TaskUs(TASK) - 2025 Q1 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements This section warns investors about forward-looking statements and outlines various risks that could impact actual results - This report contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially. Investors are cautioned not to place undue reliance on these statements[10][11] - Key risk factors include dependence on key clients, potential contract terminations, failure to acquire/retain new clients, inadequate service, inability to adapt to market/technology trends, utilization of AI, security breaches, mental health impacts of Trust + Safety work, criminal/fraudulent activities, global economic/political conditions, reliance on international operations (Philippines, India), regulatory compliance (data privacy), currency fluctuations, brand reputation, pricing pressure, volatile economic conditions, dependence on senior management, increased employee expenses, expansion difficulties, reliance on technology, maintaining asset utilization, control by Blackstone/Co-Founders, and volatility of Class A common stock price[11][12][14] Website and Social Media Disclosure The company utilizes its website and social media as official channels for material information disclosure, advising investors to monitor them - TaskUs, Inc. uses its official website (www.taskus.com) and social media channels (Facebook, Instagram, LinkedIn, YouTube, X) as distribution channels for company information, which may be deemed material. Investors should monitor these channels in addition to traditional SEC filings and public calls[16] Part I. Financial Information This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for TaskUs, Inc., including balance sheets, statements of income, comprehensive income, shareholders' equity, and cash flows for the period ended March 31, 2025, and comparative periods. These statements are prepared in accordance with US GAAP for interim financial information Unaudited Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and shareholders' equity at specific dates Unaudited Condensed Consolidated Balance Sheets (in thousands) | (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Total current assets | $455,672 | $435,352 | | Total noncurrent assets | $529,792 | $517,946 | | Total assets | $985,464 | $953,298 | | Liabilities | | | | Total current liabilities | $158,768 | $152,025 | | Total noncurrent liabilities | $306,385 | $304,354 | | Total liabilities | $465,153 | $456,379 | | Shareholders' Equity | | | | Total shareholders' equity | $520,311 | $496,919 | | Total liabilities and shareholders' equity | $985,464 | $953,298 | Unaudited Condensed Consolidated Statements of Income This section outlines the company's financial performance over a period, reporting revenues, expenses, and net income Unaudited Condensed Consolidated Statements of Income (in thousands, except share and per share data) | (in thousands, except share and per share data) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Service revenue | $277,792 | $227,470 | | Total operating expenses | $243,554 | $203,912 | | Operating income | $34,238 | $23,558 | | Income before income taxes | $29,748 | $18,222 | | Provision for income taxes | $8,600 | $6,508 | | Net income | $21,148 | $11,714 | | Net income per common share: Basic | $0.23 | $0.13 | | Net income per common share: Diluted | $0.23 | $0.13 | Unaudited Condensed Consolidated Statements of Comprehensive Income This section details the company's comprehensive income, including net income and other comprehensive income items Unaudited Condensed Consolidated Statements of Comprehensive Income (in thousands) | (in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $21,148 | $11,714 | | Unrealized gain on derivative contracts, net | $5,282 | — | | Retirement benefit reserves, net | $(21) | $5 | | Foreign currency translation adjustments | $3,237 | $(3,313) | | Comprehensive income | $29,646 | $8,406 | Unaudited Condensed Consolidated Statements of Shareholders' Equity This section tracks changes in the company's equity accounts, reflecting stock transactions and retained earnings Unaudited Condensed Consolidated Statements of Shareholders' Equity (in thousands, except share data) | (in thousands, except share data) | Balance as of Dec 31, 2024 | Issuance of common stock for settlement of equity awards | Shares withheld related to net share settlement | Repurchase of common stock | Stock-based compensation expense | Net income | Other comprehensive income | Balance as of Mar 31, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Class A common stock (shares) | 33,215,441 | 1,237,630 | (376,750) | — | — | — | — | 34,076,321 | | Class A common stock (amount) | $332 | $12 | $(3) | — | — | — | — | $341 | | Class B convertible common stock (shares) | 70,032,694 | — | — | — | — | — | — | 70,032,694 | | Class B convertible common stock (amount) | $700 | — | — | — | — | — | — | $700 | | Additional paid-in capital | $726,917 | $206 | $(5,111) | — | $8,749 | — | — | $730,761 | | Accumulated deficit | $(44,114) | — | — | — | — | $21,148 | — | $(22,966) | | Accumulated other comprehensive loss | $(25,389) | — | — | — | — | — | $8,498 | $(16,891) | | Treasury stock (shares) | 13,323,977 | — | — | 750,691 | — | — | — | 14,074,668 | | Treasury stock (amount) | $(161,527) | — | — | $(10,107) | — | — | — | $(171,634) | | Total shareholders' equity | $496,919 | $218 | $(5,114) | $(10,107) | $8,749 | $21,148 | $8,498 | $520,311 | Unaudited Condensed Consolidated Statements of Cash Flows This section reports the company's cash inflows and outflows from operating, investing, and financing activities Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $36,276 | $51,177 | | Net cash used in investing activities | $(14,480) | $(3,572) | | Net cash used in financing activities | $(17,955) | $(5,664) | | Increase in cash and cash equivalents | $3,841 | $41,941 | | Effect of exchange rate changes on cash | $845 | $(2,367) | | Cash and cash equivalents at beginning of period | $192,166 | $125,776 | | Cash and cash equivalents at end of period | $196,852 | $165,350 | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements, covering business description, accounting policies, revenue disaggregation, forward contracts, property and equipment, goodwill and intangibles, long-term debt, leases, commitments and contingencies, stock-based compensation, income taxes, earnings per share, accumulated other comprehensive loss, segment information, and subsequent events 1. Description of Business and Organization This note describes TaskUs, Inc.'s core business as a provider of outsourced digital services and next-generation customer experience - TaskUs, Inc. is a provider of outsourced digital services and next-generation customer experience, helping clients represent, protect, and grow their brands[33] - The company's global, omni-channel delivery model focuses on three key services: Digital Customer Experience (omnichannel customer care, learning experience, sales/customer acquisition), Trust + Safety (content moderation, risk management, compliance, identity management, fraud), and AI Services (large language model support, data labeling, annotation, transcription for AI training)[33][36] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and estimates used in preparing the financial statements - The financial statements are prepared in accordance with US GAAP for interim financial information, with no material changes to significant accounting policies described in the Annual Report[34][35] - Significant estimates and assumptions are made for useful lives/impairment of fixed assets, credit loss allowances, deferred tax assets, lease liabilities, forward contracts, stock-based compensation, acquired intangibles/goodwill, and contingencies[37] - Client A represented 26% of service revenue for the three months ended March 31, 2025 (up from 19% in 2024) and 21% of accounts receivable as of March 31, 2025 (up from 19% in 2024). The majority of operations and employees are in the Philippines[39][40][41] - The company, as an 'emerging growth company,' has elected to adopt new accounting guidance within the same time periods as private companies. Recent pronouncements include ASU 2023-09 (Income Taxes) effective after December 15, 2025, and ASU 2024-03 (Income Statement - Expense Disaggregation) effective after December 15, 2026[42][43][44] 3. Revenue from Contracts with Customers This note disaggregates the company's service revenue by offering and geographic delivery location Service Revenue by Offering (in thousands) | Service Offering | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Digital Customer Experience | $159,862 | $143,491 | | Trust + Safety | $72,407 | $55,272 | | AI Services | $45,523 | $28,707 | | Service revenue | $277,792 | $227,470 | Service Revenue by Delivery Geography (in thousands) | Geography | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Philippines | $151,717 | $131,213 | | United States | $33,221 | $25,590 | | India | $35,428 | $28,909 | | Rest of World | $57,426 | $41,758 | | Service revenue | $277,792 | $227,470 | - Accounts receivable, net, included $107.2 million of unbilled revenue as of March 31, 2025, up from $92.7 million as of December 31, 2024[46] 4. Forward Contracts This note explains the company's use of foreign currency forward contracts to manage exchange rate risks - The Company uses foreign currency exchange rate forward contracts to reduce volatility of cash flows related to forecasted costs in Philippine pesos, Indian rupees, Mexican pesos, and Colombian pesos, and to mitigate risk from foreign currency-denominated assets and liabilities[47] Realized Losses from Cash Flow Hedges Reclassified to Earnings (in thousands) | Expense Category | Three months ended March 31, 2025 | | :--- | :--- | | Cost of services | $433 | | Selling, general and administrative expense | $89 | | Depreciation expense | $26 | | Total amount reclassified from AOCL | $548 | Notional Amount of Outstanding Forward Contracts Designated as Cash Flow Hedges (in thousands) | Currency | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Philippine pesos | $130,607 | $152,803 | | Indian rupees | $38,364 | $41,819 | | Mexican pesos | $9,999 | $14,380 | | Colombian pesos | $24,983 | $35,141 | | Total notional amount | $203,953 | $244,143 | - Net unrealized gains on cash flow hedges for the three months ended March 31, 2025, were $6.1 million. The net accumulated gain expected to be reclassed from AOCL into earnings within the next 12 months was $2.4 million as of March 31, 2025[48] 5. Property and Equipment, net This note details the company's property and equipment, net of accumulated depreciation, by category and geographic location Property and Equipment, Net (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Leasehold improvements | $85,306 | $76,171 | | Technology and computers | $124,898 | $115,816 | | Furniture and fixtures | $9,611 | $8,480 | | Construction in process | $5,633 | $5,476 | | Other property and equipment | $18,453 | $16,260 | | Property and equipment, gross | $243,901 | $222,203 | | Accumulated depreciation | $(166,726) | $(155,428) | | Property and equipment, net | $77,175 | $66,775 | Property and Equipment, Net by Geographic Location (in thousands) | Geography | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Philippines | $29,588 | $22,888 | | United States | $6,677 | $7,116 | | India | $11,773 | $11,830 | | Colombia | $16,864 | $12,950 | | Rest of World | $12,273 | $11,991 | | Property and equipment, net | $77,175 | $66,775 | 6. Goodwill and Intangibles This note provides the carrying amounts of the company's goodwill and intangible assets, net of amortization Goodwill Carrying Amount (in thousands) | Item | Amount | | :--- | :--- | | Balance as of December 31, 2024 | $216,791 | | Foreign currency translation | $879 | | Balance as of March 31, 2025 | $217,670 | Intangible Assets, Net (in thousands) | Category | March 31, 2025 (Net) | December 31, 2024 (Net) | | :--- | :--- | :--- | | Customer relationships | $144,116 | $148,083 | | Trade names | $23,743 | $24,442 | | Other intangibles | — | — | | Total | $167,859 | $172,525 | 7. Long-Term Debt This note describes the company's long-term debt obligations, including term loans and revolving credit facilities Long-Term Debt Balances (in thousands) | Category | March 31, 2025 (Total) | December 31, 2024 (Total) | | :--- | :--- | :--- | | Term Loan | $253,800 | $257,176 | | Less: Debt financing fees | $(914) | $(1,010) | | Total | $252,886 | $256,166 | - The 2022 Term Loan Facility matures on September 7, 2027, with an interest rate of 6.649% per annum as of March 31, 2025, based on the SOFR rate[56] - The 2022 Revolving Credit Facility has $190.0 million of borrowing availability as of March 31, 2025, with no outstanding balance. The Company was in compliance with all debt covenants[57] 8. Leases This note details the company's operating lease arrangements, including costs, terms, and future payment obligations Operating Lease Costs (in thousands) | Category | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Operating lease costs - Cost of services | $5,726 | $4,477 | Weighted Average Lease Term and Discount Rate | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Weighted average remaining lease term | 3.5 years | 3.5 years | | Weighted average discount rate | 7.2 % | 6.6 % | Future Lease Payments on Operating Lease Liabilities (in thousands) | Year | Amount | | :--- | :--- | | 2025-remainder of year | $15,835 | | 2026 | $17,401 | | 2027 | $11,944 | | 2028 | $7,785 | | 2029 | $6,476 | | Thereafter | $948 | | Total lease payments | $60,389 | | Less: imputed interest | $(7,156) | | Total lease liabilities | $53,233 | 9. Commitments and Contingencies This note discloses the company's various legal proceedings and potential liabilities - The Company is subject to various legal proceedings, including a class action lawsuit (Lozada v. TaskUs, Inc. et al.) which the Company expects to settle for $17.5 million, funded by insurance. Two derivative lawsuits (Eaton v. Maddock, et al. and Tucker v. Dixit, et al.) with similar allegations are ongoing[60][61][62][63] - Three additional lawsuits (Forsberg et al. vs. TaskUs, Inc. and Shopify, Inc., My Choice Software, LLC vs. TaskUs, Inc., and Seirafi et al. v. Ledger SAS, Shopify (USA) Inc., Shopify Inc., and TaskUs, Inc.) related to a 2020 data breach are being defended, with one (Forsberg) reaching an agreement in principle for an immaterial settlement and another (Seirafi) having the motion to dismiss granted[64][65][66][67] 10. Stock-Based Compensation This note outlines the company's stock-based compensation plans and related expenses Stock-Based Compensation Expense (in thousands) | Category | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Cost of services | $202 | $680 | | Selling, general and administrative expense | $8,547 | $9,555 | | Total | $8,749 | $10,235 | - As of March 31, 2025, unrecognized compensation expense was $1.4 million for stock options (0.8 years weighted-average period), $38.4 million for RSUs (1.7 years), and $3.9 million for PSUs (1.6 years)[70] 11. Income Taxes This note provides details on the company's provision for income taxes and its effective tax rate Provision for Income Taxes and Effective Tax Rate | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Provision for income taxes | $8.6 million | $6.5 million | | Effective tax rate | 28.9 % | 35.7 % | - The difference between the effective tax rate and the 21% federal statutory rate in Q1 2025 was primarily due to nondeductible compensation, GILTI inclusion, and tax benefits from foreign income tax holidays[72] 12. Earnings Per Share This note presents the company's basic and diluted earnings per common share calculations Basic and Diluted Earnings Per Share | (in thousands, except share and per share data) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $21,148 | $11,714 | | Weighted-average common shares outstanding – basic | 90,040,348 | 88,795,211 | | Weighted-average common shares outstanding – diluted | 93,655,539 | 91,849,886 | | Net income per common share: Basic | $0.23 | $0.13 | | Net income per common share: Diluted | $0.23 | $0.13 | 13. Accumulated Other Comprehensive Loss This note details the components and changes in the company's accumulated other comprehensive loss Accumulated Other Comprehensive Loss (in thousands) | Component | Balance as of Dec 31, 2024 | Other comprehensive income (loss) before reclassifications | Income tax effects | Amounts reclassified from accumulated other comprehensive income | Income tax effects | Balance as of Mar 31, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Foreign Currency Translation Adjustments | $(21,659) | $3,237 | — | — | — | $(18,422) | | Retirement Benefit Reserves | $(397) | $(23) | $2 | — | — | $(418) | | Unrealized Gains (Losses) on Cash Flow Hedges | $(3,333) | $6,096 | $(1,250) | $548 | $(112) | $1,949 | | Accumulated Other Comprehensive Loss | $(25,389) | $9,310 | $(1,248) | $548 | $(112) | $(16,891) | 14. Segment Information This note confirms the company operates as a single reportable segment and provides significant operating expenses - The Company operates in a single operating and reportable segment, with the chief executive officer acting as the chief operating decision maker[76] Significant Operating Expenses (in thousands) | Expense Category | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Personnel costs (Cost of services) | $143,946 | $115,639 | | Operating costs (SG&A) | $48,116 | $42,730 | | Stock-based compensation expense | $9,218 | $10,564 | | Non-operating costs (SG&A) | $303 | $300 | | Other (Cost of services) | $27,022 | $19,082 | | Depreciation | $10,003 | $10,789 | | Amortization of intangible assets | $4,976 | $4,985 | | Gain on disposal of assets | $(30) | $(177) | | Total operating expenses | $243,554 | $203,912 | 15. Subsequent Events This note discloses significant events occurring after the balance sheet date, including a proposed merger agreement - On May 8, 2025, the Company entered into a definitive agreement to be acquired by an affiliate of Blackstone and its Co-Founders for $16.50 per share in cash. The merger is expected to close in the second half of 2025, after which the Company's common stock will no longer be publicly listed[79][80] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition for the three months ended March 31, 2025, compared to the prior year, highlighting revenue growth, profitability, and key operational drivers. It also discusses liquidity, capital resources, and cash flow activities Overview This section provides a high-level summary of TaskUs's business and key financial highlights for the reporting period - TaskUs is a provider of outsourced digital services and next-generation customer experience, supporting clients with Digital Customer Experience, Trust + Safety, and AI Services[83][84] - For the three months ended March 31, 2025, service revenue increased by 22.1% to $277.8 million, and net income increased by 80.5% to $21.1 million[87][88] - Adjusted Net Income rose 31.8% to $35.9 million, and Adjusted EBITDA increased 17.1% to $59.3 million for the three months ended March 31, 2025[88] Results of Operations This section analyzes the company's financial performance, detailing changes in revenues, expenses, and profitability Consolidated Financial Information (in thousands, except %) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Period over Period Change ($) | Period over Period Change (%) | | :--- | :--- | :--- | :--- | :--- | | Service revenue | $277,792 | $227,470 | $50,322 | 22.1 % | | Total operating expenses | $243,554 | $203,912 | $39,642 | 19.4 % | | Operating income | $34,238 | $23,558 | $10,680 | 45.3 % | | Income before income taxes | $29,748 | $18,222 | $11,526 | 63.3 % | | Provision for income taxes | $8,600 | $6,508 | $2,092 | 32.1 % | | Net income | $21,148 | $11,714 | $9,434 | 80.5 % | Service Revenue by Service Offering (in thousands, except %) | Service Offering | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Period over Period Change ($) | Period over Period Change (%) | | :--- | :--- | :--- | :--- | :--- | | Digital Customer Experience | $159,862 | $143,491 | $16,371 | 11.4 % | | Trust + Safety | $72,407 | $55,272 | $17,135 | 31.0 % | | AI Services | $45,523 | $28,707 | $16,816 | 58.6 % | | Service revenue | $277,792 | $227,470 | $50,322 | 22.1 % | Service Revenue by Delivery Geography (in thousands, except %) | Geography | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Period over Period Change ($) | Period over Period Change (%) | | :--- | :--- | :--- | :--- | :--- | | Philippines | $151,717 | $131,213 | $20,504 | 15.6 % | | United States | $33,221 | $25,590 | $7,631 | 29.8 % | | India | $35,428 | $28,909 | $6,519 | 22.6 % | | Rest of World | $57,426 | $41,758 | $15,668 | 37.5 % | | Service revenue | $277,792 | $227,470 | $50,322 | 22.1 % | - Cost of services increased by $35.8 million (26.4%) primarily due to higher personnel costs from increased headcount. Selling, general and administrative expense increased by $4.5 million (8.5%) due to higher personnel costs and bonus expense, partially offset by reduced stock-based compensation[98][99] Revenue by Top Clients This section highlights the concentration of service revenue derived from the company's largest clients Percentage of Total Service Revenue from Largest Clients | Client Group | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Top ten clients | 57 % | 56 % | | Top twenty clients | 70 % | 67 % | | Largest client | 26 % | 19 % | Foreign Currency This section discusses the company's exposure to foreign currency exchange rate fluctuations and their impact on financial results - The Company is exposed to foreign currency exchange rate movements, particularly impacting expenses incurred in Philippine peso, Indian rupee, Mexican peso, and Colombian peso, despite most revenues being in U.S. dollars[105] Non-GAAP Financial Measures This section reconciles GAAP financial measures to non-GAAP metrics used by management to assess performance - The Company uses Adjusted Net Income, Adjusted EPS, EBITDA, Adjusted EBITDA, Free Cash Flow, and Conversion of Adjusted EBITDA to Free Cash Flow as key non-GAAP measures to assess business performance[106] Reconciliation of Net Income to Adjusted Net Income (in thousands, except %) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Period over Period Change ($) | Period over Period Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net income | $21,148 | $11,714 | $9,434 | 80.5 % | | Amortization of intangible assets | $4,976 | $4,985 | $(9) | (0.2)% | | Operational efficiency costs | $303 | — | $303 | 100.0 % | | Foreign currency losses | $1,310 | $1,014 | $296 | 29.2 % | | Gain on disposal of assets | $(30) | $(177) | $147 | (83.1)% | | Severance costs | $679 | $487 | $192 | 39.4 % | | Litigation costs | — | $300 | $(300) | (100.0)% | | Stock-based compensation expense | $9,218 | $10,564 | $(1,346) | (12.7)% | | Tax impacts of adjustments | $(1,666) | $(1,615) | $(51) | 3.2 % | | Adjusted Net Income | $35,938 | $27,272 | $8,666 | 31.8 % | | Net Income Margin | 7.6 % | 5.1 % | | | | Adjusted Net Income Margin | 12.9 % | 12.0 % | | | Reconciliation of GAAP Diluted EPS to Adjusted EPS | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | GAAP diluted EPS | $0.23 | $0.13 | | Per share adjustments to net income | $0.15 | $0.17 | | Adjusted EPS | $0.38 | $0.30 | | Weighted-average common shares outstanding – diluted | 93,655,539 | 91,849,886 | Reconciliation of Net Income to EBITDA and Adjusted EBITDA (in thousands, except %) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Period over Period Change ($) | Period over Period Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net income | $21,148 | $11,714 | $9,434 | 80.5 % | | Provision for income taxes | $8,600 | $6,508 | $2,092 | 32.1 % | | Financing expenses | $4,663 | $5,538 | $(875) | (15.8)% | | Depreciation | $10,003 | $10,789 | $(786) | (7.3)% | | Amortization of intangible assets | $4,976 | $4,985 | $(9) | (0.2)% | | EBITDA | $49,390 | $39,534 | $9,856 | 24.9 % | | Operational efficiency costs | $303 | — | $303 | 100.0 % | | Foreign currency losses | $1,310 | $1,014 | $296 | 29.2 % | | Gain on disposal of assets | $(30) | $(177) | $147 | (83.1)% | | Severance costs | $679 | $487 | $192 | 39.4 % | | Litigation costs | — | $300 | $(300) | (100.0)% | | Stock-based compensation expense | $9,218 | $10,564 | $(1,346) | (12.7)% | | Interest income | $(1,598) | $(1,117) | $(481) | 43.1 % | | Adjusted EBITDA | $59,272 | $50,605 | $8,667 | 17.1 % | | Net Income Margin | 7.6 % | 5.1 % | | | | Adjusted EBITDA Margin | 21.3 % | 22.2 % | | | Free Cash Flow This section reconciles net cash from operating activities to free cash flow, a key liquidity measure Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (in thousands) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $36,276 | $51,177 | | Purchase of property and equipment | $(14,480) | $(3,572) | | Free Cash Flow | $21,796 | $47,605 | | Conversion of Adjusted EBITDA to Free Cash Flow | 36.8 % | 94.1 % | Liquidity and Capital Resources This section discusses the company's sources of liquidity, capital structure, and debt obligations - As of March 31, 2025, principal liquidity sources were $196.9 million in cash and cash equivalents and $190.0 million borrowing availability under the 2022 Revolving Credit Facility[122] - Total indebtedness, net of debt financing fees, was $252.9 million as of March 31, 2025, with an interest rate of 6.649% per annum on the 2022 Term Loan Facility[123] - During Q1 2025, the Company repurchased 750,691 shares of Class A common stock for $10.1 million, with $29.5 million remaining available under the share repurchase program[124] Cash Flows This section provides a detailed analysis of the company's cash flows from operating, investing, and financing activities Summary of Consolidated Cash Flows (in thousands) | Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $36,276 | $51,177 | | Net cash used in investing activities | $(14,480) | $(3,572) | | Net cash used in financing activities | $(17,955) | $(5,664) | - Net cash provided by operating activities decreased to $36.3 million in Q1 2025 from $51.2 million in Q1 2024, reflecting net income and non-cash charges partially offset by changes in operating assets and liabilities[128] - Net cash used in investing activities increased to $14.5 million in Q1 2025 from $3.6 million in Q1 2024, primarily due to higher site build-out and technology purchases. Net cash used in financing activities increased to $18.0 million from $5.7 million, mainly due to additional share repurchases and tax payments for net share settlement[129][130] Critical Accounting Estimates This section confirms no material changes to the company's critical accounting estimates from its annual report - There have been no material changes to the Company's critical accounting estimates as reported in its Annual Report[131] Recent Accounting Pronouncements This section refers to Note 2 for details on recently adopted and issued accounting pronouncements - For additional information regarding recent accounting pronouncements, refer to Note 2, 'Summary of Significant Accounting Policies' in the Notes to Unaudited Condensed Consolidated Financial Statements[132] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to various financial risks, including foreign currency risk, interest rate risk, and credit risk, and the strategies employed to mitigate these risks Foreign Currency Risk This section assesses the company's exposure to foreign currency exchange rate fluctuations and their potential financial impact - The Company's market risk primarily stems from exchange rate risk, as a substantial portion of expenses are incurred in Philippine peso, Indian rupee, Mexican peso, and Colombian peso, while revenues are mostly in U.S. dollars[134] Average Exchange Rate Against the U.S. Dollar (Three months ended March 31) | Currency | 2025 | 2024 | Depreciation | | :--- | :--- | :--- | :--- | | Philippine Peso | 57.97 | 55.97 | 3.6 % | | Indian Rupee | 86.61 | 83.04 | 4.3 % | | Mexican Peso | 20.44 | 16.98 | 20.4 % | | Colombian Peso | 4,189.99 | 3,915.72 | 7.0 % | - A hypothetical 10% appreciation of foreign currencies against the U.S. dollar would increase expenses by $11.0 million (PHP), $3.2 million (INR), $1.0 million (MXN), and $2.4 million (COP) for Q1 2025, excluding hedging[135] Interest Rate Risk This section evaluates the company's exposure to interest rate changes on its variable-rate debt obligations - The Company's market risk is influenced by changes in interest rates on its borrowings, primarily the 2022 Credit Facilities, which accrue interest at SOFR plus 2.25%[138] - As of March 31, 2025, with a principal balance of $253.8 million and an interest rate of 6.649% per annum, a hypothetical 10% increase or decrease in SOFR would cause an approximate $1.1 million change in interest expense over the next 12 months[138] Credit Risk This section discusses the company's credit risk, particularly concerning concentrations in accounts receivable from key clients - As of March 31, 2025, accounts receivable, net, totaled $206.0 million, with $44.4 million (approximately 21%) owed by one client, indicating a concentration of credit risk[139] Item 4. Controls and Procedures This section details the company's disclosure controls and procedures, confirming their effectiveness as of March 31, 2025, and stating no material changes in internal control over financial reporting Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated by management - The Company's management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2025, and concluded they were effective at the reasonable assurance level[140][141] Changes in Internal Control over Financial Reporting This section states that there have been no material changes to the company's internal control over financial reporting - There has been no change in the Company's internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting[142] Part II. Other Information This section covers legal proceedings, risk factors, equity security sales, and other disclosures not included in the financial statements Item 1. Legal Proceedings This section refers to Note 9, 'Commitments and Contingencies,' in the Notes to Unaudited Condensed Consolidated Financial Statements for detailed information regarding legal proceedings - Information regarding legal proceedings is incorporated by reference from Note 9, 'Commitments and Contingencies,' in the Notes to Unaudited Condensed Consolidated Financial Statements[144] Item 1A. Risk Factors This section highlights various risks that could materially impact the company, with a specific focus on risks related to the proposed merger, including potential non-completion, associated costs, and impacts on business operations and stock price Risks Related to the Proposed Merger This section details the potential risks associated with the proposed merger, including non-completion and financial implications - The proposed merger with an affiliate of Blackstone and the Company's Co-Founders may not be completed due to various conditions, including stockholder and regulatory approvals, which could adversely affect the stock price, business, financial condition, and results of operations[146] - If the merger is not completed, the Company may be required to pay a termination fee of $39.0 million, incur substantial costs, face limitations on retaining key personnel, suffer reputational harm, and experience business disruption[147] - Provisions in the Merger Agreement, such as restrictions on soliciting alternative acquisition proposals and the termination fee, could discourage competing acquirers or result in lower acquisition prices[151][152] - Directors and executive officers have financial interests in the merger (e.g., equity awards, severance, indemnification) that may differ from other stockholders. Stockholders will forgo potential future appreciation in the Company's value if the merger is completed[154][155][156] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides details on the company's share repurchase program, including the number of shares purchased and the remaining authorization Issuer Purchases of Equity Securities This section reports the company's repurchases of its Class A common stock under its authorized program Issuer Purchases of Class A Common Stock (Three months ended March 31, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) | | :--- | :--- | :--- | :--- | :--- | | January 1, 2025 through January 31, 2025 | — | $— | — | — | | February 1, 2025 through February 28, 2025 | — | — | — | — | | March 1, 2025 through March 31, 2025 | 750,691 | $13.44 | 750,691 | $29,547 | | Total | 750,691 | $13.44 | 750,691 | | - The Company's share repurchase authorization was extended through December 31, 2025, with a total authorization of $200.0 million of Class A common stock[157] Item 3. Defaults Upon Senior Securities This section states that there are no defaults upon senior securities - There are no defaults upon senior securities[159] Item 4. Mine Safety Disclosures This section states that the item regarding mine safety disclosures is not applicable to the company - Mine Safety Disclosures are not applicable to the Company[160] Item 5. Other Information This section discloses a Rule 10b5-1 trading arrangement adopted by the Chief Customer Officer Rule 10b5-1 Trading Arrangements This section discloses a Rule 10b5-1 trading plan adopted by a company officer for future stock sales - On March 14, 2025, Jarrod Johnson, Chief Customer Officer, adopted a Rule 10b5-1 trading arrangement for the potential sale of up to 145,986 shares of Class A Common Stock obtained from vesting restricted and performance stock units, with sales planned from August 8, 2025, to December 31, 2025[161] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report, including merger agreements, corporate documents, certifications, and XBRL data files - Exhibits include the Agreement and Plan of Merger, corporate organizational documents, Voting and Support Agreements, certifications of principal executive and financial officers, and XBRL instance and taxonomy documents[162] Signatures This section formally attests to the accuracy and completeness of the report by authorized company officials - The report was duly signed on behalf of TaskUs, Inc. by Balaji Sekar, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), on May 12, 2025[164]