TaskUs, Inc. (NASDAQ:TASK) Q4 2024 Earnings Conference Call February 26, 2025 5:00 PM ET Company Participants Trent Thrash - Senior Vice President of Corporate Development & Investor Relations Bryce Maddock - Co-Founder & Chief Executive Officer Balaji Sekar - Chief Financial Officer Conference Call Participants Jim Schneider - Goldman Sachs Cassie Chan - Bank of America Securities Jonathan Lee – Guggenheim Partners David Koning - Baird Maggie Nolan - William Blair James Faucette - Morgan Stanley Operator G ...

分组1 - TaskUs reported quarterly earnings of $0.31 per share, missing the Zacks Consensus Estimate of $0.34 per share, and down from $0.35 per share a year ago, representing an earnings surprise of -8.82% [1] - The company posted revenues of $274.24 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 2%, and up from $234.26 million year-over-year [2] - TaskUs has surpassed consensus revenue estimates four times over the last four quarters, but has only exceeded consensus EPS estimates once in the same period [2] 分组2 - The stock has underperformed the market, losing about 9% since the beginning of the year compared to the S&P 500's gain of 1.3% [3] - The current consensus EPS estimate for the coming quarter is $0.31 on revenues of $254.09 million, and for the current fiscal year, it is $1.35 on revenues of $1.1 billion [7] - The Zacks Industry Rank for Computers - IT Services is currently in the top 32% of over 250 Zacks industries, indicating a favorable outlook for the industry [8]

Financial Performance - TaskUs achieved a record full-year revenue of $995 million in 2024, representing a 17.1% year-over-year growth[2] - Fourth quarter service revenue reached $274.2 million, exceeding guidance by $4.9 million, with a 17.1% year-over-year increase[5] - Net income for Q4 2024 was $8.9 million, with a net income margin of 3.2%, down from 6.9% in Q4 2023[3] - Adjusted EBITDA for the full year 2024 was $209.9 million, achieving an Adjusted EBITDA margin of 21.1%[7] - TaskUs expects full-year 2025 revenue to be between $1.095 billion and $1.125 billion, with an Adjusted EBITDA margin of approximately 21%[2] - Service revenue for the year ended December 31, 2024, increased to $994.985 million, up from $924.365 million in 2023, representing a growth of 7.6%[15] - Net income for the year ended December 31, 2024, was $45.870 million, slightly up from $45.690 million in 2023, indicating a marginal increase of 0.4%[15] - Adjusted EBITDA for the year ended December 31, 2024, was $209.867 million, compared to $220.797 million in 2023, reflecting a decrease of 5%[21] - The company reported a net income margin of 4.6% for the year ended December 31, 2024, compared to 4.9% in 2023, indicating a slight decline[21] - Basic net income per share for the year ended December 31, 2024, was $0.52, up from $0.49 in 2023, reflecting a growth of 6.1%[15] - For the three months ended December 31, 2024, diluted EPS was $0.10, compared to $0.18 for the same period in 2023[29] - Adjusted EPS for the year ended December 31, 2024, was $1.29, slightly down from $1.32 in 2023[29] Cash Flow and Expenses - Free Cash Flow for Q4 2024 was $20.4 million, with a conversion rate of 37.9% from Adjusted EBITDA[5] - The company ended 2024 with approximately 200 clients, over half generating $1 million or more in revenue[6] - Total operating expenses for the year ended December 31, 2024, were $902.561 million, up from $829.327 million in 2023, which is an increase of 8.8%[15] - Cash and cash equivalents at the end of the period increased to $192.166 million from $125.776 million, showing a significant rise of 52.6%[19] - Free Cash Flow for the three months ended December 31, 2024, was $20,375 thousand, down from $31,684 thousand in 2023[31] - Adjusted Free Cash Flow for the year ended December 31, 2024, was $107,357 thousand, compared to $131,016 thousand in 2023[31] - Net cash provided by operating activities for the year ended December 31, 2024, was $138,888 thousand, down from $143,670 thousand in 2023[31] - The conversion of Adjusted EBITDA to Free Cash Flow was 37.9% for the three months ended December 31, 2024[31] Growth and Workforce - TaskUs added 4,200 teammates in 2024, bringing the total headcount to 59,000[6] - The company anticipates sustaining double-digit year-over-year growth in Q1 2025[4] Assets and Liabilities - Total assets as of December 31, 2024, reached $953.298 million, an increase from $864.202 million in 2023, marking a growth of 10.3%[17] - The company had a strong year-end balance sheet with $192.2 million in cash and $190 million in revolver capacity[7] Litigation and Non-Recurring Costs - The company incurred $8.393 million in litigation costs during the three months ended December 31, 2024, which were considered non-recurring[21] - The company recognized severance payments due to cost optimization measures during the period[26] - The non-GAAP effective tax rate applied was 33.3% for the three months ended December 31, 2024, compared to 28.3% for the same period in 2023[27] - The company incurred litigation costs considered non-recurring, impacting financial performance comparisons[27]

Core Insights - TaskUs (TASK) is currently viewed as a more attractive investment compared to Dynatrace (DT) for value investors seeking undervalued stocks [1][7] Valuation Metrics - TASK has a forward P/E ratio of 12.67, significantly lower than DT's forward P/E of 41.45 [5] - The PEG ratio for TASK is 2.89, while DT's PEG ratio stands at 4.12, indicating TASK's expected earnings growth is more favorably priced [5] - TASK's P/B ratio is 3.12, compared to DT's P/B of 7.61, further highlighting TASK's relative valuation advantage [6] Analyst Outlook - TASK holds a Zacks Rank of 2 (Buy), indicating a positive earnings estimate revision trend, while DT has a Zacks Rank of 3 (Hold) [3] - The stronger estimate revision activity for TASK suggests a more favorable analyst outlook compared to DT [7] Value Grades - TASK has earned a Value grade of B, while DT has received a Value grade of F, reflecting the disparity in their valuation metrics [6]

Company Overview - TaskUs (TASK) shares increased by 9.3% to close at $16.67, following a notable trading volume, contrasting with an 11.7% loss over the past four weeks [1] - The company is experiencing strong demand in specialized service lines such as trust and safety, digital customer experience, and AI services, while focusing on cross-selling and enhancing efficiency through generative AI and automation [1] Earnings Expectations - TaskUs is projected to report quarterly earnings of $0.34 per share, reflecting a year-over-year decline of 2.9%, with revenues expected to reach $268.87 million, an increase of 14.8% from the previous year [2] - The consensus EPS estimate for TaskUs has remained unchanged over the last 30 days, indicating that stock price movements may not sustain without trends in earnings estimate revisions [3] Industry Context - TaskUs operates within the Zacks Computers - IT Services industry, where another company, Vertiv Holdings Co. (VRT), closed 2.4% higher at $132, with a 6.8% return over the past month [3] - Vertiv's consensus EPS estimate for its upcoming report has decreased by 0.5% to $0.84, representing a 50% increase from the previous year [4]

Group 1 - The company TaskUs (NASDAQ: TASK) is well-positioned to benefit from favorable industry trends, particularly the increasing focus on operational efficiency and cost savings, which is driving businesses to outsource more tasks [1] - The demand for outsourcing services is expected to rise as companies seek to improve their operational efficiency [1] Group 2 - The article serves as a platform for tracking investment ideas and connecting with like-minded investors [1]

Stock Comparison: TaskUs (TASK) vs Dynatrace (DT) - Investors interested in Computers - IT Services stocks are likely familiar with TaskUs (TASK) and Dynatrace (DT) [1] - The article compares which of these two stocks offers better value for investors [1] Valuation Metrics - TASK has a forward P/E ratio of 10.86, while DT has a forward P/E of 39.56 [5] - TASK's PEG ratio is 2.47, compared to DT's PEG ratio of 3.93 [5] - TASK has a P/B ratio of 2.74, while DT has a P/B ratio of 7.26 [6] Zacks Rank and Style Scores - TASK has a Zacks Rank of 2 (Buy), while DT has a Zacks Rank of 4 (Sell) [3] - TASK's earnings estimate revision activity has been more impressive, indicating an improving analyst outlook [3] - TASK has a Value grade of B, while DT has a Value grade of F [6] Conclusion - Based on valuation metrics and Zacks Rank, TASK is likely the superior value option compared to DT [7]

Group 1 - The article discusses the services provided by IPO Edge, which includes actionable information on growth stocks, first-look S-1 filings, previews on upcoming IPOs, an IPO calendar, a database of U.S. IPOs, and a comprehensive guide to IPO investing [1] Group 2 - No relevant content available for this section [2][3]

Financial Data and Key Metrics Changes - In Q3 2024, TaskUs generated $255.3 million in revenue, exceeding the top end of guidance by $9.3 million and marking a 13.2% year-over-year growth [6][9][40] - Adjusted EBITDA for the quarter was $54.2 million, representing a margin of 21.2%, slightly below the guidance of 21.5% [9][52] - The company increased its full-year revenue guidance to between $988 million and $990 million, reflecting a $24 million increase at the midpoint [8][36] Business Line Data and Key Metrics Changes - Revenue from the Digital Customer Experience (DCX) service line was $155.2 million, growing 6.3% year-over-year [41] - Trust and Safety services grew by 30.8% year-over-year, generating $63.7 million in revenue [43][26] - AI services saw a 17.8% year-over-year growth, delivering $36.5 million in revenue [45] Market Data and Key Metrics Changes - Revenue concentration from the largest client increased to approximately 23%, up from 19% in Q3 2023 [46] - The top 20 clients accounted for 68% of total revenue, with strong growth from clients outside the top 20, which grew 7.5% year-over-year [47] - Revenue from U.S. delivery declined by 4% year-over-year, while offshore geographies demonstrated strong growth of approximately 16% [16][48] Company Strategy and Development Direction - The company focuses on four strategic growth levers: taking market share, cross-selling specialized services, diversifying the client base, and leading in AI and automation [8][10] - TaskUs plans to continue investing in operational excellence and specialized service expertise to sustain growth rates [72][88] - The company is prioritizing vertical diversification, particularly in banking, financial services, and healthcare [84] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued revenue growth into Q4, driven by trust and safety and AI services [70] - The company noted that clients are returning to a phase of investing in growth rather than cost reduction, benefiting TaskUs [81] - Management anticipates that the trust and safety service line will continue to grow due to regulatory pressures and increased investments from clients [82] Other Important Information - The company ended Q3 with approximately 54,800 global teammates, an increase of about 3,100 from Q2 [18] - Cash and cash equivalents were $180.4 million as of September 30, 2024, compared to $125.8 million at the end of 2023 [56] - Adjusted free cash flow for the year is expected to be approximately $110 million, implying a conversion rate of over 50% from adjusted EBITDA [60] Q&A Session Summary Question: What are the underlying drivers for continued growth into Q4? - Management expects revenue growth to accelerate due to strong demand in trust and safety and AI services, supported by expanded relationships with the largest client [69] Question: What drove the significant increase in revenue guidance? - The increase is attributed to clients feeling more confident and making investments in generative AI and other initiatives, leading to growth in trust and safety and AI services [76][78] Question: Is there any election-related benefit to trust and safety work? - Yes, there is election-related work, but it is not expected to impact revenues negatively as investments in trust and safety are expected to continue [82] Question: Are there targets for vertical diversification as entering 2025? - The company is focused on expanding in banking and healthcare, with successful client acquisitions in these sectors [83][85] Question: What levers are available to increase margins in 2025? - The primary lever is moving up the value chain in service offerings, focusing on specialized services that command higher pricing [96][97]

Investor Presentation November 7, 2024 Disclaimers This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts, and further include, without limitation, statements reflecting the current views of TaskUs, Inc. ("TaskUs" or the "Company") with respect to, among other things, our operations, our financial performance, our industry, the impact of the current mac ...