as associated payroll tax and 401(k) contributions.
(6)
Represents expense for non-recurring bonus payments to certain employees in connection with the IPO.
(7)
Represents stock-based compensation expense associated with equity-classified awards.
(8)
Net (Loss) Income Margin represents net (loss) income divided by service revenue and Adjusted EBITDA Margin represents Adjusted EBITDA divided by service revenue.
NM = not meaningful
(1) Represents professional service fees related to non-recurring transactions.
33
(2) Represents earn-out consideration recognized as compensation expense related to the acquisition of heloo.
Table(3) Realized and unrealized foreign currency losses (gains) include the effect of Contentsfair market value changes of forward contracts and remeasurement of U.S. dollar-denominated accounts to foreign currency.
(4) Represents severance payments as a result of certain cost optimization measures we undertook during the period to restructure support roles.
(5) Represents only those litigation costs that are considered non-recurring and outside of the ordinary course of business.
(6) Represents stock-based compensation expense, as well as associated payroll tax.
(7) Represents interest earned on short-term savings, time-deposits and money market funds.
(8) Net Income Margin represents net income divided by service revenue and Adjusted EBITDA Margin represents Adjusted EBITDA divided by service revenue.
Free Cash Flow
Free Cash Flow is a non-GAAP liquidity measure that represents our ability to generate additional cash from our business operations. Free Cash Flow is calculated as net cash provided by operating activities in the period minus cash used for purchase of property and equipment in the period. Our management believes that the inclusion of this non-GAAP measure, when considered with our GAAP results, provides management and investors with an additional understanding of our ability to generate additional cash for ongoing business operations and other capital deployment.
The following table reconciles net income,cash provided by operating activities, the most directly comparable GAAP measure, to EBITDAFree Cash Flow for the three months ended March 31, 2024 and 2023:
Three months ended March 31,
20242023
Net cash provided by operating activities$51,177 $43,683 
Purchase of property and equipment(3,572)(5,244)
Free Cash Flow$47,605 $38,439 
Conversion of Adjusted EBITDA(1)
94.1 %69.8 %
(1) Conversion of Adjusted EBITDA for the six months ended June 30, 2021 and 2020:
represents Free Cash Flow divided by Adjusted EBITDA
   
Six months
ended June 30,
2021
  
Six months
ended June 30,
2020
  
Period over
Period Change
($)
   
Period over
Period Change
(%)
 
(in thousands, except margin amounts)
              
Net income
  $(89,436)  $9,523  $(98,959)    (1,039.2)% 
Provision for income taxes
   (3,461)   1,968   (5,429)    (275.9)% 
Financing expenses
   3,175   4,202   (1,027)    (24.4)% 
Depreciation
   12,932   10,529   2,403    22.8% 
Amortization of intangible assets
   9,424   9,424   —      —   
  
 
 
  
 
 
  
 
 
   
 
 
 
EBITDA
  $(67,366)  $35,646  $(103,012)    (289.0)% 
Offering costs
(1)
   5,761   —     5,761    100.0%  
Foreign currency (gains) losses
(2)
   (808)   290   (1,098)    (378.6)% 
Loss (gain) on disposal of assets
   28   (5)   33    (660.0)% 
COVID-19
related expenses
(3)
   6,105   3,759   2,346    62.4% 
Severance costs
(4)
   —     570   (570)    (100.0)% 
Natural disaster costs
(5)
   442   —     442    100.0%  
Contingent consideration
   —     3,570   (3,570)    (100.0)% 
Phantom shares bonus
(6)
   129,362   —     129,362    100.0%  
Teammate IPO bonus
(7)
   4,361   —     4,361    100.0%  
Stock-based compensation expense
(8)
   5,771   —     5,771    100.0% 
  
 
 
  
 
 
  
 
 
   
 
 
 
Adjusted EBITDA
  $83,656  $43,830  $39,826    90.9% 
  
 
 
  
 
 
    
Net (Loss) Income Margin
(9)
   (26.9)%   4.4%    
  
 
 
  
 
 
    
Adjusted EBITDA Margin
(9)
   25.1%   20.2%    
  
 
 
  
 
 
    
(1)
Represents
one-time
professional service fees related to the preparation for the IPO that have been expensed during the period.
(2)
Realized and unrealized foreign currency gains include the effect of fair market value changes of forward contracts and remeasurement of U.S. dollar-denominated accounts to foreign currency.
(3)
Represents one time expenses related to the transition to a virtual operating model and incentive and leave pay granted to employees that are directly attributable to the
COVID-19
pandemic.
(4)
Represents severance payments as a result of certain cost optimization measures we undertook during the year.
(5)
Represents
one-time
costs associated with emergency housing, transportation costs and bonuses for our employees in connection with the natural disaster related to the severe winter storm in Texas in February 2021.
(6)
Represents expense for one-time
non-recurring
payments of $127.5 million to vested phantom shareholders in connection with the completion of the IPO, as well as associated payroll tax and 401(k) contributions.
(7)
Represents expense for non-recurring bonus payments to certain employees in connection with the IPO.
(8)
Represents stock-based compensation expense associated with equity-classified awards.
(9)
Net (Loss) Income Margin represents net (loss) income divided by service revenue and Adjusted EBITDA Margin represents Adjusted EBITDA divided by service revenue.
34
24
Liquidity and Capital Resources
As of June 30, 2021,March 31, 2024, our principal sources of liquidity were cash and cash equivalents totaling $195.9$165.4 million, which were held for working capital purposes, as well as the available balanceborrowing availability under the 2022 Revolving Credit Facility of $190.0 million.
As of March 31, 2024, our total indebtedness, net of debt financing fees was $262.6 million. The interest rate in effect for the 2022 Term Loan Facility as of March 31, 2024 was 7.680% per annum. We were in compliance with all debt covenants as of March 31, 2024. See Note 8, "Long-Term Debt" in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report for additional information regarding our debt.
During the three months ended March 31, 2024, we repurchased 285,611 shares of our 2019 Credit Facilities, described further below. We usedClass A common stock under the proceeds from the primary offering, togethershare repurchase program for $3.4 million, which we funded principally with cash on hand, to satisfy paymentsavailable cash. As of approximately $127.5March 31, 2024, $53.9 million in respect of vested phantom shares in the third quarter of 2021. remained available for share repurchases under our share repurchase program.
Historically, we have financed our operations and made investments in supporting the growth of our business which were enabled in partprimarily through cash provided by our positive cash flows from operations during these periods.operations. We expect to continue to make similar investments in the future.
We have financed our operations primarily through cash received from operations. We believe our existing cash and cash equivalents and our 20192022 Credit Facilities will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements will depend on several factors, including but not limited to our obligation to repay any amounts outstanding under our 2019 Credit Facilities, our revenue growth rate, timing of client billing and collections, the timing of expansion into new geographies, variability in the cost of delivering services in our geographies, the timing and extent of spending on technology innovation, the extent of our sales and marketing activities, and the introduction of new and enhanced service offerings and the continuing market adoption of our platform.
To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all. In particular, the widespread
COVID-19
pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when desired, our business, financial condition and results of operations could be adversely affected.
Although we are not currently a party to any material definitive agreement regarding potential investments in, or acquisitions of, complementary businesses, applications or technologies, we may enter into these types of arrangements, which could reduce our cash and cash equivalents, require us to seek additional equity or debt financing or repatriate cash generated by our international operations that could cause us to incur withholding taxes on any distributions. Additional funds from financing arrangements may not be available on terms favorable to us or at all.
As market conditions warrant, we and certain of our equity holders, including Blackstone and their respective affiliates, may from time to time seek to purchase our outstanding debt securities or loans, including the notes and borrowings under our 2019 Credit Facilities, in privately negotiated or open market transactions, by tender offer or otherwise. Subject to any applicable limitations contained in the agreements governing our indebtedness, any purchases made by us may be funded by the use of cash on our balance sheet or the incurrence of new secured or unsecured debt, including borrowings under our credit facilities. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. Any such purchases may be with respect to a substantial amount of a particular class or series of debt, with the attendant reduction in the trading liquidity of such class or series. In addition, any such purchases made at prices below the “adjusted issue price” (as defined for U.S. federal income tax purposes) may result in taxable cancellation of indebtedness income to us, which amounts may be material, and in related adverse tax consequences to us.
Indebtedness
As of June 30, 2021, our total indebtedness was $242.0 million, including outstanding borrowings under our Revolving Credit Facility (as defined below) of $39.9 million.
2019 Credit Agreement
On September 25, 2019, we entered into a credit agreement (the “2019 Credit Agreement”) that included a $210 million term loan (the “Term Loan Facility”) and a $40 million revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “2019 Credit Facilities”). On April 30, 2021, the Company entered into Amendment No. 1 to our 2019 Credit Agreement with the existing lenders providing for $50.0 million incremental revolving credit commitments on the same terms as our existing revolving credit facility. We accounted for this amendment as a debt modification and recorded $0.3 million of debt financing fees which will be amortized, along with previously deferred fees, over the remaining term of the facility.
35
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The Term Loan Facility matures on September 24, 2024 and requires quarterly principal payments of 0.25% of the original principal amount per quarter through September 30, 2020, 0.625% of the original principal amount through September 30, 2021, 1.25% of the original principal amount through September 30, 2022, 1.875% of the original principal amount through September 30, 2023 and 2.50% of the original principal amount thereafter, with any remaining principal due in a lump sum at the maturity date. As of June 30, 2021, $204.0 million was outstanding under the Term Loan Facility. The interest rate in effect for the Term Loan facility was 2.345% as of June 30, 2021.
The Revolving Credit Facility matures on September 24, 2024 and requires a commitment fee of 0.4% on undrawn commitments paid quarterly in arrears. As of June 30, 2021, the interest rate in effect was 2.345% on $39.9 million of outstanding borrowings under the Revolving Credit Facility. As of June 30, 2021, we had $50.1 million of borrowing availability under the Revolving Credit Facility.
The 2019 Credit Agreement contains certain affirmative and negative covenants applicable to us and our restricted subsidiaries, including, among other things, limitations on our Consolidated Total Net Leverage Ratio (as defined in the 2019 Credit Agreement) and restrictions on changes in the nature of our business, acquisitions and other investments, indebtedness, liens, fundamental changes, dispositions, prepayment of other indebtedness, repurchases of stock, cash dividends, and other distributions. The 2019 Credit Facilities are guaranteed by our material domestic subsidiaries and are secured by substantially all of our tangible and intangible assets, including our intellectual property, and the equity interests of our subsidiaries, subject to certain exceptions.
See Note 7, “Long-Term Debt” in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report for additional information regarding our debt.
Cash Flows
The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated.
indicated:
Three months ended March 31,
(in thousands)20242023
Net cash provided by operating activities$51,177 $43,683 
Net cash used in investing activities(3,572)(6,244)
Net cash used in financing activities(5,664)(7,097)
   
Six Months
ended June 30,
2021
   
Six Months
ended June 30,
2020
 
(in thousands)
        
Net cash provided by operating activities
  $45,677   $22,603 
Net cash used in investing activities
   (23,453)    (18,815) 
Net cash provided by financing activities
   67,733    39,353 
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Table of Contents
Operating Activities
Net cash provided by operating activities for the sixthree months ended June 30, 2021March 31, 2024 was $45.7$51.2 million compared to net cash provided by operating activities of $22.6$43.7 million for the sixthree months ended June 30, 2020.March 31, 2023. Net cash provided by operating activities for the sixthree months ended June 30, 2021March 31, 2024 reflects net income of $11.7 million, the add back for non-cash charges totaling $26.1 million, as well as changes in operating assets and liabilities of $115.0$13.3 million. Non-cash charges primarily consisted of $10.8 million primarily drivenof depreciation, $10.2 million in stock-based compensation expense and $5.0 million of amortization related to intangibles. Net cash provided by a $150.5operating activities for the three months ended March 31, 2023 reflects net income of $9.5 million, change in accrued payroll and employee-related liabilities due primarily to the one-time phantom shares bonuses that were accrued but not yet paid, partially offset by a $41.2 million change in accounts receivable. These changes were partially offset by the net loss of $89.4 million, reduced byas well as the add back for
non-cash
charges totaling $20.1$22.0 million and changes in operating assets and liabilities of $12.1 million. Non-cash charges primarily driven by $12.9consisted of $13.5 million in stock-based compensation expense, $9.7 million of depreciation $9.4and $5.1 million of amortization related to intangibles, recognized as a result of the Blackstone Acquisition, and $5.8 million of stock-based compensation expense, partially offset by deferred taxes$6.3 million of $10.5 million.unrealized foreign exchange gains on forward contracts.
Investing Activities
Net cash used in investing activities for the sixthree months ended June 30, 2021March 31, 2024 was $23.5$3.6 million compared to net cash used in investing activities of $18.8$6.2 million for the sixthree months ended June 30, 2020.March 31, 2023. Purchase of property and equipment decreased primarily due to the timing of site build-out costs. Net cash used in investing activities primarily consisted of investmentsfor the three months ended March 31, 2023 included investment in technology and computers.loan receivable.
Financing Activities
Net cash provided byused in financing activities for the sixthree months ended June 30, 2021March 31, 2024 was $67.7$5.7 million compared to net cash providedused by financing activities of $39.4$7.1 million for the sixthree months ended June 30, 2020. Net cash provided by financing activities for the six months ended June 30, 2021 consisted of proceeds from the IPO, net of underwriters’ fees,March 31, 2023. The decrease was due primarily to lower payments to acquire shares under our share repurchase program, partially offset by distributionhigher payments for taxes related to net share settlement of dividendsequity awards and payments on long-term debt. Net cash provided by financing activities for the six months ended June 30, 2020 consisted primarily of cash proceeds from our Revolving Credit Facility of $39.9 million.
JOBS Act Accounting Election
We qualify as an emerging growth company pursuant to the provisions of the JOBS Act. The JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use the extended transition period until we are no longer an emerging growth company or until we choose to affirmatively and irrevocably opt out of the extended transition period. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.
Critical Accounting Policies and Estimates
Except as described in Note 2, “Summary of Significant Accounting Policies in the Notes to Unaudited Condensed Consolidated Financial Statements, and discussed below, thereThere have been no material changes to our critical accounting policies or in the underlying accounting assumptions and estimates used in such policies as reported in the prospectus.our Annual Report.
25
Upon completion
Recent Accounting Pronouncements
For additional information regarding recent accounting pronouncements adopted and under evaluation, refer to Note 2, “Summary"Summary of Significant Accounting Policies”Policies" in the Notes to Unaudited Condensed Consolidated Financial Statements.
37
Statements included in this Quarterly Report.
Table of Contents
Item 3. Quantitative and Qualitative Disclosures About Market Risk.Risk
Our activities expose us to a variety of financial risks: market risk (includes foreign currency), interest rate risk and credit risk.
Foreign Currency Risk
Our exposure to market risk arises principally from exchange rate risk. Although substantially all of our revenues are denominated in U.S. dollars, a substantial portion of our expenses were incurred and paid in the Philippine peso and Indian rupee in the sixthree months ended June 30, 2020March 31, 2024 and the six months ended June 30, 2021.2023. We also incur expenses in U.S. dollars, and currencies of the other countries in which we have operations. The exchange rates among the Philippine peso, Indian rupee and the U.S. dollar have changed substantially in recent years and may fluctuate substantially in the future.
The average exchange rate of the Philippine peso against the U.S. dollar decreasedincreased from 50.6654.83 pesos during the sixthree months ended June 30, 2020March 31, 2023 to 48.2455.97 pesos during the sixthree months ended June 30, 2021,March 31, 2024, representing an appreciationa depreciation of the Philippine peso of 4.8%2.1%. Based upon our level of operations during the sixthree months ended June 30, 2021March 31, 2024, and excluding any forward contract arrangements that we had in place during that period, a 10% appreciation/depreciation in the Philippine Pesopeso against the U.S. dollar would have increased or decreased our expenses incurred and paid in the Philippine Pesopeso by approximately $17.3$9.3 million or $14.2$7.6 million, respectively, in the sixthree months ended June 30, 2021.
March 31, 2024.
The average exchange rate of the Indian rupee against the U.S. dollar increased from 82.22 rupees during the three months ended March 31, 2023 to 83.04 rupees during the three months ended March 31, 2024, representing a depreciation of the Indian rupee of 1.0%. Based upon our level of operations during the three months ended March 31, 2024, a 10% appreciation/depreciation in the Indian rupee against the U.S. dollar would have increased or decreased our expenses incurred and paid in the Indian rupee by approximately $2.5 million or $2.0 million, respectively, in the three months ended March 31, 2024.
In order to mitigate our exposure to foreign currency fluctuation risks and minimize the earnings and cash flow volatility associated with forecasted transactions denominated in certain foreign currencies, and economically hedge our intercompany balances and other monetary assets and liabilities denominated in currencies other than functional currencies, we enter into foreign currency forward contracts. These derivatives dohave not qualifybeen designated as fair value hedges under ASC No. Topic 815, Derivatives and Hedging (“ ("ASC 815”815"). Changes in the fair value of these derivatives are recognized in the consolidated statements of income and are included in other income. income, net.
For the three months ended March 31, 2024 and 2023, the realized losses of $0.7 million and $1.6 million, respectively, resulting from the settlement of forward contracts were included within other income, net.
For the three months ended March 31, 2024 and 2023, we had outstanding forward contracts. The forward contract receivable (payable) resulting from changes in fair value was recorded under prepaid expenses and other current assets (accounts payable and accrued liabilities). For the three months ended March 31, 2024 and 2023, the unrealized losses (gains) on the forward contracts of $1.5 million and $(6.3) million, respectively, were included within other income, net.
These contracts must be settled on the day of maturity or may be canceled subject to the receipts or payments of any gains or losses, respectively, equal to the difference between the contract exchange rate and the market exchange rate on the date of cancellation. We do not enter into foreign currency forward contracts for speculative or trading purposes.
For the three and six months ended June 30, 2021, we realized gains of $0.6 million and $1.4 million, respectively, resulting from the settlement of forward contracts were included within other (income) expense.
For the three and six months ended June 30, 2021, we had outstanding forward contracts. The forward contract receivable resulting from change in fair value was recorded under other current assets. For the three and six months ended June 30, 2021, the unrealized (gains) losses on the forward contracts of $(0.1) million and $1.7 million, respectively, were included within other (income) expense.
We also enter into foreign currency exchange rate contracts to economically hedge our intercompany balances and other monetary assets and liabilities denominated in currencies other than functional currencies. These derivatives do not qualify as fair value hedges under ASC No. Topic 815, Derivatives and Hedging (“ASC 815”). Changes in the fair value of these derivatives are recognized in the consolidated statements of income and are included in foreign exchange gain/(loss). These derivative instruments do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on the settlement of these derivatives are intended to offset revaluation losses and gains on the assets and liabilities being hedged.
Interest Rate Risk
Our exposure to market risk is influenced by the changes in interest rates paid on any outstanding balance on our borrowings, mainly under our 20192022 Credit Facilities. All of our borrowings outstanding under the 20192022 Credit Facilities as of June 30, 2021March 31, 2024 accrue interest at LIBORSOFR plus 2.25%. We entered into our 2019 Credit Facilities on September 25, 2019 and ourOur total principal balance outstanding as of June 30, 2021March 31, 2024 was $243.8.$263.9 million. Based on the outstanding balances and interest rates under the 20192022 Credit Facilities as of June 30, 2021,March 31, 2024, a hypothetical 10.0%10% increase or decrease in LIBORSOFR would cause an increase or decrease in interest expense of less than $0.1approximately $1.4 million over the next 12 months.
26
Credit Risk
As of June 30, 2021,March 31, 2024, we had accounts receivable, net of allowance for doubtful accounts,credit losses, of $127.9$165.5 million, of which $39.1$43.5 million was owed by two of our clients. Collectively, these clients represented approximately 30%26% of our gross accounts receivable as of June 30, 2021, and nearly 40% of our service revenue for the six months ended June 30, 2021.
38
March 31, 2024.
Table of Contents
Item 4. Controls and Procedures.Procedures
Disclosure Controls and Procedures
The Company maintainsWe maintain disclosure controls and procedures (as that term is defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”))Act) that are designed to ensure that information required to be disclosed in the Company’sour reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’sour management, including itsthe Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. AnyIn designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s
Our management, with the participation of the Company’sour Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’sour disclosure controls and procedures as of June 30, 2021.March 31, 2024. Based upon that evaluation, the Company’sour Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2021,March 31, 2024, the design and operation of the Company’sour disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
39
27
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
Proceedings
From timeThe information required with respect to time, we may become subject to legal proceedings, claims,this item can be found under Note 10, "Commitments and litigation arisingContingencies" in the ordinary course of business. We are not currently a partyNotes to any material legal proceedings, nor are we aware of any pending or threatened litigation that would have a material adverse effect on our business, financial condition, operating results, or cash flows should such litigation be resolved unfavorably.
Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report and is incorporated by reference into this Item 1.
Item 1A. Risk Factors
40
Table of Contents
We are subject to various risks that could have a material adverse impact on our financial position, results of operations or cash flows. Although it is not possible to predict or identify all such risks and uncertainties, they may include, but are not limited to, the factors discussed under “Risk Factors”"Risk Factors" in the prospectus.Annual Report. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our financial position, results of operations or cash flows. There have been no material changes to the risk factors included in the prospectus.Annual Report. You should carefully consider the risk factors set forth in the prospectusAnnual Report and the other information set forth elsewhere in this Quarterly Report on Form 10-Q.
Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
41
Table of Contents
Use of Proceeds
On June 15, 2021, we completedDuring the three months ended March 31, 2024, our initial public offering of our Class A Common Stock, which consisted of (i) 5,553,154 sharespurchases of Class A Common Stock issued and sold by the Company and (ii) 9,626,846 shares of Class A Common Stock sold by certain selling stockholders (including 1,980,000 shares of Class A Common Stock pursuant to the full exercise of the underwriters’ option to purchase additional shares). The shares sold in the offeringcommon stock were registered under the Securities Act pursuant to our Registration Statement on Form
S-1
(File
No. 333-255190)
which was declared effective by the SEC on June 10, 2021. Our shares of Class A Common Stock were sold at an initial offering price of $23.000 per share ($21.735 per share, after deducting underwriting discounts and commissions), which generated net proceeds to us of approximately $120.7 million after deducting underwriting discounts and commissions of approximately $7.0 million. We incurred offering expenses of approximately $30.5 million, including costs associated with the offering by the selling stockholders. In the third quarter of 2021, we used the proceeds from the offering, together with cash on hand, to satisfy payments of approximately $127.5 million in respect of vested phantom shares, including $23.5 million in respect of vested phantom shares held by certain of our executive officers, that became due upon the completion of the offering, including $10.1 million in deferred dividend payments in respect of such vested phantom shares. We did not receive any proceeds from the sale of shares of our Class A Common Stock in the offering by the selling stockholders.as follows:
Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC acted as lead book-running managers and representatives of the underwriters for the offering. BofA Securities, Inc., Morgan Stanley & Co. LLC, Robert W. Baird & Co. Incorporated, RBC Capital Markets, LLC, Wells Fargo Securities, LLC and William Blair & Company, L.L.C. acted as joint book-runners for the offering. Blackstone Securities Partners L.P., TD Securities (USA) LLC, BTIG, LLC, Fifth Third Securities, Inc., AmeriVet Securities, Inc., Blaylock Van, LLC, C.L. King & Associates, Inc. and Penserra Securities LLC acted as
co-managers
for the offering.
Period
Total Number of Shares Purchased(1)
Average Price Paid per Share(2)
Total Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
(in thousands)
January 1, 2024 through January 31, 202449,531 $11.99 49,531 $56,666 
February 1, 2024 through February 29, 202468,414 11.99 68,414 55,846 
March 1, 2024 through March 31, 2024167,666 11.86 167,666 53,856 
Total285,611 $11.91 285,611 
(1)On May 8, 2023, the Company announced that the Board of Directors of the Company authorized a $100.0 million increase to the Company's share repurchase program, increasing the total authorization to $200.0 million, with the total amount remaining available after the increase being exclusive of any commissions, fees or excise taxes. Pursuant to our share repurchase program, we may repurchase shares of our Class A common stock from time to time through open market purchases, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act. Open market repurchases are expected to be structured to occur within the pricing volume requirements of Rule 10b-18. The timing and total amount of stock repurchases will depend upon, business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, restrictions under the terms of our loan agreements and other relevant considerations. The repurchase program terminates on December 31, 2024, and may be modified, suspended or discontinued at any time at our discretion. The program does not obligate the Company to acquire any amount of Class A common stock.
(2)Average price paid per share excludes commissions and other costs associated with the repurchases.
Item 3. Defaults Upon Senior Securities.Securities
None.
Item 4. Mine Safety Disclosures.Disclosures
Not applicable.
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Item 5. Other Information.Information
Section 13(r) Disclosure
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) of the Exchange Act, we hereby incorporate by reference herein Exhibit 99.1 of this report, which includes disclosures regarding activities at Mundys S.p.A., which may be, or may have been at the time considered to be, an affiliate of Blackstone and, therefore, our affiliate.
Employment Agreements
We have entered into an employment agreement with each of Jarrod Johnson, our Chief Customer Officer, and Balaji Sekar, our Chief Financial Officer. Mr. Johnson’s agreement supersedes his previous offer letter, which contained a severance provision. Mr. Sekar did not previously have an employment agreement.
Johnson Employment Agreement
TaskUs Holdings, Inc. entered into an Employment Agreement with Mr. Johnson on August 5, 2021 (the “Johnson Employment Agreement”) pursuant to which Mr. Johnson continues to serve as our Chief Customer Officer. The Johnson Employment Agreement is effective from July 22, 2021 through July 1, 2025, after which it will automatically be extended for successive one-year terms, until terminated, which termination may be made by either us or Mr. Johnson. Pursuant to the Johnson Employment Agreement, Mr. Johnson is entitled to receive an annual base salary of $350,000 and is eligible to receive an annual incentive bonus, subject to the terms of the annual bonus plan under which it is granted. Under the Johnson Employment Agreement, Mr. Johnson received certain long-term incentive awards under our 2021 Omnibus Incentive Plan, as described below.
In the event Mr. Johnson’s employment is terminated by us without “cause”, or Mr. Johnson resigns from employment with “good reason”, in each case as defined in the Johnson Employment Agreement, subject to his execution of an effective release of claims in favor of the Company, he is entitled to receive separation pay in an amount equal to the sum of his annual base salary and target annual bonus for the year in which such termination of employment occurs.
The Johnson Employment Agreement prohibits Mr. Johnson from competing with our business during employment and for one year following the termination of Mr. Johnson’s employment for any reason. The Johnson Employment Agreement further prohibits Mr. Johnson from soliciting our employees or clients during employment and for two years following the termination of Mr. Johnson’s employment for any reason.
Mr. Johnson is also party to a confidential information and invention assignment agreement which contains a perpetual confidentiality covenant and an intellectual property assignment provision in favor of TaskUs Holdings, Inc.
The foregoing description of the Johnson Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Johnson Employment Agreement, which is attached hereto as Exhibit 10.8, and is incorporated herein by reference.
Sekar Employment Agreement
TaskUs Holdings, Inc. entered into an Employment Agreement with Mr. Sekar on August 5, 2021 (the “Sekar Employment Agreement”) pursuant to which Mr. Sekar continues to serve as our Chief Financial Officer. The Sekar Employment Agreement is effective from July 22, 2021 through July 1, 2025, after which it will automatically be extended for successive one-year terms, until terminated, which termination may be made by either us or Mr. Sekar. Pursuant to the Sekar Employment Agreement, Mr. Sekar is entitled to receive an annual base salary of $350,000 and is eligible to receive an annual incentive bonus, subject to the terms of the annual bonus plan under which it is granted. Under the Sekar Employment Agreement, Mr. Sekar received certain long-term equity incentive awards under our 2021 Omnibus Incentive Plan, as described below.
In the event Mr. Sekar’s employment is terminated by us without “cause” or Mr. Sekar resigns from employment with “good reason”, in each case as defined in the Sekar Employment Agreement, subject to his execution of an effective release of claims in favor of the Company, he is entitled to receive separation pay in an amount equal to the sum of his annual base salary and target annual bonus for the year in which such termination of employment occurs.
The Sekar Employment Agreement prohibits Mr. Sekar from competing with our business during employment and for one year following the termination of Mr. Sekar’s employment for any reason. The Sekar Employment Agreement further prohibits Mr. Sekar from soliciting our employees or clients during employment and for two years following the termination of Mr. Sekar’s employment for any reason.
Mr. Sekar is also party to a confidential information and invention assignment agreement which contains a perpetual confidentiality covenant and an intellectual property assignment provision in favor of TaskUs Holdings, Inc.
The foregoing description of the Sekar Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Sekar Employment Agreement, which is attached hereto as Exhibit 10.9, and is incorporated herein by reference.
Equity Awards
In connection with the employment agreements described above, on August 5, 2021, our board of directors granted Messrs. Johnson and Sekar certain long-term equity incentive awards under the TaskUs, Inc. 2021 Omnibus Incentive Plan (the “Omnibus Incentive Plan”). Our board of directors granted Mr. Johnson (i) 199,071 time-based restricted stock units (“RSUs”), (ii) 232,250 time-based stock options, and (iii) 66,357 performance-based restricted stock units (“PSUs”). Our board granted Mr. Sekar (i) 199,071 RSUs and (ii) 199,071 time-based stock options.
As a condition to receiving each of the long-term incentive awards described above, Messrs. Johnson and Sekar were required to enter into award agreements with us that governs the rights of Messrs. Johnson and Sekar with respect to the long-term incentive awards.
The RSU award agreements provide that 20% of the RSUs vest on each of the first three anniversaries of the vesting reference date, and the remaining 40% on the fourth anniversary of the vesting reference date, such that they will be fully vested on the fourth anniversary of the grant date, subject to continuous service through each vesting date. The vesting commencement date for the RSUs awarded to each of Messrs. Sekar and Johnson is August 5, 2021.
The stock option award agreements provide that 20% of the stock options vest on each of the first three anniversaries of the vesting reference date, and the remaining 40% on the fourth anniversary of the vesting reference date, such that they will be fully vested on the fourth anniversary of the grant date, subject to continuous service through each vesting date. The vesting commencement date for the stock options awarded to each of Messrs. Sekar and Johnson is August 5, 2021 and the exercise price is $30.14, which was the closing price per share of our common stock on the Nasdaq Global Select Market on August 5, 2021.
Mr. Johnson’s PSU award agreement provides that his PSU award will remain outstanding and eligible to vest on the fourth anniversary of the grant date, based on the achievement of market capitalization CAGR levels. 50% of the PSUs will vest if we achieve a market capitalization CAGR of at least 25.1% for the four-year period beginning on the grant date and ending on the fourth anniversary of the grant date (the “Performance Period”). 100% of the PSUs will vest if we achieve a market capitalization CAGR of at least 35.1% for the Performance Period. None of the PSUs will vest if we fail to achieve a market capitalization CAGR of at least 25.1%.
The foregoing description of the long-term incentive awards does not purport to be complete and is qualified in its entirety by reference to the full text of the forms of award agreement, which are attached hereto as Exhibits 10.10, 10.11 and 10.12, and are incorporated herein by reference.
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Table of Contents
Item 6. Exhibits.
Exhibits
Exhibit
No.		Description
Exhibit
No.
3.1
Description
  3.1Second Amended and Restated Certificate of Incorporation of TaskUs, Inc., dated as of June 10, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 15, 2021).
3.2
  3.2
3.3
10.131.1*Amended and Restated Stockholders Agreement, dated as of June 15, 2021, by and among the Company and the other parties thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
10.2Registration Rights Agreement, dated as of June 15, 2021, by and among the Company and the other parties thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 15, 2021).
10.3TaskUs, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 15, 2021).
10.4Amended and Restated 2019 TaskUs, Inc. Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on June 15, 2021).
10.5Form of Restricted Stock Unit Agreement (Founder’s Award) under TaskUs, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1/A filed on May 6, 2021).
10.6Form of Option Agreement (Founder’s Award) under TaskUs, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement Form S-1/A filed on May 6, 2021).
10.7Form of Performance Stock Unit Agreement (Founder’s Award) under TaskUs, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1/A filed on May 6, 2021)
10.8Executive Employment Agreement, dated as of August 5, 2021, by and between the Company and Jarrod Johnson.
10.9Executive Employment Agreement, dated as of August 5. 2021, by and between the Company and Balaji Sekar.
10.10Form of Restricted Stock Unit Agreement under TaskUs, Inc. 2021 Omnibus Incentive Plan.
10.11Form of Option Agreement under TaskUs, Inc. 2021 Omnibus Incentive Plan.
10.12Form of Performance Stock Unit Agreement under TaskUs, Inc. 2021 Omnibus Incentive Plan
31.1Certification of Principal Executive Officer pursuant to Exchange Act Rules13a-14(a)and15d-14(a),as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.231.2*
32.1**
32.2**
99.1*
101.INSXBRL Instance Document– the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*    Filed herewith.
*
**    Furnished herewith.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure except for the terms of the agreements or other documents themselves, and you should not rely on them for other than that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and do not apply in any other context or at any time other than the date they were made.
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30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TASKUS, INC.
TASKUS, INC.
(Registrant)
(Registrant)
Date:May 10, 2024August 11, 2021By:By:
/s/ Balaji Sekar
Balaji Sekar
Chief Financial Officer
(Principal Financial Officer)
(Authorized Signatory)
Date:May 10, 2024August 11, 2021By:By:
/s/ Steven Amaya
Steven Amaya
Senior Vice President—Finance
(Principal Accounting Officer)
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