TaskUs(TASK) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information Registrant Information This chapter provides basic information about TaskUs, Inc. as the registrant, including its company name, jurisdiction, principal executive office, telephone number, and Class A common stock listed on Nasdaq, identifying the company as an accelerated filer and an emerging growth company - TaskUs, Inc. is a Delaware-registered company headquartered in New Braunfels, Texas[2] Securities Registration Information | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :-------------------------------------- | | Class A Common Stock, par value $0.01 per share | TASK | The Nasdaq Stock Market LLC | - The company is classified as an “accelerated filer” and an “emerging growth company”[6] Common Stock Outstanding as of August 1, 2025 | Stock Class | Quantity | | :------- | :----- | | Class A common stock, par value $0.01 per share | 34,843,287 | | Class B common stock, par value $0.01 per share | 55,032,694 | CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Forward-Looking Statements Disclaimer This chapter warns investors that the quarterly report contains forward-looking statements involving known and unknown risks and uncertainties that could cause actual results to differ materially from expectations, and the company disclaims any obligation to publicly update or revise any forward-looking statements, except as required by law - This quarterly report contains forward-looking statements that may cause actual results to differ materially from expectations[10] - The company disclaims any obligation to publicly update or revise any forward-looking statements, unless legally required[10] - Key risk factors include: risks related to the proposed merger announced on May 8, 2025, reliance on key clients, contract termination or non-renewal, failure to acquire and retain new clients, service quality issues, failure to adapt to market and technology trends, risks of AI utilization, data breaches and security incidents, mental health impacts of Trust + Safety services on employees, employee misconduct, global economic and political conditions, reliance on international operations, legal and regulatory compliance, foreign currency fluctuations, brand reputation, pricing pressure, economic and political volatility, reliance on senior management and key employees, increased employee costs and labor law changes, difficulties in expanding into new markets and industries, reliance on technology and computer systems, asset utilization and cost control, control by Blackstone Inc. and its co-founders, dual-class stock structure, and volatility in Class A common stock market price[11][13] WEBSITE AND SOCIAL MEDIA DISCLOSURE Company Information Channels This chapter explains that the company utilizes its official website and social media platforms (e.g., Facebook, Instagram, LinkedIn, YouTube, and X) as important channels for disseminating company information, advising investors to monitor these channels for financial and other material information - The company disseminates information through its website (www.taskus.com) and social media platforms (Facebook, Instagram, LinkedIn, YouTube, X)[15] - Investors should monitor these channels for financial and other material information, in addition to press releases, SEC filings, and public conference calls and webcasts[15] PART I. FINANCIAL INFORMATION Item 1. Financial Statements This chapter presents TaskUs, Inc.'s unaudited condensed consolidated financial statements as of June 30, 2025, including balance sheets, statements of income, comprehensive income, shareholders' equity, and cash flows, along with related notes detailing business, accounting policies, revenue, derivatives, assets, liabilities, equity, taxes, and earnings per share Unaudited Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and shareholders' equity at specific reporting dates Condensed Consolidated Balance Sheets (as of June 30, 2025 and December 31, 2024) | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Assets | | | | Cash and cash equivalents | $181,916 | $192,166 | | Accounts receivable, net | $231,442 | $198,996 | | Total current assets | $471,129 | $435,352 | | Property and equipment, net | $86,545 | $66,775 | | Goodwill | $219,539 | $216,791 | | Total assets | $1,018,277 | $953,298 | | Liabilities | | | | Total current liabilities | $166,025 | $152,025 | | Long-term debt | $231,421 | $241,357 | | Total liabilities | $473,727 | $456,379 | | Shareholders' Equity | | | | Total shareholders' equity | $544,550 | $496,919 | | Total liabilities and shareholders' equity | $1,018,277 | $953,298 | Unaudited Condensed Consolidated Statements of Income This section outlines the company's financial performance, reporting service revenue, operating expenses, and net income over specified periods Condensed Consolidated Statements of Income (for the three and six months ended June 30, 2025 and 2024) | (in thousands, except share and per share data) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service revenue | $294,086 | $237,928 | $571,878 | $465,398 | | Total operating expenses | $263,724 | $215,206 | $507,278 | $419,118 | | Operating income | $30,362 | $22,722 | $64,600 | $46,280 | | Income before income taxes | $27,054 | $19,935 | $56,802 | $38,157 | | Provision for income taxes | $7,007 | $7,337 | $15,607 | $13,845 | | Net income | $20,047 | $12,598 | $41,195 | $24,312 | | Net income per common share: Basic | $0.22 | $0.14 | $0.46 | $0.27 | | Net income per common share: Diluted | $0.22 | $0.14 | $0.44 | $0.27 | - Service revenue increased by 23.6% year-over-year in Q2 2025 and by 22.9% in H1 2025[21] - Net income increased by 59.1% year-over-year in Q2 2025 and by 69.4% in H1 2025[21] Unaudited Condensed Consolidated Statements of Comprehensive Income This section details the company's comprehensive income, including net income and other comprehensive income components, for the reported periods Condensed Consolidated Statements of Comprehensive Income (for the three and six months ended June 30, 2025 and 2024) | (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $20,047 | $12,598 | $41,195 | $24,312 | | Unrealized gain on derivative contracts, net | $2,773 | — | $8,055 | — | | Retirement benefit reserves, net | $(28) | $17 | $(49) | $22 | | Foreign currency translation adjustments | $4,729 | $(7,734) | $7,966 | $(11,047) | | Comprehensive income | $27,521 | $4,881 | $57,167 | $13,287 | - Comprehensive income for Q2 2025 was $27,521 thousand, a significant increase from $4,881 thousand in the same period of 2024[24] - Comprehensive income for H1 2025 was $57,167 thousand, a significant increase from $13,287 thousand in the same period of 2024[24] Unaudited Condensed Consolidated Statements of Shareholders' Equity This section presents changes in the company's shareholders' equity, reflecting net income, stock-based compensation, and share transactions - Total shareholders' equity as of June 30, 2025, was $544,550 thousand, an increase from $496,919 thousand as of December 31, 2024[27] - In H1 2025, the company issued common stock for equity award settlements, repurchased common stock, and recognized stock-based compensation expense and net income[27] - 15,000,000 shares of Class B common stock were converted to Class A common stock[27] Unaudited Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities over the reported periods Condensed Consolidated Statements of Cash Flows (for the six months ended June 30, 2025 and 2024) | (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $53,285 | $81,211 | | Net cash used in investing activities | $(31,451) | $(8,088) | | Net cash used in financing activities | $(33,493) | $(18,614) | | Increase (decrease) in cash and cash equivalents | $(11,659) | $54,509 | | Cash and cash equivalents at end of period | $181,916 | $171,133 | - Net cash provided by operating activities in H1 2025 was $53.3 million, a decrease from $81.2 million in the same period of 2024[29] - Net cash used in investing activities significantly increased to $31.5 million in H1 2025, primarily due to increased property and equipment purchases[29] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements 1. Description of Business and Organization This section describes TaskUs, Inc.'s formation, headquarters, core outsourced digital services, and the proposed merger with Blackstone affiliates and co-founders - TaskUs, Inc. was formed in July 2018, headquartered in New Braunfels, Texas, as the acquisition vehicle for TaskUs Holdings, Inc. by investment funds affiliated with Blackstone Inc[32] - The company provides outsourced digital services and next-generation customer experience, primarily offering Digital Customer Experience, Trust + Safety, and AI Services[33][37] - On May 8, 2025, the company entered into a merger agreement to be acquired by Blackstone affiliates, co-founder and CEO Bryce Maddock, and co-founder and President Jaspar Weir (collectively, the "Buyer Group") for $16.50 per share in cash for Class A common stock[34] - The merger is expected to close in H2 2025, after which the company's common stock will no longer be listed on any public market[36] 2. Summary of Significant Accounting Policies This section outlines the company's adherence to US GAAP, key customer and operational geographies, and its election to adopt new accounting standards on a private company timeline - The company's accounting policies comply with U.S. Generally Accepted Accounting Principles (US GAAP), with no material changes to significant accounting policies described in the annual report for this quarterly report[38][39] - The company's primary customers are located in the U.S., with international customers concentrated in Europe; as of June 30, 2025, Customer A accounted for 26% of service revenue and 19% of accounts receivable[42] - The company's main business operations and most employees and fixed assets are located in the Philippines[43] - The company has elected to adopt new or revised accounting standards on a private company timeline[44] 3. Revenue from Contracts with Customers This section details the company's service revenue breakdown by type and geographic location, along with information on unbilled revenue Revenue by Service Type (for the three and six months ended June 30, 2025 and 2024) | (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Digital Customer Experience | $165,082 | $148,352 | $324,944 | $291,843 | | Trust + Safety | $76,451 | $59,066 | $148,911 | $114,338 | | AI Services | $52,553 | $30,510 | $98,023 | $59,217 | | Service revenue | $294,086 | $237,928 | $571,878 | $465,398 | Revenue by Geographic Location of Service Delivery (for the three and six months ended June 30, 2025 and 2024) | (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Philippines | $160,191 | $138,308 | $311,908 | $269,521 | | United States | $32,393 | $25,267 | $65,614 | $50,857 | | India | $37,079 | $29,468 | $72,507 | $58,377 | | Rest of World | $64,423 | $44,885 | $121,849 | $86,643 | | Service revenue | $294,086 | $237,928 | $571,878 | $465,398 | - As of June 30, 2025, net accounts receivable included $104.1 million in unbilled revenue, up from $92.7 million as of December 31, 2024[48] 4. Forward Contracts This section explains the company's use of forward foreign exchange contracts to hedge against currency fluctuations in various foreign currencies, aiming to reduce cash flow volatility - The company hedges anticipated costs denominated in foreign currencies such as the Philippine Peso, Indian Rupee, Mexican Peso, and Colombian Peso through forward foreign exchange contracts to reduce cash flow volatility[49] Notional Amount of Settled Forward Contracts Designated as Cash Flow Hedges (for the three and six months ended June 30, 2025 and 2024) | (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Notional amount of settled forward contracts in Philippine pesos | $46,842 | — | $92,777 | — | | Notional amount of settled forward contracts in Indian rupees | $12,302 | — | $24,101 | — | | Notional amount of settled forward contracts in Mexican pesos | $4,217 | — | $8,598 | — | | Notional amount of settled forward contracts in Colombian pesos | $10,687 | — | $20,845 | — | | Total notional amount of settled forward contracts designated as cash flow hedges | $74,048 | — | $146,321 | — | Notional Amount of Outstanding Forward Contracts Designated as Cash Flow Hedges (as of June 30, 2025 and December 31, 2024) | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Notional amount of outstanding forward contracts in Philippine pesos | $158,121 | $152,803 | | Notional amount of outstanding forward contracts in Indian rupees | $50,459 | $41,819 | | Notional amount of outstanding forward contracts in Mexican pesos | $15,087 | $14,380 | | Notional amount of outstanding forward contracts in Colombian pesos | $40,922 | $35,141 | | Total notional amount of outstanding forward contracts designated as cash flow hedges | $264,589 | $244,143 | - As of June 30, 2025, the cumulative net gain from forward foreign exchange cash flow hedges expected to be reclassified from AOCL to earnings within the next 12 months is $6.0 million[50] 5. Property and Equipment, net This section provides a breakdown of the company's property and equipment, net, highlighting increases primarily in the Philippines, India, and Colombia Property and Equipment, net (as of June 30, 2025 and December 31, 2024) | (in thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Leasehold improvements | $96,462 | $76,171 | | Technology and computers | $131,439 | $115,816 | | Furniture and fixtures | $11,438 | $8,480 | | Construction in process | $4,807 | $5,476 | | Other property and equipment | $21,479 | $16,260 | | Property and equipment, gross | $265,625 | $222,203 | | Accumulated depreciation | $(179,080) | $(155,428) | | Property and equipment, net | $86,545 | $66,775 | - As of June 30, 2025, property and equipment, net, increased to $86,545 thousand, with growth primarily in the Philippines, India, and Colombia[54] 6. Goodwill and Intangibles This section details the changes in goodwill and the composition of intangible assets, noting the impact of foreign currency translation and amortization Changes in Carrying Amount of Goodwill (as of June 30, 2025) | (in thousands) | | | :------------- | :----- | | Balance as of December 31, 2024 | $216,791 | | Foreign currency translation | $2,748 | | Balance as of June 30, 2025 | $219,539 | Intangible Assets Composition (as of June 30, 2025 and December 31, 2024) | (in thousands) | June 30, 2025 Net | December 31, 2024 Net | | :------------- | :---------------- | :-------------------- | | Customer relationships | $140,460 | $148,083 | | Trade names | $23,045 | $24,442 | | Other intangibles | — | — | | Total | $163,505 | $172,525 | - As of June 30, 2025, total goodwill was $219,539 thousand, an increase from December 31, 2024, primarily due to foreign currency translation effects[55] - Net intangible assets decreased from $172,525 thousand as of December 31, 2024, to $163,505 thousand as of June 30, 2025, mainly due to amortization of customer relationships and trade names[55] 7. Long-Term Debt This section outlines the company's long-term debt, including the term loan, effective interest rates, and compliance with debt covenants Current and Non-Current Portions of Debt (as of June 30, 2025 and December 31, 2024) | (in thousands) | June 30, 2025 Total | December 31, 2024 Total | | :------------- | :------------------ | :-------------------- | | Term Loan | $250,425 | $257,176 | | Less: Debt financing fees | $(820) | $(1,010) | | Total | $249,605 | $256,166 | - As of June 30, 2025, the company's total long-term debt (net of debt financing fees) was $249,605 thousand, a decrease from $256,166 thousand as of December 31, 2024[56] - The 2022 Term Loan Facility bears interest at SOFR plus 2.25%, with an effective interest rate of 6.646% as of June 30, 2025[58] - As of June 30, 2025, the company was in compliance with all debt covenants, had no outstanding balance under the 2022 Revolving Credit Facility, and had $190 million available for borrowing[59] 8. Leases This section presents operating lease costs, weighted-average remaining lease term, discount rate, and cash payments for lease liabilities Operating Lease Costs (for the three and six months ended June 30, 2025 and 2024) | (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease costs - Cost of services | $6,160 | $4,642 | $11,886 | $9,119 | - As of June 30, 2025, the weighted-average remaining lease term was 3.5 years, and the weighted-average discount rate was 6.9%[61] - In H1 2025, the company made cash payments for operating lease liabilities of $10,280 thousand and recognized ROU assets from operating lease liabilities of $19,877 thousand[61] 9. Commitments and Contingencies This section details the company's legal proceedings, including class-action lawsuits, derivative actions, and data breach-related litigation, along with its indemnification agreements - The company faces multiple legal proceedings, including the Lozada v. TaskUs, Inc. et al. class action, which reached a $17.5 million settlement agreement on February 24, 2025, fully covered by the company's insurance[63] - Two derivative lawsuits (Eaton v. Maddock, et al. and Tucker v. Dixit, et al.) alleging misrepresentations in public filings prior to the IPO and SPO are currently stayed pending the completion of the merger[64][65] - The company is also involved in several data breach-related class actions, including Gregory Forsberg et al. v. TaskUs, Inc. and Shopify, Inc., with the Gregory Forsberg case dismissed on July 29, 2025[67][69][70] - The company enters into indemnification agreements in the ordinary course of business, committing to indemnify customers, suppliers, and other business partners for losses arising from breaches, cybersecurity incidents, service provision, or intellectual property infringement claims[71] 10. Stock-Based Compensation This section summarizes the company's stock-based compensation activities, including options, RSUs, and PSUs granted, exercised, and forfeited, along with related expenses Summary of Stock-Based Compensation Activity (for the six months ended June 30, 2025) | | Options | RSUs | PSUs | | :-------------------------- | :-------- | :----- | :----- | | Outstanding at January 1, 2025 | 4,846,497 | 4,309,358 | 3,693,417 | | Granted | — | 1,758,292 | 396,198 | | Exercised or released | (943,805) | (1,393,936) | (26,667) | | Forfeited, cancelled, or expired | (1,620) | (272,552) | (3,307,060) | | Outstanding at June 30, 2025 | 3,901,072 | 4,401,162 | 755,888 | Stock-Based Compensation Expense (for the three and six months ended June 30, 2025 and 2024) | (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of services | $250 | $501 | $452 | $1,181 | | Selling, general and administrative expense | $8,057 | $10,620 | $16,604 | $20,175 | | Total | $8,307 | $11,121 | $17,056 | $21,356 | - As of June 30, 2025, total unrecognized stock-based compensation expense was $34.6 million, expected to be recognized over a period of 0.6 to 1.6 years[73] 11. Income Taxes This section provides details on the company's income tax expense and effective tax rates for the reported periods, explaining the factors influencing rate differences - Income tax expense for Q2 2025 was $7.007 million with an effective tax rate of 25.9%, lower than $7.337 million and 36.8% in the same period of 2024[75] - Income tax expense for H1 2025 was $15.607 million with an effective tax rate of 27.5%, lower than $13.845 million and 36.3% in the same period of 2024[76] - The difference between the effective tax rate and the 21% federal statutory tax rate is primarily influenced by state taxes, GILTI inclusion, non-deductible executive compensation, and tax holidays in foreign jurisdictions[76] 12. Earnings Per Share This section presents the calculation of basic and diluted earnings per share, highlighting the increase in EPS for the reported periods Basic and Diluted Earnings Per Share Calculation (for the three and six months ended June 30, 2025 and 2024) | (in thousands, except share and per share data) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $20,047 | $12,598 | $41,195 | $24,312 | | Weighted-average common shares outstanding – basic | 89,493,215 | 88,331,992 | 89,766,782 | 88,563,601 | | Weighted-average common shares outstanding – diluted | 92,576,805 | 91,629,930 | 93,116,173 | 91,739,908 | | Net income per common share: Basic | $0.22 | $0.14 | $0.46 | $0.27 | | Net income per common share: Diluted | $0.22 | $0.14 | $0.44 | $0.27 | - Basic and diluted earnings per share for Q2 2025 were both $0.22, higher than $0.14 in the same period of 2024[79] - Basic earnings per share for H1 2025 was $0.46, and diluted earnings per share was $0.44, both higher than $0.27 in the same period of 2024[79] 13. Accumulated Other Comprehensive Loss This section details the changes in accumulated other comprehensive loss, primarily influenced by foreign currency translation adjustments and unrealized gains on cash flow hedges Summary of Changes in Accumulated Other Comprehensive Income (Loss) (for the three and six months ended June 30, 2025) | (in thousands) | Foreign Currency Translation Adjustments | Retirement Benefit Reserves | Unrealized Gains (Losses) on Cash Flow Hedges | Accumulated Other Comprehensive Loss | | :------------- | :------------------------------------- | :-------------------------- | :------------------------------------ | :----------------------------------- | | Balance as of March 31, 2025 | $(18,422) | $(418) | $1,949 | $(16,891) | | Other comprehensive income (loss) before reclassifications | $4,729 | $(31) | $5,452 | $10,150 | | Income tax effects | — | $3 | $(1,177) | $(1,174) | | Amounts reclassified from accumulated other comprehensive income | — | — | $(1,898) | $(1,898) | | Income tax effects | — | — | $396 | $396 | | Other comprehensive income (loss) | $4,729 | $(28) | $2,773 | $7,474 | | Balance as of June 30, 2025 | $(13,693) | $(446) | $4,722 | $(9,417) | - As of June 30, 2025, accumulated other comprehensive loss was $9,417 thousand, a significant reduction from $25,389 thousand as of December 31, 2024, primarily due to foreign currency translation adjustments and unrealized gains on cash flow hedges[80] 14. Segment Information This section explains that the company operates in a single operating and reportable segment, with resource allocation and performance evaluation based on consolidated net income - The company's CEO, as the chief operating decision maker, allocates resources and assesses performance based on factors such as client demand, capacity, and consolidated net income, thus determining that the company operates in a single operating and reportable segment[82] Major Expenses for Single Segment (for the three and six months ended June 30, 2025 and 2024) | (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Personnel costs (Cost of services) | $152,754 | $120,675 | $296,700 | $236,314 | | Operating costs (Selling, general, and administrative expense) | $49,142 | $43,333 | $97,258 | $86,063 | | Stock-based compensation expense | $8,428 | $11,128 | $17,646 | $21,692 | | Non-operating costs (Selling, general, and administrative expense) | $11,088 | $2,318 | $11,391 | $2,618 | | Other (Cost of services) | $27,562 | $22,698 | $54,584 | $41,780 | | Total operating expenses | $263,724 | $215,206 | $507,278 | $419,118 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This chapter provides management's detailed discussion and analysis of the company's financial condition and operating results for the three and six months ended June 30, 2025, covering business overview, 2025 developments, recent financial highlights, operating results, key client revenue, foreign exchange impact, non-GAAP financial measures, and liquidity and capital resources Overview This section provides an overview of TaskUs as a leading provider of outsourced digital services and next-generation customer experience, emphasizing its scalable platform and culture - TaskUs is a global leader in outsourced digital services and next-generation customer experience, supporting client brands through Digital Customer Experience, Trust + Safety, and AI Services[87][88] - The company's platform is designed for rapid scalability and client growth, attracting new clients and enterprise-level brands through "ridiculously good" outsourced services[89] - The company's culture is central to its operations, aligning with client cultures to attract and retain highly engaged frontline employees, leading to superior outcomes[90] 2025 Developments This section discusses the impact of generative AI investments by clients, the company's efforts to integrate AI into operations, and the proposed merger agreement with Blackstone affiliates and co-founders - The company's clients, including its largest, have announced automation initiatives involving significant investments in generative AI, which TaskUs is supporting, potentially leading to short-term revenue growth but long-term automation of some services[91] - The company is seeking to integrate advanced AI technologies into customer experience operations through partnerships with agent AI technology developers to create new, lasting revenue streams[91] - On May 8, 2025, the company entered into a merger agreement to be acquired by Blackstone affiliates and company co-founders for $16.50 per share in cash for Class A common stock[92] - The merger is expected to close in H2 2025, after which the company's common stock will no longer be listed on any public market[94] Recent Financial Highlights This section presents key financial performance indicators, including service revenue, net income, adjusted net income, and adjusted EBITDA, for the reported periods Recent Financial Highlights (for the three and six months ended June 30, 2025 and 2024) | (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service revenue | $294.1 | $237.9 | $571.9 | $465.4 | | Net income | $20.0 | $12.6 | $41.2 | $24.3 | | Adjusted Net Income | $39.7 | $28.6 | $75.6 | $55.9 | | Adjusted EBITDA | $65.0 | $51.3 | $124.2 | $101.9 | - Service revenue increased by 23.6% in Q2 2025 and 22.9% in H1 2025 year-over-year[95][96] - Net income increased by 59.1% in Q2 2025 and 69.4% in H1 2025 year-over-year[95][96] - Adjusted Net Income and Adjusted EBITDA both showed significant growth in Q2 and H1 2025[96] Results of Operations This section provides a detailed comparison of the company's operating results for the three and six months ended June 30, 2025, and 2024 Comparison of the Three Months Ended June 30, 2025 and 2024 This section compares the company's service revenue, operating expenses, and net income for the second quarters of 2025 and 2024, highlighting growth drivers and cost changes Operating Results Comparison (for the three months ended June 30, 2025 and 2024) | (in thousands, except %) | 2025 | 2024 | Period over Period Change ($) | Period over Period Change (%) | | :----------------------- | :--- | :--- | :---------------------------- | :---------------------------- | | Service revenue | $294,086 | $237,928 | $56,158 | 23.6 % | | Total operating expenses | $263,724 | $215,206 | $48,518 | 22.5 % | | Operating income | $30,362 | $22,722 | $7,640 | 33.6 % | | Net income | $20,047 | $12,598 | $7,449 | 59.1 % | - Service revenue in Q2 2025 grew by 23.6%, primarily driven by AI Services (up 72.2%) and Trust + Safety (up 29.4%)[99] - Revenue by geography showed growth across the Philippines, United States, India, and Rest of World, with the Rest of World experiencing the fastest growth at 43.5%[102] - Operating expenses increased by 22.5%, mainly driven by a $32.5 million increase in personnel costs and $10.2 million in transaction costs, partially offset by a $2.3 million reduction in litigation costs[106][107] Comparison of the Six Months Ended June 30, 2025 and 2024 This section compares the company's service revenue, operating expenses, and net income for the first six months of 2025 and 2024, detailing growth drivers and cost changes Operating Results Comparison (for the six months ended June 30, 2025 and 2024) | (in thousands, except %) | 2025 | 2024 | Period over Period Change ($) | Period over Period Change (%) | | :----------------------- | :--- | :--- | :---------------------------- | :---------------------------- | | Service revenue | $571,878 | $465,398 | $106,480 | 22.9 % | | Total operating expenses | $507,278 | $419,118 | $88,160 | 21.0 % | | Operating income | $64,600 | $46,280 | $18,320 | 39.6 % | | Net income | $41,195 | $24,312 | $16,883 | 69.4 % | - Service revenue in H1 2025 grew by 22.9%, primarily driven by AI Services (up 65.5%) and Trust + Safety (up 30.2%)[112] - Revenue by geography showed growth across the Philippines, United States, India, and Rest of World, with the Rest of World experiencing the fastest growth at 40.6%[115] - Operating expenses increased by 21.0%, mainly driven by a $59.7 million increase in personnel costs and $10.2 million in transaction costs, partially offset by a $2.6 million reduction in litigation costs[119][120] Revenue by Top Clients This section analyzes the concentration of service revenue from the company's top clients and its strategy for client and revenue diversification Revenue Contribution by Top Clients (for the three and six months ended June 30, 2025 and 2024) | | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Top ten clients | 58 % | 55 % | 58 % | 55 % | | Top twenty clients | 71 % | 68 % | 71 % | 68 % | - The company's top ten clients contributed 58% of service revenue, and the top twenty clients contributed 71%, both showing an increase from the prior year[124] - The company's largest client contributed 26% of service revenue in both Q2 and H1 2025, up from 20% in the same periods of 2024[124] - The company's strategy is to deepen relationships with existing clients by cross-selling new solutions and offering services across multiple geographies, while also identifying and targeting high-growth industry verticals and clients for diversification[125] Foreign Currency This section addresses the company's exposure to foreign exchange rate fluctuations, particularly concerning USD-denominated revenue and foreign currency-denominated expenses - As a global company, the company faces foreign exchange rate fluctuation risks, with most revenue denominated in USD but a significant portion of expenses paid in Philippine Pesos, Indian Rupees, Mexican Pesos, and Colombian Pesos[126] Non-GAAP Financial Measures This section discusses the company's use of non-GAAP financial measures like Adjusted Net Income, Adjusted EPS, EBITDA, Adjusted EBITDA, and Free Cash Flow to assess business performance - The company uses Adjusted Net Income, Adjusted EPS, EBITDA, Adjusted EBITDA, Free Cash Flow, and Adjusted EBITDA to Free Cash Flow Conversion Rate as key non-GAAP metrics to evaluate business performance[127] - These non-GAAP measures are not substitutes for GAAP-recognized metrics, but management believes they provide additional information for investors to better understand factors and trends affecting the business[128] Adjusted Net Income This section reconciles adjusted net income to net income, highlighting adjustments for amortization, transaction costs, and stock-based compensation Reconciliation of Adjusted Net Income to Net Income (for the three months ended June 30, 2025 and 2024) | (in thousands, except %) | 2025 | 2024 | Period over Period Change ($) | Period over Period Change (%) | | :----------------------- | :--- | :--- | :---------------------------- | :---------------------------- | | Net income | $20,047 | $12,598 | $7,449 | 59.1 % | | Amortization of intangible assets | $4,997 | $4,982 | $15 | 0.3 % | | Transaction costs | $10,164 | — | $10,164 | 100.0 % | | Operational efficiency costs | $924 | — | $924 | 100.0 % | | Foreign currency losses (gains) | $139 | $(1,312) | $1,451 | NM | | Loss (gain) on disposal of assets | $(114) | $94 | $(208) | NM | | Severance costs | $156 | — | $156 | 100.0 % | | Litigation costs | — | $2,318 | $(2,318) | (100.0)% | | Stock-based compensation expense | $8,428 | $11,128 | $(2,700) | (24.3)% | | Tax impacts of adjustments | $(5,044) | $(1,173) | $(3,871) | 330.0 % | | Adjusted Net Income | $39,697 | $28,635 | $11,062 | 38.6 % | | Net Income Margin | 6.8 % | 5.3 % | | | | Adjusted Net Income Margin | 13.5 % | 12.0 % | | | Reconciliation of Adjusted Net Income to Net Income (for the six months ended June 30, 2025 and 2024) | (in thousands, except %) | 2025 | 2024 | Period over Period Change ($) | Period over Period Change (%) | | :----------------------- | :--- | :--- | :---------------------------- | :---------------------------- | | Net income | $41,195 | $24,312 | $16,883 | 69.4 % | | Amortization of intangible assets | $9,973 | $9,967 | $6 | 0.1 % | | Transaction costs | $10,164 | — | $10,164 | 100.0 % | | Operational efficiency costs | $1,227 | — | $1,227 | 100.0 % | | Foreign currency losses (gains) | $1,449 | $(298) | $1,747 | NM | | Gain on disposal of assets | $(144) | $(83) | $(61) | 73.5 % | | Severance costs | $835 | $487 | $348 | 71.5 % | | Litigation costs | — | $2,618 | $(2,618) | (100.0)% | | Stock-based compensation expense | $17,646 | $21,692 | $(4,046) | (18.7)% | | Tax impacts of adjustments | $(6,710) | $(2,788) | $(3,922) | 140.7 % | | Adjusted Net Income | $75,635 | $55,907 | $19,728 | 35.3 % | | Net Income Margin | 7.2 % | 5.2 % | | | | Adjusted Net Income Margin | 13.2 % | 12.0 % | | | - Adjusted Net Income for Q2 2025 increased by 38.6% to $39.7 million, with Adjusted Net Income Margin improving from 12.0% to 13.5%[130] - Adjusted Net Income for H1 2025 increased by 35.3% to $75.6 million, with Adjusted Net Income Margin improving from 12.0% to 13.2%[134] Adjusted EPS This section reconciles adjusted EPS to GAAP diluted EPS, providing a per-share view of the company's adjusted profitability Reconciliation of Adjusted EPS to GAAP Diluted EPS (for the three and six months ended June 30, 2025 and 2024) | | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP diluted EPS | $0.22 | $0.14 | $0.44 | $0.27 | | Per share adjustments to net income | $0.21 | $0.17 | $0.37 | $0.34 | | Adjusted EPS | $0.43 | $0.31 | $0.81 | $0.61 | | Weighted-average common shares outstanding – diluted | 92,576,805 | 91,629,930 | 93,116,173 | 91,739,908 | - Adjusted EPS for Q2 2025 was $0.43, higher than $0.31 in the same period of 2024[140] - Adjusted EPS for H1 2025 was $0.81, higher than $0.61 in the same period of 2024[140] EBITDA and Adjusted EBITDA This section reconciles EBITDA and Adjusted EBITDA to net income, detailing adjustments for non-operating and non-cash items Reconciliation of EBITDA and Adjusted EBITDA to Net Income (for the three months ended June 30, 2025 and 2024) | (in thousands, except %) | 2025 | 2024 | Period over Period Change ($) | Period over Period Change (%) | | :----------------------- | :--- | :--- | :---------------------------- | :---------------------------- | | Net income | $20,047 | $12,598 | $7,449 | 59.1 % | | Provision for income taxes | $7,007 | $7,337 | $(330) | (4.5)% | | Financing expenses | $4,635 | $5,490 | $(855) | (15.6)% | | Depreciation | $9,867 | $9,978 | $(111) | (1.1)% | | Amortization of intangible assets | $4,997 | $4,982 | $15 | 0.3 % | | EBITDA | $46,553 | $40,385 | $6,168 | 15.3 % | | Transaction costs | $10,164 | — | $10,164 | 100.0 % | | Operational efficiency costs | $924 | — | $924 | 100.0 % | | Foreign currency losses (gains) | $139 | $(1,312) | $1,451 | NM | | Loss (gain) on disposal of assets | $(114) | $94 | $(208) | NM | | Severance costs | $156 | — | $156 | 100.0 % | | Litigation costs | — | $2,318 | $(2,318) | (100.0)% | | Stock-based compensation expense | $8,428 | $11,128 | $(2,700) | (24.3)% | | Interest income | $(1,298) | $(1,361) | $63 | (4.6)% | | Adjusted EBITDA | $64,952 | $51,252 | $13,700 | 26.7 % | | Net Income Margin | 6.8 % | 5.3 % | | | | Adjusted EBITDA Margin | 22.1 % | 21.5 % | | | Reconciliation of EBITDA and Adjusted EBITDA to Net Income (for the six months ended June 30, 2025 and 2024) | (in thousands, except %) | 2025 | 2024 | Period over Period Change ($) | Period over Period Change (%) | | :----------------------- | :--- | :--- | :---------------------------- | :---------------------------- | | Net income | $41,195 | $24,312 | $16,883 | 69.4 % | | Provision for income taxes | $15,607 | $13,845 | $1,762 | 12.7 % | | Financing expenses | $9,298 | $11,028 | $(1,730) | (15.7)% | | Depreciation | $19,870 | $20,767 | $(897) | (4.3)% | | Amortization of intangible assets | $9,973 | $9,967 | $6 | 0.1 % | | EBITDA | $95,943 | $79,919 | $16,024 | 20.1 % | | Transaction costs | $10,164 | — | $10,164 | 100.0 % | | Operational efficiency costs | $1,227 | — | $1,227 | 100.0 % | | Foreign currency losses (gains) | $1,449 | $(298) | $1,747 | NM | | Gain on disposal of assets | $(144) | $(83) | $(61) | 73.5 % | | Severance costs | $835 | $487 | $348 | 71.5 % | | Litigation costs | — | $2,618 | $(2,618) | (100.0)% | | Stock-based compensation expense | $17,646 | $21,692 | $(4,046) | (18.7)% | | Interest income | $(2,896) | $(2,478) | $(418) | 16.9 % | | Adjusted EBITDA | $124,224 | $101,857 | $22,367 | 22.0 % | | Net Income Margin | 7.2 % | 5.2 % | | | | Adjusted EBITDA Margin | 21.7 % | 21.9 % | | | - Adjusted EBITDA for Q2 2025 increased by 26.7% to $65.0 million, with Adjusted EBITDA Margin improving from 21.5% to 22.1%[145] - Adjusted EBITDA for H1 2025 increased by 22.0% to $124.2 million, with Adjusted EBITDA Margin slightly decreasing from 21.9% to 21.7%[149] Free Cash Flow This section reconciles free cash flow to net cash provided by operating activities, highlighting the impact of capital expenditures Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities (for the six months ended June 30, 2025 and 2024) | (in thousands) | 2025 | 2024 | | :------------- | :--- | :--- | | Net cash provided by operating activities | $53,285 | $81,211 | | Purchase of property and equipment | $(31,451) | $(8,088) | | Free Cash Flow | $21,834 | $73,123 | | Conversion of Adjusted EBITDA to Free Cash Flow | 17.6 % | 71.8 % | - Free cash flow for H1 2025 was $21.8 million, a significant decrease from $73.1 million in the same period of 2024, primarily due to reduced operating cash flow and increased property and equipment purchases[154] - The conversion of Adjusted EBITDA to Free Cash Flow decreased from 71.8% in H1 2024 to 17.6% in H1 2025[154] Liquidity and Capital Resources This section details the company's liquidity sources, including cash and credit facilities, net debt, and share repurchase activities, and its ability to meet future financial needs - As of June 30, 2025, the company's primary liquidity sources were $181.9 million in cash and cash equivalents and $190 million available for borrowing under the 2022 Revolving Credit Facility[155] - As of June 30, 2025, the company's total net debt was $249.6 million, and it was in compliance with all debt covenants[156] - In H1 2025, the company repurchased 2,112,247 shares of Class A common stock for $27.7 million and has since suspended its stock repurchase program to align with the merger agreement[157] - The company anticipates that existing cash and credit facilities will be sufficient to meet working capital and capital expenditure needs for the next 12 months[158] Cash Flows This section summarizes the company's cash flows from operating, investing, and financing activities, explaining the key drivers of changes in each category Summary of Cash Flows (for the six months ended June 30, 2025 and 2024) | (in thousands) | 2025 | 2024 | | :------------- | :--- | :--- | | Net cash provided by operating activities | $53,285 | $81,211 | | Net cash used in investing activities | $(31,451) | $(8,088) | | Net cash used in financing activities | $(33,493) | $(18,614) | - Net cash provided by operating activities in H1 2025 was $53.3 million, a decrease from the prior year, primarily due to increased net income offset by changes in operating assets and liabilities[161] - Net cash used in investing activities increased to $31.5 million in H1 2025, mainly due to higher costs for facility construction and technology equipment purchases[162] - Net cash used in financing activities increased to $33.5 million in H1 2025, primarily due to increased stock repurchases and tax payments related to net share settlements[163] Critical Accounting Estimates This section states that there have been no significant changes to the company's critical accounting estimates compared to those disclosed in the annual report - There have been no significant changes to the company's critical accounting estimates in this quarterly report compared to those disclosed in the annual report[164] Recent Accounting Pronouncements This section refers to Note 2, "Summary of Significant Accounting Policies," for information on recently adopted and evaluated accounting pronouncements - For information on recently adopted and evaluated accounting pronouncements, refer to Note 2, "Summary of Significant Accounting Policies," in the financial statements[165] Item 3. Quantitative and Qualitative Disclosures About Market Risk This chapter discloses the company's market risks, primarily foreign currency risk, interest rate risk, and credit risk, and how these risks are managed through measures like forward contracts Foreign Currency Risk This section details the company's exposure to foreign currency risk due to revenue and expense currency mismatches and its use of forward contracts for hedging - The company faces foreign currency risk primarily because most of its revenue is denominated in USD, while a significant portion of its expenses is paid in Philippine Pesos, Indian Rupees, Mexican Pesos, and Colombian Pesos[167] Summary of Foreign Exchange Rates and Changes (for the six months ended June 30, 2025 and 2024) | | Philippine Peso | Indian Rupee | Mexican Peso | Colombian Peso | | :-------------------------------- | :-------------- | :----------- | :----------- | :------------- | | Average exchange rate against the U.S. dollar (Six months ended June 30, 2025) | 57.11 | 86.09 | 19.97 | 4,192.17 | | Average exchange rate against the U.S. dollar (Six months ended June 30, 2024) | 56.90 | 83.23 | 17.11 | 3,922.04 | | Depreciation | 0.4 % | 3.4 % | 16.7 % | 6.9 % | - The company uses forward foreign exchange contracts to hedge against foreign currency fluctuation risks, aiming to reduce volatility in earnings and cash flows related to anticipated transactions and intercompany balances[169] Interest Rate Risk This section describes the company's interest rate risk, primarily from variable-rate borrowings under its credit facility, and quantifies the potential impact of rate changes - The company faces interest rate risk primarily from changes in interest rates on outstanding borrowings under its 2022 Credit Facilities, with all borrowings bearing interest at SOFR plus 2.25%[171] - As of June 30, 2025, the total outstanding principal was $250.4 million, with an effective interest rate of 6.646%; a hypothetical 10% increase or decrease in SOFR would result in an approximate $1.1 million increase or decrease in interest expense over the next 12 months[171] Credit Risk This section addresses the company's credit risk, specifically highlighting the concentration of accounts receivable from a single major customer - As of June 30, 2025, the company's net accounts receivable was $231.4 million, with $43.2 million from one customer, representing approximately 19% of total accounts receivable[172] Item 4. Controls and Procedures This chapter describes the effectiveness of the company's disclosure controls and procedures and changes in internal control over financial reporting Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures, designed to ensure timely and accurate reporting of required information - The company maintains disclosure controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is recorded, processed, summarized, and reported within specified time periods[173] - As of June 30, 2025, the company's Chief Executive Officer and Chief Financial Officer evaluated and concluded that the design and operation of disclosure controls and procedures were effective[174] Changes in Internal Control over Financial Reporting This section states that there were no material changes in the company's internal control over financial reporting during the most recent fiscal quarter - There were no changes in the company's internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[175] PART II. OTHER INFORMATION Item 1. Legal Proceedings This chapter provides information on legal proceedings, claims, and litigation faced by the company by referencing Note 9, "Commitments and Contingencies," to the financial statements - Information on legal proceedings can be found in Note 9, "Commitments and Contingencies," to the financial statements[178] Item 1A. Risk Factors This chapter outlines various risks that could materially and adversely affect the company's financial condition, operating results, or cash flows, with a particular focus on risks related to the proposed merger Risks Related to the Proposed Merger This section details risks associated with the proposed merger, including potential failure to complete, negative impacts on business operations, and financial implications like termination fees - The proposed merger may not be completed on the anticipated terms or timeline, or at all, which could adversely affect the company's stock price, business, financial condition, and results of operations[180] - If the merger is not completed, the company may be required to pay a termination fee of $39.0 million to the merger company and incur substantial merger-related costs[181][187] - The announcement and pendency of the merger could negatively impact the company's business, financial condition, and results of operations, including difficulties in retaining and recruiting key personnel, and potential delays or terminations of collaborations with customers and business partners[183] - Terms in the merger agreement may deter potential competing acquirers or lead to acquisition proposals at a lower price than would otherwise be offered[185] - The company's directors and executive officers have financial interests in the merger that are different from, or in addition to, those of common shareholders[188] - If the merger is completed, shareholders will forgo the opportunity to benefit from any potential future increase in the company's value[189] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This chapter discloses the company's Class A common stock repurchases during the reporting period, including quantities, average prices, and remaining authorization, noting the suspension of the repurchase program due to the merger agreement Issuer Purchases of Equity Securities (for the three months ended June 30, 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) | | :----------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------- | :------------------------------------------------------------------------------------------------- | | April 1, 2025 through April 30, 2025 | 1,169,385 | $12.81 | 1,169,385 | $14,565 | | May 1, 2025 through May 31, 2025 | 192,171 | $13.87 | 192,171 | $11,899 | | June 1, 2025 through June 30, 2025 | — | — | — | $11,899 | | Total | 1,361,556 | $12.96 | 1,361,556 | | - In Q2 2025, the company repurchased 1,361,556 shares of Class A common stock at an average price of $12.96 per share[191] - As of June 30, 2025, $11.9 million remained available for repurchase under the company's stock repurchase plan, which has been suspended due to the merger agreement[191] Item 3. Defaults Upon Senior Securities This chapter states that the company did not experience any defaults upon senior securities during the reporting period - The company did not experience any defaults upon senior securities during the reporting period[193] Item 4. Mine Safety Disclosures This chapter states that mine safety disclosures are not applicable to the company's business - Mine safety disclosures are not applicable to the company[194] Item 5. Other Information This chapter states that the company has no other information to disclose during the reporting period - The company has no other information to disclose during the reporting period[195] Item 6. Exhibits This chapter lists the exhibits filed with the quarterly report, including the merger agreement, organizational documents, voting and support agreements, executive certifications, and XBRL data files - Exhibits include the merger agreement, organizational documents, voting and support agreements, executive certifications, and XBRL data files[196] - The agreements and documents in the exhibits are provided solely to inform of their terms and should not be relied upon for factual information or other disclosures[196] Signatures This chapter contains the company's report signature by the Chief Financial Officer, as required by the Securities Exchange Act of 1934 - This report was signed by Balaji Sekar, Chief Financial Officer of TaskUs, Inc., on August 7, 2025[198]