Good afternoon. And welcome to the TaskUs Investor Call. My name is Olivia and I will be your conference facilitator today. At this time, all lines have been placed on mute to avoid background noise. After the speakers remarks, there will be a question-and-answer session. [Operators Instructions]. I will now like to introduce Alan Katz, Vice President of Investor Relations. Alan, you may begin.

Good afternoon. And thank you for joining the TaskUs Fourth Quarter and Year-End 2021 earnings call. Joining me on the call today are Bryce Maddock, Co-Founder and Chief Executive Officer of TaskUs, and Balaji Sekar, Chief Financial Officer. Full details of our results and additional management commentary are available in our earnings release, which can be found on the Investor Relations section of the website at ir.taskus.com. We also plan to post supplemental information on our website, including an investor presentation and other materials following this call. Please note that this call is being simultaneously webcast on the Investor Relations section of the company's corporate website. Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meaning of the federal securities laws, including, but not limited to statements regarding TaskUs' future financial results and management's expectations and plans for the business. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here. You should not place undue reliance on any forward-looking statements. Factors that could cause actual results to differ from forward-looking statements can be found in our updated prospectus filed with the SEC on October 22nd, 2021, which is accessible on the SEC's website, as well as in the Investor Relations section of our website, and may be supplemented with subsequent periodic reports we filed with the FTC. Any forward-looking statements made in this conference call, including responses to questions, are based on current expectations as of today, for very 282022. And TaskUs assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. The following discussion contains non-GAAP financial measures. For reconciliation of each of these non-GAAP financial measures the most directly comparable GAAP metric, please see our earnings press release, which is available in the IR section of our website, @ir.taskus.com. Now, I will turn the call over to Bryce Maddock, Co-Founder and Chief Executive Officer of TaskUs. Bryce?

Thank you, Alan. Good afternoon everyone and thank you for joining us. 2021 was a very strong year for TaskUs. Our team delivered growth in the fourth quarter that once again came in above the high-end of our guidance range and we set ourselves up for another year of solid growth in 2022. Before I dive into the financial results, I want to take a minute to acknowledge the great work of our team in keeping our teammates safe and healthy. The pandemic and recent world events have impacted everyone in different ways. Many of us have seen our mental health impacted. In response, our global wellness and resiliency team stepped up to support our teammates during this difficult year. They completed nearly 30,000 group in one-to-one counseling sessions with TaskUs teammates across the globe. At TaskUs, our teammates are the most important asset in our company. Our highest priority is to support them and keep them safe. Moving to our financials, Q4 was another very strong quarter of top and bottom line growth. Revenue grew organically by 63.4% year-on-year to $226.8 million, above the top end of our guidance range of $217 million. Adjusted EBITDA grew 70.5% year-on-year to $56.2 million for an adjusted EBITDA margin of 24.8%, also above the top end of our guidance range of 23.3%. For the full-year, we achieved $760.7 million in revenue and a $187.9 million in adjusted EBITDA, for an adjusted EBITDA margin of 24.7%, again, above the top end of our guidance ranges. We ended the year with top-line growth of over 59% while maintaining margins that we believe are among the highest in the industry. To say that I'm proud of what we accomplished this year would be an understatement. 2022 is off to a strong start. The theme for…

Thanks Bryce, and good afternoon everyone. I'm going to focus my remarks on our financial DSOs for the fourth quarter. Please note that some of these items are non-GAAP measures and the relevant reconciliations are attached to the press release we issued earlier today. In the fourth quarter, we earned total revenues of $226.8 million, an increase of 63% over the prior year, leading to the total revenues for the year of $760.7 million and growth of over 59%. We saw year-over-year growth in each of our three specialized service offerings. In the fourth quarter of a digital customer experience offering generated $148.1 million for a year-over-year growth rate of 69%. Our Content Security business grew 23% compared to Q4 2020, resulting in $44.6 million of revenue. And our air operation business grew 128% year-over-year for revenues of $34.1 million. In Q4, we continued to see diversification of our revenue base. We grew revenue with our top two clients year-over-year, while growing with the rest of our clients at an even faster rate. As a result, our revenue concentration with our largest client was 25%, down from 27% in Q3 and 32% in 2020. Even with this improvement in revenue concentration, our largest client grew revenues quarter-over-quarter by approximately $3 million. Our second largest client was 9% of our revenue, down from 11% in the previous quarter. This slight sequential quarterly decline was the result of our success in helping this client optimize their global footprint and cost structure. We expect to return to sequential revenue growth with this client beginning Q1 of 2022 and should continue to see sustained growth throughout the year. In Q4 of 2021, our top 10 and top 20 clients accounted for 60% and 75% of our revenue respectively, compared to 66% and 80% in…

Thank you Balaji. Before we move into our Q&A session, I wanted to share another TaskUs teammate's story. In December 2021, Typhoon Odette devastated parts of the Philippines and especially impacted our site in Bohol. When it became clear that Odette was going to hit the site, we mobilized as a company and our people and customers rallied to ensure the safety and well-being of our teammates. Janice (ph) and Mediator Voisa (ph) are two teammates who work at Lizzie's playground, our site in Bohol. Jenise and Mediator Stanley home was destroyed by the typhoon. During the typhoon, our team grew concerned as both teammates were unreachable by phone. The day after the typhoon, our door-to-door rescue team was able to locate Janice and Mediator, and our team provided them temporary shelter in a hotel, free food and transportation services. Despite having lost their home, Janice and Mediator told us that they were ready to report back to work. So we transformed the second floor of our office into a temporary shelter for teammates and their families, like Jonathan mediator, who were affected by the typhoon. During their stay, all teammates were provided free food, medicine, and toiletries. And today I'm proud to report that Jonathan mediator are having their homes rebuilt by TaskUs teammates as part of our TaskUs Home Rebuilding program. Our clients and teammates around the world donated their time, money, and resources to make this happen. With quarantine restrictions now lifted, I'm finally going back to the Philippines next quarter and plan to visit our site in Bohol to thank our team there personally. For now, I want to give a heartfelt and public thank you to all of our teammates, their leaders, and our incredible clients whose compassion made this possible. With that, I'll ask our Operator to open our line for the question and answer session.

[Operator Instructions]. Please stand-by while we compile the Q&A roster. And our first question coming from the line of Maggie Nolan with William Blair. Your line is now open.

Hi. Thank you and huge congrats to you guys for surpassing expectations. Bryce, you said you're optimizing the global delivery footprint for your largest client. Can you talk a little bit more about what does this mean for the relationship and for profitability at the account. And then, do you expect this pattern in other large accounts?

Yes. Thanks, Maggie. So the relationship with our largest client remains one of our strongest client relationships, at the start of the year, we came together and we put together a plan to optimize our global delivery footprint under that plan, we're going to move hundreds of roles to the Philippines and India before the end of this year. As we said in the past, we make lower revenue per employee in the Philippines and India, and that's the reason we're not forecasting any annual revenue growth from this client currently. With that said, since we put this plan in place, we've actually been awarded two new lines of business that will add hundreds of addition roles to our teams supporting this client globally. So by the end of this year, we're going to have more role supporting this client globally than we do to today, to the teams of hundreds of more roles. It is also worth noting that the Philippines in India are our highest margin geographies. So once the transition is complete, the margins we earned from the client will. expand. And finally, we're seeing very robust growth from our other clients across our global regions. So every single teammates supporting this client today, whose roles will be transitioned, will be offered new role supporting some of our most exciting and fast-growing clients.

Thank you. That's helpful. And then Gregg guide, including the outlook for Q1, can you talk a little bit about the sales trends on the pipeline so far this year, and how that compares to the prior year and Q1 in the prior-year. Thank you.

2021 was one of our strongest, actually our strongest sales year ever and I previously shared that Q1 of 2021 was the best quarter that we've ever had in terms of sales in our company's history. Q1 of 2022 is off to a very fast start and it feels reminiscent of Q1 of last year. So I'm excited to tell you more about the specifics of the wins we've had so far when we report our Q1 results.

Our next question coming from the line of James Faucette, with Morgan Stanley. Your line is now open.

Thank you very much. I wanted to ask, about if you're seeing any incremental wage pressure in the market right now, and how that maybe impacting your expectations for margin evolution through the course of the year?

Yes. I'll let Balaji talk a little bit about this in specific, but let me just talk a little about the hiring environment. We are seeing a very competitive hiring environment. And it's in environments like this that we see the investments that we have made in our employee value proposition since day one really pay off. The hiring environment today allows us to further distinguish ourselves from the competition. In 2021, we added over 16,000 net new positions. And we actually added progressively more roles in each quarter, and delivered against our client's very aggressive hiring timelines. At the start of 2022, we're seeing the competition intensify and that's certainly putting pressure on wages. We're seeing this most acutely in the U.S. and for our global leadership positions. But despite this, we anticipate adding more -- as many or more roles in Q1 than we did in Q4 of 2021, which really underlines our ability to attract and retain talent in almost any market. Balaji, do you want to comment further on margins?

Yeah, thanks Bryce. So we are seeing great pressure across all delivery locations most significantly in the U.S., and the [Indiscernible] intention actually depends on geography, the performance and tenure, but these are then factored into margin guidance that I provided today. We believe that we are seeing current market rise to geographies in which we operate. So we're not in a situation behavior now playing catch up. And this question will be offset by [Indiscernible] provisions in our contracts, the margin [Indiscernible] offshore geography mix, that we're starting to see this year, and positive currency environment. And we believe that cost of service as a percent of revenues will be roughly flat from 2021 in 2022.

Got it. And then, if we look at your guide for this year and with changes in delivery mix etc., what do you think is the adequate number of net headcount additions, at least on a quarterly basis to support the revenue growth? And I guess as part of that, Bryce, you mentioned acquisitions could be incremental to your guide, but what are the other potential upside drivers that you see to your growth rate for this year? Thanks.

Yes, thanks for that question, James. So to start, we anticipate continuing to add, well, north and 4,000 net new teammates in every quarter of this year. And we're very confident in our ability to continue to do that for our clients. As far as the 30% growth forecast that we've provided at the midpoint, 2022 is off to a very, very strong start. We've got visibility to around 95% of the forecast that we provided today and we're continuing to see robust demand across our broadening portfolio of clients. With the exception of our largest client, we expect that the other four of our top five clients will grow revenue significantly year-on-year. We expect two of our top five clients to grow revenue by double-digit percentage point year-on-year, and the other two to grow by triple-digit percentages year-on-year. And what's best about that is that we're already in the midst of aggressive hiring efforts for these clients, today. So a large portion of this growth will be ramped by the end of Q1. As I've already said, Q1 sales are off to a very strong start in Q1 of 2022 feels reminiscent of our record sales quarter for Q1 of 2021. And I'll just finish by saying that we've reported three quarters now as a public company. So hopefully they're getting the sense that we only provide [Indiscernible], that we have a high degree of conviction that we can meet or exceed.

[Indiscernible]. Thank you so much, guys.

Our next question coming from the line of Puneet Jain with JPMorgan. Your line is open.

Thanks for taking my question. Bryce or Balaji, can you talk about margin profile of some of the new services that you are adding, and how should we think about margins beyond this year -- just in qualitatively in terms for levers, puts and takes we should consider as we model margins beyond this year.

Yes, thank you for that question Puneet. So, to start, in the past we pointed out that the main driver of margin is geography rather than service line. With that said, we're seeing higher margins in some of our new service lines, such as financial crimes, learning experience solutions, and the more advanced areas of AI Services. So as these areas make up a larger and larger percentage of our revenues, they are going to help us to expand our margins. Balaji, I'll let you comment maybe on the midterm margin guidance.

Yes. So we have -- while for this year we've indicated about 23 percentage in adjusted EBITDA margin, what the indicative that the in the medium-term, we will be able to deliver above 25 + percentage from adjusted EBITDA -- I've talked about 25% in adjusted EBITDA margin, and a couple of things that is going to drive that positive operating in a bit, that comes from growth. We would see that both, in our cost of service and [Indiscernible] line items. And second is the geo mix shift that we spoke about earlier towards offshore, which is margin [Indiscernible]. And lastly, the growth in specialized services that Bryce just spoke about, which have better price leading to growth and margins.

Got you. And can you also talk about your use of cash priorities. I know you talked about M&A and organic investments in business. Can you talk about which areas you're looking for deals and which areas you're looking to invest in?

Yeah. We're investing this year to continue our growth into 2023 and beyond. Specifically, we're making investments to deepen our specialized services, expand into new geographies, and to further accelerate our development and technology to help our clients drive efficiencies into their business. We're also expanding our sales and go-to-market team to accelerate our growth. As we've indicated, we absolutely intend to pursue acquisitions, to accelerate all of these efforts, and we do not expect to let cash build up on the balance sheet.

And Puneet, just to add onto what Bryce said, is also we have a very comfortable cash situation and our net leverage ratio compared to adjusted EBITDA was about 0.9x as of the year-end, which is below our debt covenant of about -- approximately about 3.75.

Thank you.

And our next question coming from the line of Dave Koning with Baird, your line is open.

Hey, guys, congrats, and it was all very impressive. One thing that stood out that's particularly impressive; to guide 30%- ish. And then basically have a headwind from the geoshift. It seems like so -- maybe -- could you tell us what -- your volume growth expectation? It seems like it's going to be nicely better than the 30%, to start off.

Dave, yes, that's correct. And I think what's underlying this is our -- the strength of growth that we're seeing from across the rest of our client portfolio. With the exception of our largest client, we expect the other two of our top five points to grow revenue year-over-year by either double or triple digit percentage points. And that is going to lead to this really broad diversified base of customers that will help us to meet or exceed that 30% revenue growth guide.

Got it, thanks. And then I guess the second question just do you still expect -- now that the base keeps getting bigger and bigger, do you still expect that you can grow 25% a year past this year? And are there acquisitions -- maybe broadening out the different vertical markets, is that to -- are there acquisitions you can find that actually can keep up the same type of growth rate as you see?

Yeah. To answer the first question, we do. When we think about medium-term, we think about the next two to three years and so we absolutely believe we can grow revenue in 25% or above for the next two to three years at a minimum. When we look at our acquisitions, we started by focusing on modestly-sized acquisitions that will be easier for a company of our size to digest. And unfortunately, those companies are growing revenue at a percentage that's comparable or in some cases better than ours. And so we're excited to focus on that type of company when we do our first acquisition.

Great. Thanks. Nice job.

And our next question coming from the line of Jason Kupferberg with Bank of America. Your line is open.

Thanks, guys. Congrats on this quarter. I know there's been a lot asked on revenues and margins, but I'll ask on DSO and cash flow because I thought that was quite impressive as well. And Balaji, I know you've mentioned the improvement in the DSO, I think from 71 to 65 quarter-over-quarter. Can you give us the breakdown on the unbilled portion of the DSO there and any thoughts on that metric for 2022 and for free cash for that matter? Thank you.

Yes. So from an analyst perspective, one of the things that I mentioned earlier is that see an improvement in numbers in Q3 and Q4 of 2021. So if you look at the first half of 2021, unbilled as a percentage of payable revenues was of about 9%. And the -- driven why it was because the higher backlog of invoice because of the grew that we saw in 2021 with [Indiscernible]. In Q3 and Q4 and going forward in this business, [Indiscernible] typically tends to be above one month of quaterly revenues. In Q4 were approximately 3%. And that is what we will continue to see getting into 2022.

Okay. And then I know you guys mentioned FinTech encrypt a couple of times. Curious what you might be able to tell us in terms of size and growth of those verticals combined at this point sounds like it's becoming much more relevant for you.

Thanks for that question. So actually in 2021 FinTech, HealthTech, and retail, and e-commerce all grew revenues at triple digit percentage point year-over-year. And we're seeing that growth sustained into 2022, particularly for FinTech and HealthTech. We've been working with some of the industry leaders in both the FinTech and crypto currency space. In addition to providing customer support, we're also providing financial crimes work where we're analyzing blockchain security transactions during any money laundering and know your customer work. And so, while we've seen robust growth over the last year, we think we're just getting started in the overall growth potential in this space.

Alright. Well, thanks for the comments. Appreciate it.

Our next question coming from the line of Brian Essex with Goldman Sachs. Your line is open.

Hi, good afternoon and thank you for taking the question and congrats on what I guess is a better than rule of 80 quarter. Wanted to follow up with Matt on -- to Maggie's question with regard to your largest customer, and that migration effort, how long does that take from beginning to end? Maybe if you give us a little bit of color in terms of how that conversation transpired, was it more of an effort of them to mitigate some rising costs on their side, or has this been the playbook from the beginning? And does this kind of cut-over in a specific quarter or is there a general migration throughout the year?

Thanks for your question Brian. So we as a company, go through these migrations with customers over time. We tend to start with clients when they are very small scale very quickly, and then look to optimize our clients spend. And so all of these efforts are done in conjunction and collaboration between TaskUs and our clients. And so this was a conversation that began in January of this year as we looked for ways to optimize our clients spend and we made a recommendation to shift a large portion of these roles to the Philippines and to India. The transition will start in Q2 and we expect it to be completed in Q3. So there will be a relatively low impact to Q1 revenues and you'll see a full impact to our Q4 revenues. And would that said I will I'll just say again that we continue to win very exciting new business from this client. We've won two opportunities since putting this plan in place, and that'll add hundreds of additional headcount to our global delivery footprint for the client this year. So we're very optimistic about our ability to grow with this client again, in 2023.

Got it. That's super helpful. So thank you for that. And maybe just a quick follow-up just on the top ten clients, just backing out the first the two largest for the quarter, it looks like clients three through ten more than doubled if my math is. Halfway right. Could you give us a little bit of color in terms of the dynamics at play there was that a relatively diverse set of customers in the top ten where they're ones that swapped in or out and what were some of the core drivers of that growth?

Yes. So it is a very diverse set of customers and we've got on-demand transportation clients, FinTech clients, eCommerce clients, all in our top ten customers. And we've seen really strong growth across that group as you said, about a 100% when you back up the top two clients new every year. And as I said, as we look forward to 2022 amongst our top five other than our largest customer, four of those clients are, are going to be growing between double and triple percentage points year-on-year. So we're really excited about the broad base of growth that we're seeing in 2022.

Got it. Helpful. Thank you very much.

Next question coming from the line of Dan Perlin with RBC Capital. Your line is open.

Thanks, and I'll echo my well wishes here on some very good numbers which we obviously greatly appreciate. I had a question around the scope of work and how it's changed in the past year. Bryce, you talked about -- I think you said FinTech, HealthTech and retail all grew triple-digits. And what it -- some of these sounds like it's like -- all of these new clients are moving more, they're giving you more specialized work. That works seems like it's a positive mix shift for you in terms of both breadth of opportunities, but also potentially longer-term margin opportunities. Maybe -- can you just speak to the scope of work, and how that's changed over let's say the past maybe 12 months?

Yes, thank you for your question, Dan. We have seen increasing demand for more sophisticated services. As an example, inside AI Services, going from doing things like data annotation into software quality operations. We've seen demand inside our financial technology services going from doing customer support into supporting institutional clients, or doing financial crimes work. We just signed a deal this quarter with one of the largest technology companies in the world, a client that we've been pursuing for a long time. And instead of getting in there doing standard customer support work, we're going to be providing learning experience solutions. Actually, writing their training content and maintaining their knowledge base. And all of those are services where we will make higher margins. We're beginning to see this specialized service strategy pay off in the form of higher margins.

Is there something, as just a follow-up, unique as we think about FinTech, crypto, HealthTech becoming larger and larger percentages of the mix of your business that we need to be mindful of? Do they tend to want to be a little bit more in lower GEO areas, which helps in addition to the specialized services that you're providing or is it just the nature of the work that's coming your way now?

Yes, I think that in both of these categories, we're supporting industry leaders, and these are companies that really care about the quality of service that they're delivering. When it comes to things like regulation, in many ways they're helping to champion some of those regulations, and we believe that those regulations will actually lead to an increase in demand for our services. But when we think about geographic delivery footprint, some of our FinTech and HealthTech clients demand that we keep work onshore for either regulatory reasons or just client preferences. And so I think that there's probably a lower probability of the geographic footprint optimization that we're going through with some other clients at the moment, but ultimately time will tell.

Yes. Okay. That's great. Thank you.

Our next question coming from the line of Matt VanVliet with BTIG. Your line is open.

Congrats guys. Thanks for taking the question. I guess first price, you've talked about learning services opportunity, both at a large tech company and maybe expanding that out. So wanted to dig in a little bit more there. Is this something that you've been doing for a number of your clients for a while and it's now just becoming maybe a little bit more of a formalized product offering? Or is this something you've really just developed in the last several months or a couple of quarters and are now ready to go to market with it?

Yes. Thanks for the question, Matt. So actually what happened here was really interesting. We've always invested a huge amount in the employee experience, and that starts with making sure that we are training our teammates in the most exciting and innovative way possible. So we've got an incredible learning leader, a gentlemen named Dhairya Sharma (ph), who has really championed our approach to teaching our teammates the skills they need to support our clients and putting our leadership through a really robust leadership development program. So that work has attracted one of our large clients a couple of years back. And this is a large autonomous vehicle company and they were interested in us taking over a team that was working on training content for them. This is a rebadge of the team based in the United States. We did that successfully and have since scaled that offering to multiple clients using a combination of domestic and offshore resources to maintain knowledge-based content, and put together instructional content. In many cases, actually, conduct the training sessions on behalf of our clients.

And then you talked about a couple of times, both with your largest customer and maybe second and many others, as they start to use more of TaskUs, they -- they tend to look at the offshore markets, maybe a little bit more focused. Can you give us a sense of maybe how many of all your customers are using some form of offshore today? Maybe not just revenue mix, but just maybe longer-term, what the opportunity is, how that might have puts and takes in the model overall?

Yes. So we -- as a company we started with delivery operations in the Philippines and the Philippines only and it wasn't until 2016 when we launched our operations in the U.S. that we had operations anywhere else. So the vast majority of our customers today use some portion of our offshore delivery model. That being said, we've got operations today in 10 different countries and we're really seeing a robust demand amongst customers to not just single-source for reasons of business continuity, language coverage and sourcing the right talent at the right price, our customers are increasingly leveraging two,three or four our countries to deliver their services.

All right, great. Thank you for taking my questions.

I'm showing no further questions at this time. I would now like to turn the call back over to Bryce Maddock, TaskUs CEO and Co-Founder for closing remarks.

Thanks, Olivia. And just in closing, I want to thank our teammates, our clients, and our shareholders. We've had a very strong 2021 and we're looking forward to delivering another very strong year in 2022. Look forward to our next call in May. Talk soon.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.