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What changed in TaskUs, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TaskUs, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+397 added−455 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-06)

Top changes in TaskUs, Inc.'s 2023 10-K

397 paragraphs added · 455 removed · 310 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

65 edited+20 added−48 removed32 unchanged
Biggest changeThe FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records, which in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the corporation, including international subsidiaries, if any, and to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements.
Biggest changeThe FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records, which in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the corporation, including international subsidiaries, if any, and to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements. 9 Table of Contents Globally, other countries in which we operate have enacted anti-bribery laws and/or regulations similar to the FCPA, such as the Anti-Graft and Corrupt Practices Act in the Philippines and the United Kingdom Bribery Act 2010, all of which prohibit companies and their intermediaries from bribing government officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment.
Customer Acquisition: TaskUs supports outbound sales, lead research, lead generation, appointment setting, new customer outreach and activation, retention, and advanced customer conversion from free and low cost subscription/product offerings to offerings of higher value and profitability.
Sales and Customer Acquisition: TaskUs supports outbound sales, lead research, lead generation, appointment setting, new customer outreach and activation, retention, and advanced customer conversion from free and low cost subscription/product offerings to offerings of higher value and profitability.
We believe the principal competitive factors in our business include vendor company culture; ability to act as partners and support innovation; quality of personnel and service; breadth of offering; scalability and global coverage; ability to apply technology to improve efficiency and quality; and pricing.
We believe the principal competitive factors in our business include company culture; ability to act as partners and support innovation; quality of personnel and service; breadth of offering; scalability and global coverage; ability to apply technology to improve efficiency and quality; and pricing.
We identify emerging industry verticals or those going through transformative changes, and we find attractive sub-segments to address these clients’ needs. We have a demonstrated track record of rapidly scaling in the industries that we target.
We identify emerging industry verticals or those going through transformative changes, and we find attractive sub-segments to address these clients’ needs. We have a demonstrated track record of scaling in the industries that we target.
Item 1. Business Overview We are a leading provider of outsourced digital services and next-generation customer experience to the world’s most innovative companies, helping our clients represent, protect and grow their brands.
Item 1. Business Overview We are a provider of outsourced digital services and next-generation customer experience to the world’s most innovative companies, helping our clients represent, protect and grow their brands.
Our website and the information contained on or connected to that site are not incorporated into this Annual Report on Form 10-K. 11 Table of Contents
Our website and the information contained on or connected to that site are not incorporated into this Annual Report on Form 10-K. 10 Table of Contents
We operate in many parts of the world that have experienced government corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices, although adherence to local customs and practices is generally not a defense under United States and 10 Table of Contents other anti-bribery laws.
We operate in many parts of the world that have experienced government corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices, although adherence to local customs and practices is generally not a defense under United States and other anti-bribery laws.
Utilizing primarily offshore and near-shore markets is a central tenet of our service delivery strategy . Since 92% of our revenue in 2022 wa s delivered from non-voice, digital channels or omni-channel services, we are particularly well positioned to leverage an off-shore/near-shore model.
Utilizing primarily offshore and near-shore markets is a central tenet of our service delivery strategy . Since 88% of our revenue in 2023 wa s delivered from non-voice, digital channels or omni-channel services, we are particularly well positioned to leverage an off-shore/near-shore model.
We have multiple agreements across several lines of business with our largest and second largest clients, which generally include a description of the services provided by TaskUs, invoicing and payment terms, the number of TaskUs employees to be assigned to a given campaign in each location in which the work is performed, client obligations for providing headcount forecasting and notice in the event of an increase or decrease in volume, and renewal and termination provisions, including termination for convenience subject to advance notice requirements of varying length.
We have multiple agreements across several lines of business with our largest client, which generally include a description of the services provided by TaskUs, invoicing and payment terms, the number of TaskUs employees to be assigned to a given campaign in each location in which the work is performed, our service level obligations, client obligations for providing headcount forecasting and notice in the event of changes in volume, and renewal and termination provisions, including termination for convenience subject to advance notice requirements of varying length.
At the core of our operations are scaled teams of employees, our TaskUs teammates. These individuals ultimately determine the quality of service we provide our clients and, as such, we are obsessive about the standards of our frontline teammates and our team leaders, the first level of management.
At the core of our operations are scaled teams of employees, our TaskUs teammates. These individuals ultimately determine the quality of service we provide our clients and, as such, we are passionate ab out the standards of our frontline teammates and our team leaders, the first level of management.
We develop thesis-led prospecting strategies, and apply a multi-faceted pipeline generation process to drive engagement with our target clients. We invite them to our conferences, share value-added content and host them at events and virtual “meetups” in an effort to build genuine relationships as their trusted advisors.
We develop thesis-led prospecting strategies, and apply a multi-faceted pipeline generation process to drive engagement with our target clients. We invite them to our conferences, share value-added content, and host them at events to build genuine relationships as trusted advisors.
Our Clients As of December 31, 2022 , we served over 150 clients, the majority of which are innovative technology companies in attractive, high growth industry verticals, including social media, e-commerce, gaming, streaming media, food delivery and ride sharing, Technology, FinTech and HealthTech.
Our Clients As of December 31, 2023 , we served nearly 200 clients, the majority of which are innovative technology companies in attractive, high growth industry verticals, including social media, e-commerce, gaming, streaming media, food delivery and ride sharing, Technology, FinTech and HealthTech.
We have organized our global operating model around our sites, which are run by operations leaders, who act as “Site CEOs.” Our operations are supported by centralized shared services based in the Philippines and India. Each of our sites has at least one leader on-site from each of our support functions, including Human Resources, Workforce Management and Information Technology.
Our agile operating structure, supported by centralized shared services based in the Philippines and India, allows us to serve our clients, and provide teammates flexibility, through various models: On-site: We have organized our global operating model around our sites, which are run by operations leaders, who act as “Site CEOs.” Each of our sites has at least one leader on-site from each of our support functions, including Human Resources, Workforce Management and Information Technology.
To deliver to these standards we offer: • Subject Matter Expertise: We have “SME” teams in each of our primary services—Digital Customer Experience, Trust and Safety and Artificial Intelligence Operations. • Project Management Organization: Our “PMO” is the linchpin between sales and operations, leading the launch process to plan, execute and deliver for client success. 5 Table of Contents • Modern Service Excellence : We use real-time dashboards, via our PowerUs platform, and KPI management to meet and exceed our clients’ expectations.
To deliver to these standards we offer: • Subject Matter Expertise: We have “SME” teams in each of our primary services. • Project Management Organization: Our “PMO” is the linchpin between sales and operations, leading the launch process to plan, execute and deliver for client success. • Modern Service Excellence : We use real-time dashboards and KPI management to meet and exceed our clients’ expectations.
As of December 31, 2022, women made up 51% of our workforce and 47% of our managers at all levels.
As of December 31, 2023, women made up 50% of our workforce and 47% of our managers at all levels.
We have registered or are registering various trademarks and service marks in the United States and other countries, including for “TaskUs.” In some countries we also have common law rights to certain trademarks and service marks, including “TaskUs.” Our ability to obtain trademark registrations varies from country to country, as does the duration of trademark and service mark registrations, which may generally be renewed indefinitely as long as the marks are in use and their registrations are properly maintained.
In some countries we also have common law rights to certain trademarks and service marks. Our ability to obtain trademark registrations varies from country to country, as does the duration of trademark and service mark registrations, which may generally be renewed indefinitely as long as the marks are in use and their registrations are properly maintained.
For the fiscal year ended December 31, 2022 , Digital Customer Experience, Trust and Safety and Artificial Intelligence Services represented 66%, 19% and 15%, respectively, of our total service revenue of $960.5 million compared to 64%, 22% and 14%, respectively, of our total service revenue of $760.7 million for the year ended December 31, 2021.
For the fiscal year ended December 31, 2023 , Digital Customer Experience, Trust and Safety and Artificial Intelligence Services represented 66%, 20% and 14%, respectively, of our total service revenue of $924.4 million compared to 66%, 19% and 15%, respectively, of our total service revenue of $960.5 million for the year ended December 31, 2022.
Under these agreements, our service fees are generally subject to minimums and maximums, depending on whether the actual volume of services provided falls below or exceeds periodic volume forecasts provided by these clients. Our Competition We compete in a large and fragmented market.
Under these agreements, our fees are generally subject to minimums and maximums, depending on whether the actual volume of services provided falls below or exceeds periodic volume forecasts provided by these clients.
We operate as an extension of our clients’ in-house teams delivering key market insights, speed and agility, and frontline feedback on the true customer experience so they can adapt and win quickly in new initiatives.
New Product or Market Launches: We support our clients’ in-house teams delivering key market insights, speed and agility, and frontline feedback on the true customer experience so they can adapt and win quickly in new initiatives.
We position our most skilled teammates to perform the critical support needed to protect end users, detect and eliminate fraud, address unwanted user activity, and manage regulatory compliance. Our Risk and Response services include: • Identity: Our identity solutions help safeguard client platforms while accounting for and servicing know-your-customer (“KYC”) and know-your-business (“KYB”) requirements.
Risk and Response Risk and Response pertains to services designed to protect end users, detect and eliminate fraud, address unwanted user activity, and manage regulatory compliance. Our Risk and Response services include: • Identity: We help safeguard client platforms while accounting for and servicing know-your-customer (“KYC”) and know-your-business (“KYB”) requirements.
We believe companies choose TaskUs because of our deep expertise in working with the world’s most innovative companies , corporate culture, leading employee wellness programs, high quality teammates and strong employee engagement, understanding of complex and rapidly changing industry dynamics, differentiated tech-enabled offerings combined with value added consulting services, and proven ability to rapidly scale.
We believe companies choose TaskUs because of our deep expertise in working with the world’s most innovative companies , corporate culture, leading employee wellness programs, high quality teammates and strong employee engagement, understanding of complex and rapidly changing industry dynamics, differentiated tech-enabled offerings combined with value added consulting services, and proven ability to rapidly scale. 7 Table of Contents Intellectual Property The success of our business depends, in part, on our proprietary technology and intellectual property, including our proprietary processes and know-how.
Furthermore, we sometimes grant a perpetual, worldwide, royalty-free, nonexclusive, transferable and irrevocable license to our clients to use our pre-existing intellectual property, but only to the extent necessary in order to use the software or systems we develop for them.
Furthermore, we sometimes grant a perpetual, worldwide, royalty-free, nonexclusive, transferable and irrevocable license to our clients to use our pre-existing intellectual property, but only to the extent necessary in order to use the software or systems we develop for them. We have registered or are registering various trademarks and service marks in the United States and other countries.
The combination of onsite leadership with scaled shared services allows us to support our Site CEO model in a cost effective manner and execute processes with the appropriate consistency globally while accounting for local nuance. In 2022, we launched PowerUs to streamline and document tried and tested industry practices while balancing global consistency and local compatibility.
The combination of onsite leadership with scaled shared services allows us to support our Site CEO model in a cost effective manner and execute processes with the appropriate consistency globally while accounting for local nuance.
In our 2022 cNPS Survey, 81% of all respondents agreed or strongly agreed that their programs’ operational performance expectations are regularly met.
In 2023, our cNPS was 73, where 83% of all respondents agreed or strongly agreed that their programs’ operational performance expectations are regularly met.
Our Artificial Intelligence Services solutions include: Data Annotation: We refine large sets of training data for our clients by annotating videos, photos, audio clips and text based on their policy specifications. The quality of this training data is based on the accuracy of our annotation and plays a large role in the success of the resulting AI algorithm.
Our Artificial Intelligence Services solutions include: Data Annotation: We refine large sets of training data for our clients by annotating videos, photos, audio clips and text based on their policy specifications.
Our process discipline has allowed us to achieve multiple certifications and compliance standards including Service Organization Report (“SOC 2 Type 2”), HIPAA and PCI-DSS. • Agile Automation: There are often opportunities to continuously improve our efficiency and quality with our own technology.
Our process discipline has allowed us to achieve multiple certifications and compliance standards including Service Organization Report (“SOC 2 Type 2”), ISO 27001, HITRUST and PCI-DSS. 4 Table of Contents • Agile Automation and Generative AI (TaskGPT): We continuously strive to improve our efficiency and quality with our own technology.
Learning Experience : TaskUs provides the curricula, training processes, e-Learning systems, and programs that enable global brands to scale operations, make impactful decisions, build smarter process flows and create high-performing teams. New Product or Market Launches: Our clients are often in a high-stakes race to get a new product launched or enter a new market.
Learning Experience : TaskUs provides the curricula, training processes, e-Learning systems, and programs that enable global brands to scale operations, make impactful decisions, build smarter process flows and create high-performing teams.
We deploy and scale Anti-Money Laundering/Countering the Financing of Terrorism (“AML/CFT”) compliance, sanctions screening, and enhanced due diligence teams and respond to regulatory changes over time. • Fraud: We monitor platform activity for signs of fraud and respond to user-reported complaints, escalating high-priority matters for immediate review. Our fraud investigators identify systemic threats and manage cases to maintain tolerance limits.
We verify the identity of new users, sellers, merchants, and other third parties like hosts and drivers, and support the due diligence process for businesses and higher-risk customers. • Compliance: We deploy and scale Anti-Money Laundering/Countering the Financing of Terrorism (“AML/CFT”) compliance, sanctions screening, and enhanced due diligence teams and respond to regulatory changes over time. • Fraud: We monitor platform activity for signs of fraud and respond to user-reported complaints, escalating high-priority matters for immediate review.
We continually work on our company culture like it is a product we sell in the market, by listening to our employees like we listen to our clients. We leverage this feedback to drive continuous improvement and conduct quality control to ensure global consistency.
We continually work on our company culture like it is a product we sell in the market, by listening to our employees like we listen to our clients. We leverage this feedback to drive continuous improvement of our employee experience globally. Our primary employee-related metric is eNPS, the barometer we use to measure employee engagement.
As we have expanded across the globe, we strive to champion our vision of operational excellence through an employee-centric culture everywhere we operate. As of December 31, 2022, our worldwide Headcount totaled approximately 49,500 people across 27 sites in 13 countries, including one country where operations are expected to start in 2023.
As we have expanded across the globe, we strive to champion our vision of operational excellence through an employee-centric culture everywhere we operate. As of December 31, 2023, our worldwide Headcount totaled approximately 48,200 people across 28 sites in 12 countries delivering services in more than 30 languages.
These agreements also provide that any confidential or proprietary information disclosed or otherwise made available by us remains confidential. 8 Table of Contents We also enter into confidentiality and non-disclosure agreements with our clients.
These agreements also provide that any confidential or proprietary information disclosed or otherwise made available by us remains confidential. We also enter into confidentiality and non-disclosure agreements with our clients. These customary agreements cover our use of our clients’ software systems and platforms as our clients often own the intellectual property in the products we develop for them.
As AI becomes more sophisticated and its applications become more global it can require data sets that are annotated by people who speak various languages and come from varying backgrounds and cultures. We believe that the TaskVerse platform could help us supplement our capabilities to meet these needs.
As AI becomes more sophisticated and its applications become more global it can require data sets that are annotated by people who speak various languages, come from varying backgrounds and cultures, or specialize in unique and highly in-demand skills.
In 2022, 88% o f our Digital CX revenues were generated from non-voice, digital channels or omni-channel services , while the remaining 12% were generated purely from voice channels; even our pure voice work is supported by cloud-based infrastructure. Engagement Lifecycle: When we begin a Digital CX engagement, we often lead with our consulting group.
In 2023, 83% o f our Digital CX reve nues were generated from non-voice, digital channels or omni-channel services, while the remaining 17% were generated purely from voice channels; even our pure voice work is supported by cloud-based and generative AI infrastructure.
We offer the following: • Global Life Coaching: We partner with employees in their pursuit of personal well-being through transformative coaching conversations. • The Resiliency Studio: A psychological health and safety program providing innovative interventions to bolster brain health and protect employees from the potential effects of content moderation. • Division of Wellness + Resiliency Research: We have a dedicated behavioral health research team committed to enhancing employees’ mental health through innovative research and enhanced data collection. • Advanced Services, Consulting, and Technology: We leverage our expertise to help companies assess, create, and deploy culturally competent and comprehensive programming and tools.
We offer the following: • Global Life Coaching: We partner with employees in their pursuit of personal well-being through transformative coaching conversations. • The Resiliency Studio: A psychological health and safety program providing innovative interventions to bolster brain health and equip individuals with the tools to cope with the unique challenges they may encounter. • Division of Wellness + Resiliency Research: A dedicated team focused on behavioral health to advance teammates’ mental health and well-being through innovative research and comprehensive data collection. • Wellness Technology: We specialize in assessing, creating, and deploying culturally competent and comprehensive well-being tools.
Our largest client, Meta, and our second largest client, DoorDash, generated 22% and less than 10% of our revenue for the fiscal year ended December 31, 2022, respectively.
Our top 10 and top 20 clients accounted for 55% and 68% of our revenue for the fiscal year ended December 31, 2023 , respectively. Our largest client, Meta, generated 19% of our revenue for the fiscal year ended December 31, 2023 .
Our Digital Innovation team focuses on rapid prototyping using lightweight technical solutions like browser based extensions, robotic process automation, and productivity and workflow analytics. • Data Science and Analytics: Our Business Intelligence teams apply data science to client data to drive insights back into our operations in a cycle of continuous improvement.
Our Digital Innovation team focuses on rapid prototyping using lightweight technical solutions like browser based extensions, robotic process automation, and productivity and workflow analytics.
While we believe the ability to meet these requirements is within our control, there can be no assurance that we will retain these benefits in the future. 9 Table of Contents The initial term including the subsequent extensions of the income tax holiday (“ITH”) for three of our sites has expired.
While we believe the ability to meet the requirements to maintain these incentives is within our control, there can be no assurance that we will retain these benefits in the future.
We deploy workflows, automation, and case management tools to quickly process chargebacks and disputes, and validate transactions. • Digital Transformation: We build automation technology into our solutions to deliver better quality outcomes faster, improve efficiency and reduce risks. 3 Table of Contents Artificial Intelligence Services Intelligent applications based on Artificial Intelligence are a key facet of digital innovation.
Our fraud investigators identify systemic threats and manage cases to maintain tolerance limits. We deploy workflows, automation, and case management tools to quickly process chargebacks and disputes, and validate transactions. • Digital Transformation: We build automation technology into our solutions to deliver better quality outcomes faster, improve efficiency and reduce risks.
We work with a broad range of clients in different stages of their lifecycle, ranging from start-up companies to well-capitalized and established public companies with scaled operations. Our top 10 and top 20 clients accounted for 58% and 72% of our revenue for the fiscal year ended December 31, 2022 , respectively.
We work with a broad range of clients in different stages of their lifecycle, ranging from start-up companies to well-capitalized and established public companies with scaled operations. Many of our clients retain us on a non-exclusive basis.
New geographies mean new languages and/or capabilities to offer to our clients and increasing opportunities to win new business. We have grown from 18 sites in eight countries in 2020 to 27 sites in 13 countries in 2022.
New geographies mean new languages and/or capabilities to offer to our clients and increasing opportunities to win new business, including clients headquartered in the new countries into which we have expanded. We have grown from 23 sites in 10 countries in 2021 to 28 locations in 12 countries in 2023.
We differentiate our performance with our focus on driving efficiency, based on frontline insights and advanced analytics, so our teammates can deliver higher value services and our culture of employee engagement enhances the customer experience they provide.
Our Digital Customer Experience solutions include: Omni-Channel Customer Care: Protecting and maintaining our clients’ brands makes up a significant portion of our Digital CX services. We differentiate our performance with our focus on driving efficiency, based on frontline insights and advanced analytics, and our culture of employee engagement which enhances the customer experience they provide.
Growth Strategy We intend to continue to grow by ta king advantage of attractive and actionable opportunities, including: Growing with our Current Clients: As our clients grow in size and the complexity of their outsourcing needs increases, we believe we have an opportunity to increase the addressable spend available to TaskUs.
As our clients grow in size, and the complexity of their outsourcing needs increases, we believe we have an opportunity to increase the addressable spend available to TaskUs, including partnering with clients to optimize their outsourcing spend and cross-selling our full portfolio of services. In 2023, 58 current clients signed new statements of work with us.
Vertically aligned business development representatives triage marketing qualified leads, perform outbound outreach to prospects, and generate pipeline while our sales executives and vice presidents focus on deal closure and value delivery. These teams take advantage of skilled proposal, marketing and demand generation resources offshore for support.
Effective and Highly Efficient: We maintain an effective and efficient sales operating model by using industry-leading tools and an offshore sales support model. Vertically aligned business development representatives triage marketing qualified leads, perform outbound outreach to prospects and generate opportunity pipeline while our sales executives focus on deal closure and value delivery.
Today, our AI Services have increased in sophistication and complexity as AI applications have evolved, and we have invested in digital innovation to meet the growing demand in this service offering.
Artificial Intelligence Services We first began supporting AI applications over a decade ago. Today, our AI Services have increased in sophistication and complexity as AI applications have evolved in emerging industries, such as generative AI, where we have invested in specialized skills and digital innovation to meet growing demand.
We expect to continue to grow TaskVerse through continued improvement of platform capabilities, the launch of a dedicated mobile app and enhanced integration with data labeling partners. 6 Table of Contents ______________ * Headcount numbers are approximate Human Capital We believe that serving frontline employees helps us to better serve our clients.
We believe that the TaskVerse platform could help us supplement our capabilities to meet these needs. 5 Table of Contents ______________ * Headcount numbers are approximate Human Capital We believe that serving frontline employees helps us to better serve our clients.
As of December 31, 2022, we served over 150 clients spanning established and emerging industry segments, including e-commerce, FinTech, food delivery and ride sharing, gaming, Technology, HealthTech, social media and streaming media.
As of December 31, 2023, we served nearly 200 clients spanning established and emerging industry segments, including e-commerce, FinTech, food delivery and ride sharing, gaming, Technology, HealthTech, social media and streaming media. Our global, omni-channel delivery model is focused on providing our clients three key services – Digital Customer Experience (“Digital CX”), Trust and Safety and Artificial Intelligence (“AI”) Services.
The audio file must be transcribed and annotated to enable Natural Language Processing and objects in the image files must be tagged to enable Computer Vision. Sensor Processing: Refining algorithms which make decisions based on sensor data requires annotated sets of sensor data from sources such as the LiDAR systems of autonomous vehicles.
Video Processing: Understanding videos requires the segmentation and recombination of two distinct training data sets—audio and visual. The audio file must be transcribed and annotated to enable natural language processing and objects in the image files must be tagged to enable Computer Vision.
Sales and Marketing * Deal duration reflects the number of days between the creation of an opportunity in our opportunity management system and when a contract is signed or lost. This includes opportunities for both New Clients and Existing Clients. We believe TaskUs has developed a strong reputation for its work with recognizable technology companies.
Sales and Go-To-Market * Deal duration reflects the number of days between the creation of an opportunity in our opportunity management system and when a contract is signed or lost.
We won 40 new clients in 2022, achieving a new client win rate of 43%. Expanded Service Offerings: We aim to bolster our portfolio of highly complementary service capabilities by integrating consultative expertise, process automation, and technology that further expand our value proposition to clients.
We aim to bolster our portfolio of highly complementary service capabilities by integrating consultative expertise, process automation, and technology that further expand our value proposition to clients. This may include evaluating M&A opportunities to expand into higher value, specialized services, gain vertical market expertise, or additional capabilities and technologies.
Our primary culture-related goal metric is eNPS, the single most important barometer we use to measure employee engagement. In 2022, our eNPS was 65, and 75% of our employees who participated rated us 9 or 10 on a scale of 10. Our ability to maintain high eNPS scores enables us to drive real business impact.
In 2023, our eNPS was 59, and 69% of our employees who participated rated us 9 or 10 on a scale of 10. We believe happy employees deliver better results, and our ability to maintain high eNPS scores enables us to drive real business impact, including improved attendance and higher retention.
Natural Language Processing: To understand the meaning of phrases, algorithms are trained with large sets of written text that has been annotated based on parts of speech, meaning and sentiment. Video Processing: Understanding videos requires the segmentation and recombination of two distinct training data sets—audio and visual.
For mission critical applications, such as autonomous vehicles, these images often must be labeled down to a single pixel. Natural Language Processing: To understand the meaning of phrases, algorithms are trained with large sets of written text that has been annotated based on parts of speech, meaning and sentiment.
Any failure to comply with applicable data privacy and security laws and regulations could harm our business, results of operations and financial condition.” Tax Several of our sites located within special economic zones in the Philippines benefit from favorable tax treatment provided by registrations with Philippine Economic Zone Authority (“PEZA”) and the Philippine Board of Investment (“BOI”).
Any failure to comply with applicable data privacy and security laws and regulations could harm our business, results of operations and financial condition.” 8 Table of Contents Tax Several of our sites in the Philippines, India, Mexico and Croatia receive tax incentives based on our compliance with specific criteria.
We group our algorithm training services into three phases: learning, generalizing, and predicting. Each of the three phases of development requires distinct support methodologies including quality, training, and knowledge management. Beyond Data Annotation: We have begun moving up the value chain in AI Services to troubleshooting and remediation of AI applications online and in the field.
Beyond Data Annotation: We have begun moving up the value chain in AI Services to troubleshooting and remediation of AI applications online and in the field. Our generative AI services span a wide range of reinforcement learning from human feedback tasks to support the development of multimodal Large Language Models (“LLMs”).
As a result of government regulations and cultural norms, online platforms must maintain increasingly distinct content policies in different geographies. These policies are dynamically updated in response to the latest threats and evolving bad actor behavior. TaskUs advises and supports clients’ policy development, and provides distribution and policy training.
TaskUs Digital CX Consulting : TaskUs provides a suite of services to our clients that need assistance designing their customer experience programs and optimizing their operating environments, including D igital CX strategy, operational excellence and technology assessment & recommendations. 1 Table of Contents Trust and Safety As a result of government regulations and cultural norms, online platforms must maintain increasingly distinct content policies in different geographies which are dynamically updated in response to the latest threats and evolving bad actor behavior.
Our cloud-based technology infrastructure is designed to enable clients to set up operations quickly and seamlessly and allows clients to outsource many of their core processes throughout their company lifecycle. We use data science and process automation to achieve technology-driven efficiency gains. We believe that prioritizing and investing in our frontline employees helps us better serve our clients.
Our delivery model is tailored to meet the needs of modern businesses and digital re-inventors. Our cloud-based technology infrastructure is designed to enable clients to set up operations quickly and seamlessly and allows clients to outsource many of their core processes throughout their company lifecycle.
With hybrid working becoming more common, our Cirrus strategy follows our client needs with some clients deciding to work 100% remotely and other clients utilizing a hybrid model. At TaskUs we have a tethered or hub and spoke model with sites where we can bring employees for orientation, training and team activities, but allows them to work from home predominantly.
We have dedicated leadership in each geography to support our Cirrus model that allows employees to work from home predominantly, with sites for orientation, training and team activities. As of December 31, 2023 , more than 45% of our teammates were working 100% remotely or utilizing a hybrid model.
We align our Sales and Client Services teams to industry verticals, which allows us to develop deep domain expertise to better attract and retain clients, understand their pain points, and provide superior solutions. We leverage our brand position and highly effective sales team to continue to diversify our client base and add more enterprise-class brands to our client list.
This includes opportunities for both New Clients and Existing Clients. 3 Table of Contents Deep Domain Expertise: Our Sales and Client Services teams are organized in industry verticals which allows us to develop deep domain expertise to better attract and grow with clients, understand their pain points, and provide superior solutions.
We believe this approach lowers the total cost of sales and creates repeatability and sustainability by maintaining the entire sales funnel at all times. Delivery and Operations TaskUs operations are designed for agility and scale, with perpetual experimentation and iteration, and a devotion to data-driven decision making.
These teams take advantage of skilled proposal, marketing and demand generation resources offshore for support. We believe this approach lowers the total cost of our sales function and creates repeatability and sustainability by maintaining the entire sales funnel at all times.
In addition to our on-site operations, we utilize an internally developed cloud-based operating model, Cirrus, which is customized to each of our geographies and enables our employees to deliver services remotely on behalf of our clients.
Remote/Hybrid: W e utilize an internally developed cloud-based operating model, Cirrus, which enables our employees to deliver services remotely. Our Cirrus strategy follows our client needs with some clients deciding to work 100% remotely and other clients utilizing a hybrid model.
AI can be leveraged effectively to remove text that is commonly understood to be objectionable and images that have previously been marked as offensive. Human Content Moderation experts step in to discern context, parse novel slang, and identify images that have been modified to intentionally avoid detection.
Our Content Moderation experts possess deep domain knowledge, as well as broad cultural and market expertise, which helps them discern context, parse novel slang, and identify images that have been modified to intentionally avoid detection.
We believe it drives improved attendance as our teammates show up on time and excited to work. We believe happy employees deliver better results and higher retention. The voluntary attrition rate for employees who were employed by TaskUs for more than 180 days was 26.0% f or the year ended December 31, 2022 .
The voluntary attrition rate for employees who were employed by TaskUs for more than 180 days was 25.2% f or the year ended December 31, 2023 . Teammate Development We invest heavily in our teammates' personal and career development. We believe that employees can be their best at work when they are happy, included, and empowered.
Pursuing O pportunistic M&A: We evaluate M&A opportunities to expand into higher value, specialized se rvices, add new geographies or add additional capabilities to support our teammates in delivering exceptional service. 1 Table of Contents Solutions and Services The TaskUs platform is purpose-built and organized around three service offerings: Digital Customer Experience, Trust and Safety and Artificial Intelligence Services.
Solutions and Services The TaskUs platform is purpose-built and organized around three service offerings: Digital Customer Experience, Trust and Safety and Artificial Intelligence Services.
In addition to our full-time and in-house dedicated TaskUs Teammates, Taskers take on tasks such as audio transcription, image annotation, and data collection, among others. With the ability to work flexible hours from anywhere, TaskVerse opens a new dimension to attract, access and engage with the best global talent. During 2022, we executed numerous projects for multiple clients leveraging TaskVerse.
With the ability to work flexible hours from anywhere, TaskVerse opens a new dimension to attract, access and engage with the best global talent.
Trust and Safety Our Trust and Safety offering is focused on helping our clients protect their users, enabling them to maintain trust by creating a safe environment for users to interact. Global Policy Management : Our Trust and Safety organization partners with our clients to apply best practices to policy development and distribution, product design, quality, and training.
Our Trust and Safety organization partners with clients to apply best practices to policy development and distribution, product design, quality, and training. Trust and Safety consists of two primary areas of service: Content Moderation and Risk and Response.
Trust and Safety consists of two primary areas of service: Content Moderation and Risk and Response. Content Moderation Content Moderation pertains to the review and disposition of user and advertiser generated content, which may include removal or labeling of policy violating, offensive or misleading content.
Content Moderation Content Moderation pertains to the review and disposition of user and advertiser generated content, which may include removal or labeling of policy violating, offensiv e or misleading content. We may rely on certain technology to remove content that is commonly understood to be objectionable; however, as a result of increasingly complex policies, decisions are often ambiguous.
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Our global, omni-channel delivery model is focused on providing our clients three key services – Digital Customer Experience (“Digital CX”), Trust and Safety (formerly known as Content Security) and Artificial Intelligence (“AI”) Services (formerly known as AI Operations). Our delivery model is tailored to meet the needs of modern businesses and digital re-inventors.
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We use data science, process automation and transformation, and generative AI to achieve technology-driven efficiency gains. We believe that our distinctive culture which prioritizes investments in the training, well-being, and financial success of our frontline employees helps us attract, develop, and retain talent while differentiating our services to better serve our clients.
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To capture this opportunity, we invest heavily in strategic account management and planning through our Client Services organization to deliver domain expertise, industry insight, and best practices. We use data science and front-line insights to identify new problems to solve, which we proactively present to clients. We believe these approaches unlock additional opportunities for work of greater complexity and importance.
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Highlights of our Content Moderation services include: TaskUs Wellness + Resiliency Department: follows a preventative care approach, leveraging existing best practices in the fields of mental health care, medicine, and occupational health and safety to inform the type, scope and degree of offerings available to our teammates.
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In 2022, 63 current clients signed new statements of work with us. New Client Wins: We thoughtfully enter industry verticals, or sub-verticals, when we identify emerging trends or we see a sizable market where we can take significant share.
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The quality of this training data is based on the accuracy of our annotation and plays a large role in the success of the resulting AI algorithm. 2 Table of Contents Examples of the applications that Data Annotation powers include: Computer Vision: Algorithms which allow a computer to interpret and analyze the visual world simulating the human eye requires millions of high-quality labeled images.
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We are well positioned across multiple commercial markets with substantial addressable spend opportunities where we target companies with a focus on digital transformation and employee engagement. We believe a brand associated with digital innovation is desired by companies wishing to be more agile and looking for a different breed of partner.
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Sensor Processing: Refining algorithms which make decisions based on sensor data requires annotated sets of sensor data from sources such as the LiDAR systems of autonomous vehicles. We group our algorithm training services into three phases: learning, generalizing, and predicting. Each of the three phases of development requires distinct support methodologies including quality, training, and knowledge management.
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Services such as content moderation, anti-money laundering, fraud prevention, our breadth of AI Services and learning experience are areas we believe are particularly attractive and highly relevant for our forward-leaning client base. Expanding Geographically: We plan to continue expanding our geographic footprint to drive growth.
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New Client Wins and Current Client Growth: We leverage our deep domain expertise and highly effective sales team to continue to diversify our client base and add more enterprise-class brands to our portfolio. We won 47 new clients in 2023, achieving a new client win rate of 35%.
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They bring deep expertise in channel strategy, tool selection, talent enablement and operations optimization. Once we have established an operating framework, our Implementations and Operations teams are brought in to build the project plan and execute the strategy.
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Expanding our Addressable Market: We use our strong reputation and expertise serving the digital economy to attract new innovators and enterprise-class brands looking to transform. TaskUs has advanced its recognition and positioning with leading industry analysts and advisors, whom many enterprise buyers turn to for feedback early in their buying journey.
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We identify the critical key performance indicators (“KPIs”) which define success and provide a roadmap for continuous improvement and implement them in real-time management dashboards. We execute these solutions through our team of highly-trained and dedicated omni-channel service experts, whom we call teammates.
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We have complemented our sales team with seasoned talent, experienced in selling into enterprise markets, and invested in additional resources and programs to attract and capture new business opportunities with traditional enterprise-class brands.
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We create a deep connection between our teammates and our clients—we become brand ambassadors for our clients and are deeply integrated in their workflows. Their success is our success. Our Digital Customer Experience solutions include: Omni-Channel Customer Care: Protecting and maintaining our clients’ brands makes up a significant portion of our Digital CX services.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditionally, there could be unauthorized disclosure or use of our technical knowledge, business practices or procedures by such personnel. Any non-competition, non-solicitation or non-disclosure agreements we have with our senior executives or key employees might not provide effective protection to us in light of legal uncertainties and jurisdictional variations associated with the enforceability of such agreements.
Biggest changeAny non-competition, non-solicitation or non-disclosure agreements we have or might in the future have with our senior executives or key employees might not provide effective protection to us in light of legal uncertainties and jurisdictional variations associated with the enforceability of such agreements. 19 Table of Contents Risks Related to Macroeconomic, Geographical and Political Conditions Our results of operations have been, and could in the future be, adversely affected by volatile, unfavorable or uncertain economic and political conditions, particularly in the markets in which our clients and operations are concentrated, and the effects of these conditions on our clients’ businesses.
Our business, and those of our clients, are subject to laws related to content moderation in some jurisdictions. In the United States, the Communications Decency Act (“CDA”) Section 230 provides protection to those who provide “interactive computer services” (e.g., websites, social media platforms) from being liable for the speech of their users (with certain exceptions).
Our business, and those of our clients, are subject to laws related to content moderation in some jurisdictions. In the United States, the Communications Decency Act (“CDA”) Section 230 provides protection to those who provide “interactive computer services” (e.g., websites and social media platforms) from being liable for the speech of their users (with certain exceptions).
Further, our reliance on any individual client for a significant portion of our revenue may give that client a certain a certain degree of pricing leverage against us when negotiating contracts and terms of service and solutions. In addition, competition continues to increase in the markets in which we operate, and we expect competition to further increase in the future.
Further, our reliance on any individual client for a significant portion of our revenue may give that client a certain degree of pricing leverage against us when negotiating contracts and terms of service and solutions. In addition, competition continues to increase in the markets in which we operate, and we expect competition to further increase in the future.
Such litigation, that has or may in the future be instituted against us, as well as responding to reports published by short sellers or other speculation in the press or the investment community, could result in substantial costs and a diversion of our management’s attention and resources.
Such litigation, that has or may in the future be instituted against us, as well as responding to reports published by short sellers or other speculation in the press or the investment community, has and could result in substantial costs and a diversion of our management’s attention and resources.
Among other things, these provisions: • provide that our board of directors will be divided into three classes, as nearly equal in size as possible, with directors in each class serving three-year terms and with terms of the directors of only one class expiring in any given year; • provide for the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% in voting power of the outstanding shares of our capital stock entitled to vote, if the parties to our stockholders agreement and their affiliates cease to beneficially own less than 30% of the total voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors and provide that specified directors designated pursuant to the stockholders agreement may not be removed without cause without the consent of the specified designating party; • our dual class common stock structure, which provides our holders of Class B common stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B common stock; • provide that, subject to the rights of the holders of any preferred stock and the rights granted pursuant to the stockholders agreement, vacancies and newly created directorships may be filled only by the remaining directors, if the parties to our stockholders agreement and their affiliates cease to beneficially own less than 30% of the total voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors; • would allow us to authorize the issuance of shares of one or more series of preferred stock, including in connection with a stockholder rights plan, financing transactions or otherwise, the terms of which series may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent from and after the date on which the parties to our stockholders agreement and their affiliates cease to beneficially own at least 30% of the total voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors and require the consent of our Sponsor in any action by written consent; • provide for certain limitations on convening special stockholder meetings; • provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws and that our stockholders may only amend our bylaws with the approval of 66 2/3% or more of all of the outstanding shares of our capital stock entitled to vote, if the parties to our stockholders agreement and their affiliates beneficially own less than 30% of the total voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors; and • provide that certain provisions of our amended and restated certificate of incorporation may be amended only by the affirmative vote of the holders of at least 66 2/3% in voting power of the outstanding shares of our capital stock entitled to vote thereon, if the parties to our stockholders agreement and their affiliates cease to beneficially own less than 30% of the total voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors; • establish advance notice requirements for nominations for elections to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings; and • provide that, subject to the rights of holders of any preferred stock and the terms of our stockholders agreement, the total number of directors shall be determined exclusively by resolution adopted by the board.
Among other things, these provisions: • provide that our board of directors will be divided into three classes, as nearly equal in size as possible, with directors in each class serving three-year terms and with terms of the directors of only one class expiring in any given year; 40 Table of Contents • provide for the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% in voting power of the outstanding shares of our capital stock entitled to vote, if the parties to our stockholders agreement and their affiliates cease to beneficially own less than 30% of the total voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors and provide that specified directors designated pursuant to the stockholders agreement may not be removed without cause without the consent of the specified designating party; • our dual class common stock structure, which provides our holders of Class B common stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B common stock; • provide that, subject to the rights of the holders of any preferred stock and the rights granted pursuant to the stockholders agreement, vacancies and newly created directorships may be filled only by the remaining directors, if the parties to our stockholders agreement and their affiliates cease to beneficially own less than 30% of the total voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors; • would allow us to authorize the issuance of shares of one or more series of preferred stock, including in connection with a stockholder rights plan, financing transactions or otherwise, the terms of which series may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of common stock; • prohibit stockholder action by written consent from and after the date on which the parties to our stockholders agreement and their affiliates cease to beneficially own at least 30% of the total voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors and require the consent of our Sponsor in any action by written consent; • provide for certain limitations on convening special stockholder meetings; • provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws and that our stockholders may only amend our bylaws with the approval of 66 2/3% or more of all of the outstanding shares of our capital stock entitled to vote, if the parties to our stockholders agreement and their affiliates beneficially own less than 30% of the total voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors; • provide that certain provisions of our amended and restated certificate of incorporation may be amended only by the affirmative vote of the holders of at least 66 2/3% in voting power of the outstanding shares of our capital stock entitled to vote thereon, if the parties to our stockholders agreement and their affiliates cease to beneficially own less than 30% of the total voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors; • establish advance notice requirements for nominations for elections to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings; and • provide that, subject to the rights of holders of any preferred stock and the terms of our stockholders agreement, the total number of directors shall be determined exclusively by resolution adopted by the board.
Operating internationally subjects us to new risks and may increase risks that we currently face, including risks associated with: • compliance with applicable international laws and regulations, including laws and regulations with respect to privacy, data protection, consumer protection, and unsolicited email, and the risk of penalties to our users and individual members of management or employees if our practices are deemed to be out of compliance; • recruiting and retaining talented and capable employees, and maintaining our company culture across our sites; 21 Table of Contents • providing our services and solutions and operating our business across a significant distance, in different languages and among different cultures, including the potential need to modify our services and solutions to ensure that they are culturally appropriate and relevant in different countries; • management of an employee base in jurisdictions, such as Mexico, Greece and Ireland, that do not give us the same employment and retention flexibility as does the United States; • operating in jurisdictions that do not protect intellectual property rights to the same extent as does the United States; • compliance by us and our business partners with anti-corruption laws, import and export control laws, tariffs, trade barriers, economic sanctions, and other regulatory limitations on our ability to provide our platform in certain international markets; • foreign exchange controls that might require significant lead time in setting up operations in certain geographic territories and might prevent us from repatriating cash earned outside the United States; • political and economic instability; • changes in diplomatic and trade relationships, including the imposition of new trade restrictions, trade protection measures, import or export requirements, trade embargoes and other trade barriers; • double taxation of our international earnings and potentially adverse tax consequences due to changes in the income and other tax laws of the United States or the international jurisdictions in which we operate; and • higher costs of doing business internationally, including increased accounting, travel, infrastructure, and legal compliance costs.
Operating internationally subjects us to new risks and may increase risks that we currently face, including risks associated with: • compliance with applicable international laws and regulations, including laws and regulations with respect to privacy, data protection, consumer protection, and unsolicited email, and the risk of penalties to our users and individual members of management or employees if our practices are deemed to be out of compliance; • recruiting and retaining talented and capable employees, and maintaining our company culture across our sites; • providing our services and solutions and operating our business across a significant distance, in different languages and among different cultures, including the potential need to modify our services and solutions to ensure that they are culturally appropriate and relevant in different countries; • management of an employee base in jurisdictions, such as Mexico, Greece and Ireland, that do not give us the same employment and retention flexibility as does the United States; • operating in jurisdictions that do not protect intellectual property rights to the same extent as does the United States; • compliance by us and our business partners with anti-corruption laws, import and export control laws, tariffs, trade barriers, economic sanctions, and other regulatory limitations on our ability to provide our platform in certain international markets; • foreign exchange controls that might require significant lead time in setting up operations in certain geographic territories and might prevent us from repatriating cash earned outside the United States; • political and economic instability; • changes in diplomatic and trade relationships, including the imposition of new trade restrictions, trade protection measures, import or export requirements, trade embargoes and other trade barriers; • double taxation of our international earnings and potentially adverse tax consequences due to changes in the income and other tax laws of the United States or the international jurisdictions in which we operate; and • higher costs of doing business internationally, including increased accounting, travel, infrastructure, and legal compliance costs.
Companies that currently may be or may have been at the time considered our affiliates have from time to time publicly filed and/or provided to us the disclosure reproduced on Exhibit 99.1 of this report, which disclosure is hereby incorporated by reference herein. We do not independently verify or participate in the preparation of these disclosures.
Companies that currently may be or may have been at the time considered our affiliates have from time to time publicly filed and/or provided to us the disclosure reproduced on Exhibit 99.1 of this Annual Report, which disclosure is hereby incorporated by reference herein. We do not independently verify or participate in the preparation of these disclosures.
In particular, a natural disaster, catastrophic event or public health pandemic or epidemic could cause us or our clients to suspend all or a portion of their operations for a significant period of time, result in a permanent loss of resources, or require the relocation of personnel and material to alternate sites that may not be available or adequate.
A natural disaster, catastrophic event or public health pandemic or epidemic could cause us or our clients to suspend all or a portion of their operations for a significant period of time, result in a permanent loss of resources, or require the relocation of personnel and material to alternate sites that may not be available or adequate.
Fluctuations against the U.S. dollar in the local currencies in the countries in which we operate could have a material effect on our results of operations. A majority of our revenues are in U.S. Dollars and our costs are primarily in local currencies, including the U.S. Dollar, Philippine Peso, Indian Rupee, Mexican Peso, Euro and Taiwanese Dollar.
Fluctuations against the U.S. dollar in the local currencies in the countries in which we operate could have a material effect on our results of operations. A majority of our revenues are in U.S. Dollars and our costs are primarily in local currencies, including the U.S. Dollar, Philippine Peso, Indian Rupee, Mexican Peso, Colombian Peso, Euro and Taiwanese Dollar.
Such events could adversely affect global economies, worldwide financial markets and our clients’ levels of business activity and could potentially lead to economic recession, which could impact our clients’ purchasing decisions and reduce demand for our services and solutions and, consequently, adversely affect our business, financial condition, results of operations and cash flows.
Such events could also adversely affect global economies, worldwide financial markets and our clients’ levels of business activity and could potentially lead to economic recession, which could impact our clients’ purchasing decisions and reduce demand for our services and solutions and, consequently, adversely affect our business, financial condition, results of operations and cash flows.
Although we maintain professional liability insurance, product liability insurance, commercial general and property insurance, business interruption insurance, workers’ compensation coverage, and umbrella insurance for certain of our operations, our insurance coverage does not insure against all risks in our operations or all claims we may receive.
Although we maintain professional liability insurance, product liability insurance, commercial general and property insurance, crime insurance, business interruption insurance, workers’ compensation coverage, and umbrella insurance for certain of our operations, our insurance coverage does not insure against all risks in our operations or all claims we may receive.
As we continue to expand our business into new countries, we may encounter economic, regulatory, personnel, technological and other difficulties that increase our expenses or delay our ability to start up our operations or become profitable in such countries.
As we continue to expand our business into new countries or industries, we may encounter economic, regulatory, personnel, technological and other difficulties that increase our expenses or delay our ability to start up our operations or become profitable in such countries or industries.
Further, if we invest in new companies and key human resources needed to use the technology leave the company, we may not be able to realize the return on investment expected. 28 Table of Contents Risks Related to Legal, Regulatory and Tax Matters We are subject to laws and regulations in the United States and other countries in which we operate, including export restrictions, economic sanctions, the FCPA, and similar anti-corruption laws.
Further, if we invest in new companies and key human resources needed to use the technology leave the company, we may not be able to realize the return on investment expected. 29 Table of Contents Risks Related to Legal, Regulatory and Tax Matters We are subject to laws and regulations in the United States and other countries in which we operate, including export restrictions, economic sanctions, the FCPA, and similar anti-corruption laws.
If we are unable to further refine and enhance our solutions or to anticipate innovation opportunities and keep pace with evolving technologies in a timely manner or on a cost effective basis, our solutions could become uncompetitive or obsolete and as a result our clients may terminate their relationship with us or choose to divert their business elsewhere, and our revenue may decline as a result.
If we are unable to further refine and enhance our solutions or to anticipate innovation opportunities and keep pace with evolving technologies, including AI, in a timely manner or on a cost-effective basis, our solutions could become uncompetitive or obsolete and as a result our clients may terminate their relationship with us or choose to divert their business elsewhere, and our revenue may decline as a result.
If a government authority or court makes any adverse determination with respect to project classifications in general or one or more of our independent contractors specifically, we could incur significant costs, including for prior periods, in respect of tax withholding, social security taxes or payments, workers’ compensation and unemployment contributions, and recordkeeping, or 24 Table of Contents we may be required to modify our business model, any of which could materially adversely affect our business, financial condition and results of operations and increase the difficulty in attracting and retaining personnel.
If a government authority or court makes any adverse determination with respect to project classifications in general or one or more of our independent contractors specifically, we could incur significant costs, including for prior periods, in respect of tax withholding, social security taxes or payments, workers’ compensation and unemployment contributions, and recordkeeping, or we may be required to modify our business model, any of which could materially adversely affect our business, financial condition and results of operations and increase the difficulty in attracting and retaining personnel.
Some of our projects require a portion of the work to be undertaken at our clients’ facilities, which are often located outside our employees’ country of residence. The ability of our employees to work in locations around the world may depend on their ability to obtain the required visas and work permits, and this process can be lengthy and difficult.
Some of our projects require a portion of the work to be undertaken at our clients’ facilities, which are often located outside our employees’ countries of residence. The ability of our employees to work in locations around the world may depend on their ability to obtain the required visas and work permits, and this process can be lengthy and difficult.
More generally, future changes in either tax incentives or concessional rates provided by local laws and regulations could require us to pay significant tax liabilities, and we may not have the available cash or borrowing capacity to make the payments, which could materially impair our ability to conduct our business.
Future changes in either tax incentives or concessional rates provided by local laws and regulations could require us to pay significant tax liabilities, and we may not have the available cash or borrowing capacity to make the payments, which could materially impair our ability to conduct our business.
The transportation, hospitality, entertainment, e-commerce, FinTech (including cryptocurrency) and retail industries are particularly sensitive to the economic environment, and tend to decline during general economic downturns. In the past we have experienced, and may in the future experience, substantial variation in revenues from our high growth consumer technology clients, including our FinTech (including cryptocurrency) clients.
The transportation, hospitality, entertainment, e-commerce, FinTech (including cryptocurrency) and retail industries are particularly sensitive to the economic environment, and tend to decline during general economic downturns. In the past we have experienced, and may in the future experience, substantial variation in revenues from our consumer technology clients, including our FinTech (including cryptocurrency) clients.
In addition, wage inflation, whether driven by competition for talent or ordinary course pay increases, may increase our cost of providing services and reduce our profitability if we are not able to pass those costs on to our clients or charge premium prices.
In addition, wage inflation, whether driven by macroeconomic factors, competition for talent or ordinary course pay increases, may increase our cost of providing services and reduce our profitability if we are not able to pass those costs on to our clients or charge premium prices.
Increases in income tax rates, changes in income or other tax laws or disagreements with tax authorities could adversely affect our business, financial condition or results of operations. We are subject to income taxes in the United States and in certain foreign jurisdictions in which we operate.
Increases in income tax rates, changes in income or other tax laws, losses of tax incentives or disagreements with tax authorities could adversely affect our business, financial condition or results of operations. We are subject to income taxes in the United States and in certain foreign jurisdictions in which we operate.
Under these rules, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements.
Under these corporate governance standards, a company of which more than 50% of the voting power in the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements.
In addition, changes in tax laws in some jurisdictions may have an retroactive effect and we may be found to have paid less tax than required in such regions. Compliance with diverse legal requirements is costly, time consuming and requires significant resources.
In addition, changes in tax laws in some jurisdictions may have a retroactive effect and we may be found to have paid less tax than required in such regions. Compliance with diverse legal requirements is costly, time consuming and requires significant resources.
As technology evolves, more tasks currently performed by our team members may be replaced by automation, robotics, artificial intelligence, chatbots and other technological advances, which puts our lower-skill tier one customer care offerings at risk. These technology innovations could potentially reduce our business volumes and related revenues, unless we are successful in adapting and deploying them profitably.
As technology evolves, more tasks currently performed by our team members may be replaced by automation, robotics, AI, chatbots and other technological advances, which puts our lower-skill tier one customer care offerings at risk. These technology innovations could potentially reduce our business volumes and related revenues, unless we are successful in adapting and deploying them profitably.
Further, an increase to our level of indebtedness could: • require us to dedicate an increased portion of our cash flow from operations to payments on our indebtedness, which could reduce the availability of cash flow to fund acquisitions, start-ups, working capital, capital expenditures and other general corporate purposes; 33 Table of Contents • limit our ability to borrow money or sell stock for working capital, capital expenditures, debt service requirements and other purposes; • limit our flexibility in planning for, and reacting to, changes in our industry or business; • make us more vulnerable to unfavorable economic or business conditions; and • limit our ability to make acquisitions or take advantage of other business opportunities.
An increase to our level of indebtedness could: • require us to dedicate an increased portion of our cash flow from operations to payments on our indebtedness, which could reduce the availability of cash flow to fund acquisitions, start-ups, working capital, capital expenditures and other general corporate purposes; • limit our ability to borrow money or sell stock for working capital, capital expenditures, debt service requirements and other purposes; • limit our flexibility in planning for, and reacting to, changes in our industry or business; • make us more vulnerable to unfavorable economic or business conditions; and • limit our ability to make acquisitions or take advantage of other business opportunities.
The loss of any of our 12 Table of Contents major clients or a significant decrease in the volume of work they outsource to us or the price they are willing or able to pay us, if not replaced by new service engagements and revenue, could cause us to incur expenses, including related to severance payments, and materially adversely affect our revenues and results of operations.
The loss of any of our major clients or a significant decrease in the volume of work they outsource to us or the price they are willing or able to pay us, if not replaced by new service engagements and revenue, could cause us to incur expenses, including related to severance payments, and materially adversely affect our revenues and results of operations.
In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, services, products, personnel or operations of acquired companies, particularly if the key personnel of the acquired company choose not to work 22 Table of Contents for us, the acquired company’s technology is not easily compatible with ours or we have difficulty retaining the clients of any acquired business due to changes in management or otherwise.
In particular, we may encounter difficulties assimilating or integrating the businesses, technologies, services, products, personnel or operations of acquired companies, particularly if the key personnel of the acquired company choose not to work for us, the acquired company’s technology is not easily compatible with ours or we have difficulty retaining the clients of any acquired business due to changes in management or otherwise.
We continue to monitor the situation closely to ensure business continuity plans are in place for neighboring countries where we have a presence, but there can be no assurance that such plans will be effective.
We continue to monitor the situations closely to ensure business continuity plans are in place for neighboring countries where we have a presence, but there can be no assurance that such plans will be effective.
See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Trends and Factors Affecting our Performance.” As we increase our revenues from non-U.S. sites or expand our solution delivery or back office footprint to other international locations, this effect may be magnified.
See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Trends and Factors Affecting our Performance.” 18 Table of Contents As we increase our revenues from non-U.S. sites or expand our solution delivery or back office footprint to other international locations, this effect may be magnified.
We also could be required to seek funds through arrangements with partners or others that may require us to relinquish rights or jointly own some aspects of our technologies or products that we would otherwise pursue on our own. We track certain operational metrics with internal systems and tools and do not independently verify such metrics.
We also could be required to seek funds through arrangements with partners or others that may require us to relinquish rights or jointly own some aspects of our technologies or products that we would otherwise pursue on our own. 35 Table of Contents We track certain operational metrics with internal systems and tools and do not independently verify such metrics.
In several countries, a small number of individuals provide services to us as independent contractors. In addition, over 100,000 individuals have accounts on TaskVerse, an open platform that connects a global community of freelancers to complete a variety of tasks in exchange for compensation. Freelancers who perform projects on the TaskVerse are not employees of TaskUs.
In several countries, a small number of individuals provide services to us as independent contractors. In addition, over 6 00,000 individuals have accounts on TaskVerse, an open platform that connects a global community of freelancers to complete a variety of tasks in exchange for compensation. Freelancers who perform projects on the TaskVerse are not employees of TaskUs.
In addition, some contractual provisions protecting against 26 Table of Contents unauthorized use, copying, transfer, and disclosure of our technology may be unenforceable under the laws of jurisdictions outside the United States and the laws of some countries do not protect intellectual property rights to the same extent as the laws of the United States, and as a result we may not be able to protect our technology and intellectual property in all jurisdictions in which we operate.
In addition, some contractual provisions protecting against unauthorized use, copying, transfer, and disclosure of our technology may be unenforceable under the laws of jurisdictions outside the United States and the laws of some countries do not protect intellectual property rights to the same extent as the laws of the United States, and as a result we may not be able to protect our technology and intellectual property in all jurisdictions in which we operate.
We derive a significant portion of our revenues from high-growth consumer technology companies located in the United States. In particular, a substantial portion of our clients are concentrated in the social media, meal delivery and transport industries.
We derive a significant portion of our revenues from consumer technology companies located in the United States. In particular, a substantial portion of our clients are concentrated in the social media, meal delivery and transport industries.
Additional changes in the U.S. tax regime or in how U.S. multinational corporations are taxed on foreign earnings, including changes in how existing tax laws are interpreted or enforced, could adversely affect our business, financial condition or results of operations. We cannot predict the outcome of any specific legislative proposals or amendments to existing treaties.
Additional changes in the U.S. tax regime or in how U.S. multinational corporations are taxed on foreign earnings, including changes in how existing tax laws are interpreted or enforced, could adversely affect our business, financial condition or results of operations. 32 Table of Contents We cannot predict the outcome of any specific legislative proposals or amendments to existing treaties.
These 14 Table of Contents accommodations could result in increased costs and reductions in the availability of employees who can perform content moderation work for our clients. Our content moderation employees may also make claims under workers’ compensation programs or other public or private insurance programs in connection with their employment or applicable labor or other laws.
These accommodations could result in increased costs and reductions in the availability of employees who can perform content moderation work for our clients. Our content moderation employees may also make claims under workers’ compensation programs or other public or private insurance programs in connection with their employment or applicable labor or other laws.
Increases in income tax rates or other changes in income tax laws in any particular jurisdiction could reduce our after-tax income from such jurisdictions and could adversely affect our business, financial condition or results of operations.
Increases in income tax rates, losses of tax incentives or other changes in income tax laws in any particular jurisdiction could reduce our after-tax income from such jurisdictions and could adversely affect our business, financial condition or results of operations.
In particular, our employees may access, use or disclose protected health information in compliance with the requirements of the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical 17 Table of Contents Health Act, and related regulations, which are collectively referred to as HIPAA, and/or related federal and state laws and regulations.
In particular, our employees may access, use or disclose protected health information in compliance with the requirements of the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, and related regulations, which are collectively referred to as HIPAA, and/or related federal and state laws and regulations.
These factors may cause differences in revenues and income among the various quarters of any financial year, which means that the individual quarters of a year may not be predictive of our financial results in any other period. 32 Table of Contents Portions of our business have long sales cycles and long implementation cycles, which require significant resources and working capital.
These factors may cause differences in revenues and income among the various quarters of any financial year, which means that the individual quarters of a year may not be predictive of our financial results in any other period. Portions of our business have long sales cycles and long implementation cycles, which require significant resources and working capital.
If we are unable to comply with these laws and regulations or manage the complexity of our global operations successfully, our business, financial condition and results of operations could be adversely affected. We face substantial competition in our business. The markets in which we compete are highly competitive, highly fragmented and continuously evolving.
If we are unable to comply with these laws and regulations or manage the complexity of our global operations successfully, our business, financial condition and results of operations could be adversely affected. 22 Table of Contents We face substantial competition in our business. The markets in which we compete are highly competitive, highly fragmented and continuously evolving.
Our operating metrics are not necessarily indicative of the historical performance of our business or the results that may be expected for any future period. 34 Table of Contents Our sites operate on leasehold property, and our inability to renew our leases on commercially acceptable terms or at all may adversely affect our results of operations.
Our operating metrics are not necessarily indicative of the historical performance of our business or the results that may be expected for any future period. Our sites operate on leasehold property, and our inability to renew our leases on commercially acceptable terms or at all may adversely affect our results of operations. Our sites operate on leasehold property.
Any failure to maintain effective internal control over financial reporting could adversely affect the results of annual independent registered public accounting firm attestation 36 Table of Contents reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that are filed with the SEC.
Any failure to maintain effective internal control over financial reporting could adversely affect the results of annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that are filed with the SEC.
Also, it is possible that we may be required to pay substantial damages or settlement costs which could have a material adverse effect on our business, financial condition, results of operations and prospects. 30 Table of Contents From time to time, some of our employees spend significant amounts of time at our client’s sites, often in foreign jurisdictions, which expose us to certain risks.
Also, it is possible that we may be required to pay substantial damages or settlement costs which could have a material adverse effect on our business, financial condition, results of operations and prospects. 31 Table of Contents From time to time, some of our employees spend significant amounts of time at our clients’ sites, often in foreign jurisdictions, which expose us to certain risks.
Such loss of trust and negative publicity could cause our 15 Table of Contents existing clients to terminate or reduce the scope of their dealings with us and harm our ability to attract new clients, which would have an adverse effect on our business and results of operations.
Such loss of trust and negative publicity could cause our existing clients to terminate or reduce the scope of their dealings with us and harm our ability to attract new clients, which would have an adverse effect on our business and results of operations.
This may affect our relationships with our clients and could have an adverse effect on our business, financial condition, results of operations and prospects. Any new markets or countries into which we attempt to provide our services and solutions may not be receptive.
This may affect our relationships with our clients and could have an adverse effect on our business, financial condition, results of operations and prospects. Any new markets, industries or countries in which we attempt to provide our services and solutions may not be receptive.
The trading market for our Class A common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price may decline.
The trading market for our Class A common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price may decline.
See also Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Risk.” 18 Table of Contents Our business depends on a strong brand and corporate reputation, and if we are not able to maintain and enhance our brand, our ability to expand our client base will be impaired and our business and operating results will be adversely affected.
See also Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Risk.” Our business depends on a strong brand and corporate reputation, and if we are not able to maintain and enhance our brand, our ability to expand our client base will be impaired and our business and operating results will be adversely affected.
Any failure or perceived failure by us to comply with applicable industry standards and codes of conduct, our privacy policies, or our privacy-related obligations to third-parties, may result in litigation, regulatory investigations, fines, individual claims, commercial liabilities or other liabilities, as well as negative publicity and a potential loss of business.
Any failure or perceived failure by us to comply with applicable industry standards and codes of conduct, our privacy policies, or our privacy-related obligations to third-parties, has in the past and may in the future result in litigation, regulatory investigations, fines, individual claims, commercial liabilities or other liabilities, as well as negative publicity and a potential loss of business.
Further, as we continue to evaluate new solutions and services for our clients, these new solutions or services, or the third-party components we use to provide such solutions, may contain or introduce cybersecurity threats or vulnerabilities to our clients’ information technology networks.
Further, as we continue to evaluate new solutions and services for our clients, including AI initiatives, these new solutions or services, or the third-party components we use to provide such solutions, may contain or introduce cybersecurity threats or vulnerabilities to our clients’ information technology networks.
Furthermore, the availability or performance of our solutions could also be adversely affected by our clients’ and their customers’ and other users’ inability to access the internet. For example, our clients and their customers and other users access 27 Table of Contents our solutions through their internet service providers.
Furthermore, the availability or performance of our solutions could also be adversely affected by our clients’ and their customers’ and other users’ inability to access the internet. For example, our clients and their customers and other users access our solutions through their internet service providers.
Our insurance policies, including our cyber and errors and omissions insurance, may be inadequate to compensate us for the potentially significant losses that may result from claims arising from breaches of our contracts (including breaches that result in the unauthorized access to systems or disclosure of data), disruptions in our services, failures or disruptions to our infrastructure, catastrophic events, the COVID-19 pandemic, disasters or otherwise.
Our insurance policies, including our cyber and errors and omissions insurance, may be inadequate to compensate us for the potentially significant losses that may result from claims arising from breaches of our contracts (including breaches that result in the unauthorized access to systems or disclosure of data), disruptions in our services, failures or disruptions to our infrastructure, catastrophic events, pandemics, disasters or otherwise.
Our rapid growth has been fueled in part by the rapid growth of our major clients in high growth industries, such as social media, meal delivery and transport, e-commerce and FinTech. We may not be able to sustain revenue growth consistent with our recent history or at all.
Our past rapid growth was fueled in part by the rapid growth of our major clients in high-growth industries, such as social media, meal delivery and transport, e-commerce and FinTech. We may not be able to sustain revenue growth consistent with our recent history or at all.
Dollars, whereas some portion of the cost is incurred in foreign currencies, any significant unhedged fluctuations in the currency exchange rates between the U.S. Dollar and the currencies of countries in which we incur costs in local currencies will affect our results of operations and financial statements.
Dollars and revenues are primarily generated in U.S. Dollars, whereas some portion of the cost is incurred in foreign currencies, any significant unhedged fluctuations in the currency exchange rates between the U.S. Dollar and the currencies of countries in which we incur costs in local currencies will affect our results of operations and financial statements.
Natural events, health pandemics (including the COVID-19 pandemic) or epidemics, infrastructure breakdowns, wars, widespread civil unrest, terrorist attacks and other acts of violence involving any of the countries in which we or our clients have operations could adversely affect our operations and client confidence.
Natural events, health pandemics or epidemics, infrastructure breakdowns, wars, widespread civil unrest, terrorist attacks and other acts of violence involving any of the countries in which we or our clients have operations could adversely affect our operations and client confidence.
In addition, any slowdown in the growth of our major clients, or the industries that we serve, may adversely impact the rate of our revenue growth. In addition, the industry in which we operate is continuously evolving.
In addition, any slowdown in the growth of our major clients, or the industries that we serve, may adversely impact the rate of our revenue growth. 23 Table of Contents In addition, the industry in which we operate is continuously evolving.
The introduction of such laws and regulations or the change in interpretation of existing laws and regulations could adversely affect our business, financial condition, results of operations and prospects. The consolidation of our clients or potential clients may adversely affect our business, financial condition, results of operations and prospects.
The introduction of such laws and regulations or the change in interpretation of existing laws and regulations could adversely affect our business, financial condition, results of operations and prospects. 25 Table of Contents The consolidation of our clients or potential clients may adversely affect our business, financial condition, results of operations and prospects.
If we assign intellectual property rights to clients that may be more broadly useful in our business, that would limit or prevent our ability to use such intellectual property rights in our solutions. We may be required to spend significant resources to monitor and protect our intellectual property rights.
If we assign intellectual property rights to clients that may be more broadly useful in our business, that would limit or prevent our ability to use such intellectual property rights in our solutions. 27 Table of Contents We may be required to spend significant resources to monitor and protect our intellectual property rights.
In 37 Table of Contents addition, our ability to pay dividends is limited by our existing indebtedness and may be limited by covenants of other indebtedness we or our subsidiaries incur in the future.
In addition, our ability to pay dividends is limited by our existing indebtedness and may be limited by covenants of other indebtedness we or our subsidiaries incur in the future.
Our revenue growth rate may slow due to a number of factors, which may include slowing demand for our services, increasing competition, decreasing growth of our overall market, our inability to engage and retain a sufficient number of skilled employees or otherwise scale our business, prevailing wages in the markets in which we operate or our failure, for any reason, to capitalize on growth opportunities.
As we continue to grow our business, our revenue growth rates could continue to slow due to a number of factors, which may include slowing demand for our services, increasing competition, decreasing growth of our overall market, our inability to engage and retain a sufficient number of skilled employees or otherwise scale our business, prevailing wages in the markets in which we operate or our failure, for any reason, to capitalize on growth opportunities.
While we utilize hedging contracts, an appreciation of local currencies against the U.S. Dollar would cause a net adverse impact to our profitability. Our exchange rate forward contracts are not designated hedges under Accounting Standards Codification Topic 815, Derivatives and Hedging. Because our financial statements are presented in U.S. Dollars and revenues are primarily generated in U.S.
While we utilize hedging contracts for some local currencies, an appreciation of local currencies against the U.S. Dollar would cause a net adverse impact to our profitability. Our exchange rate forward contracts are not designated hedges under Accounting Standards Codification Topic 815, Derivatives and Hedging. Because our financial statements are presented in U.S.
Such unauthorized or other improper access, disclosures, security breaches or incidents may be inadvertent, or 13 Table of Contents may be caused by intentional misconduct or other malfeasance or by human error or technical malfunctions, including those caused by hackers, employees, contractors, or vendors.
Such unauthorized or other improper access, disclosures, security breaches or incidents may be inadvertent, or may be caused by intentional misconduct or other malfeasance or by human error or technical malfunctions, including those caused by hackers, employees, contractors, or vendors.
These anti-takeover provisions and other provisions under our amended and restated certificate of incorporation, 39 Table of Contents amended and restated by laws or Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our Class A common stock.
These anti-takeover provisions and other provisions under our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our Class A common stock.
Any claims 29 Table of Contents or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.
Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.
We are required to separately file with the SEC a notice when such activities have been disclosed in this report, and the SEC is required to post such notice of disclosure on its website and send the report to the President and certain US Congressional committees.
We are required to separately file with the SEC a notice when such activities have been disclosed, and the SEC is required to post such notice of disclosure on its website and send the report to the President and certain U.S. Congressional committees.
As 23 Table of Contents federal or state minimum wage rates increase, we may need to increase the wages paid to our hourly team members. Further, should we fail to increase our wages competitively in response to increasing wage rates, our attrition could increase and the quality of our workforce could decline, causing our client service to suffer.
As federal or state minimum wage rates increase, we may need to increase the wages paid to our hourly team members. Further, should we fail to increase our wages competitively in response to increasing wage rates, our attrition could increase and the quality of our workforce could decline, causing our client service to suffer. Additionally, the U.S.
Risks Related to Ownership of our Class A Common Stock Our Sponsor and our Co-Founders control us and their interests may conflict with ours or yours in the future. Our Sponsor and our Co-Founders beneficially owned approximately 96.3% of the combined voting power of our Class A common stock and Class B common stock as of December 31, 2022.
Risks Related to Ownership of our Class A Common Stock Our Sponsor and our Co-Founders control us and their interests may conflict with ours or yours in the future. Our Sponsor and our Co-Founders beneficially owned approximately 97.6% of the combined voting power of our Class A common stock and Class B common stock as of December 31, 2023.
Our success depends, in part, upon our ability to anticipate our clients’ needs by adapting to market and technology trends. We may need to invest significant resources in research and development to maintain and improve our solutions and respond to our clients’ changing needs.
Our success depends, in part, upon our ability to anticipate our clients’ needs by adapting to market and technology trends. We may need to invest significant resources in research and development to maintain and improve our solutions, adapt to technological advancements, including AI, and respond to our clients’ changing needs.
Our clients, regulators, or other third parties may attempt to hold us liable, through contractual indemnification clauses or directly, for any such losses or damages resulting from such an attack. Trust and Safety (formerly known as Content Security), including content monitoring and moderation services, is a large portion of our business.
Our clients, regulators, or other third parties may attempt to hold us liable, through contractual indemnification clauses or directly, for any such losses or damages resulting from such an attack. 14 Table of Contents Trust and Safety, including content monitoring and moderation services, is a large portion of our business.
Our sites operate on leasehold property. Our leases are subject to renewal and we may be unable to renew such leases on commercially acceptable terms or at all.
Our leases are subject to renewal and we may be unable to renew such leases on commercially acceptable terms or at all.
Our Sponsor and our Co-Founders are parties to a stockholders agreement and beneficially own approximately 96.3% of the combined voting power of all classes of our stock entitled to vote generally in the election of directors. As a result, we are a “controlled company” within the meaning of the corporate governance standards of Nasdaq.
Our Sponsor and our Co-Founders are parties to a stockholders agreement and, as of the date of this Annual Report, beneficially own approximately 97.6% of the combined voting power of all classes of our stock entitled to vote generally in the election of directors. As a result, we are a “controlled company” within the meaning of Nasdaq corporate governance standards.
In addition, if we experience an increase in the time required to bill and collect for our services or if our clients are delayed in making payments or stop payments altogether, our cash flows could be adversely affected, which in turn could adversely affect our ability to make necessary investments and, therefore, could affect our results of operations.
In addition, if we experience an increase in the time required to bill and collect for our services or if our clients are delayed in making payments or stop payments altogether, our cash flows could be adversely affected, which in turn could adversely affect our ability to make necessary investments and, therefore, could affect our results of operations. 34 Table of Contents We are exposed to adverse changes in our clients’ payment policies.
Our Class A common stock has one vote per share and our Class B common stock has ten votes per share. Our Sponsor and our Co-Founders held in the aggregate 96.3% of the combined voting power of our Class A common stock and our Class B common stock as of December 31, 2022.
Our Class A common stock has one vote per share and our Class B common stock has ten votes per share. Our Sponsor and our Co-Founders held in the aggregate 97.6% of the combined voting power of our Class A common stock and our Class B common stock as of December 31, 2023.
The IRA, among other things, includes a new 15% corporate minimum tax as well as a 1% excise tax on corporate stock repurchases completed after December 31, 2022, subject to certain exceptions.
The IRA, among other things, includes a 15% corporate minimum tax as well as a 1% excise tax on corporate stock repurchases completed after December 31, 2022, subject to certain exceptions. The IRA applies to our repurchases pursuant to our stock repurchase plan.
For example, controlled companies, within one year of the date of the listing of their Class A common stock: • are not required to have a board of directors that is composed of a majority of “independent directors,” as defined under the Nasdaq rules; • are not required to have a compensation committee that is composed entirely of independent directors; and • are not required to have director nominations be made, or recommended to the full board of directors, by our independent directors or by a nominations committee that is composed entirely of independent directors.
For example, controlled companies: • are not required to have a board of directors that is composed of a majority of “independent directors,” as defined under Nasdaq rules; • are not required to have a compensation committee that is composed entirely of independent directors; and • are not required to have director nominations be made, or recommended to the full board of directors, by our independent directors or by a nominations committee that is composed entirely of independent directors.
We do not have employees, facilities, or operations in either Russia or Ukraine; however, the continuation of the conflict or its political expansion into surrounding geographic areas could directly impact us, our clients, vendors or subcontractors, which could impact our operations and financial performance.
Although we do not have employees, facilities, or operations in Russia or Ukraine or Israel or Palestine, the continuation of conflicts or political expansion into surrounding geographic areas could directly impact us, our clients, vendors or subcontractors, which could impact our operations and financial performance.
There are a number of factors relating to our clients that are outside of our control, which have in some cases led them to terminate or not renew a contract or project with us, be unable to pay us, or restrict our agreements with other clients, including: • financial difficulties; • a demand for price reductions by that client; • corporate restructuring, or mergers and acquisitions activity; • change in our client’s outsourcing strategy to retain the same type and volume of work with TaskUs but to enter into lower cost contracts and move work to another lower-cost TaskUs support location; • change in strategic priorities or economic conditions, resulting in elimination of the impetus for the project or a reduced level of technology related spending; • change in outsourcing strategy resulting in moving more work to the client’s in-house technology departments or to our competitors or transfer to a lower cost TaskUs support location; • government regulation that affects our clients’ business; • restrictions on serving certain potential clients that may be viewed as competing with certain existing clients; • replacement of existing software with packaged software supported by licensors; and • uncertainty and disruption to the global markets.
There are a number of factors relating to our clients that are outside of our control, which have in some cases led them to terminate or not renew a contract or project with us, be unable to pay us, or restrict our agreements with other clients, including: • financial difficulties; • a demand for price reductions by that client; • corporate restructuring, or mergers and acquisitions activity; • change in our client’s outsourcing strategy to retain the same type and volume of work with TaskUs but to enter into lower cost contracts and move work to another lower-cost TaskUs support location; • change in strategic priorities or economic conditions, resulting in elimination of the impetus for the project or a reduced level of technology related spending; • change in outsourcing strategy resulting in moving more work to the client’s in-house departments or to our competitors or transfer to a lower cost TaskUs support location; • increasing reliance on technology and AI to improve customer experience and automate tasks; • government regulation that affects our clients’ business; • restrictions on serving certain potential clients that may be viewed as competing with certain existing clients; • replacement of existing software with packaged software supported by licensors; and • uncertainty and disruption to the global markets. 11 Table of Contents Termination or non-renewal of a client contract could cause us to experience a higher than expected number of unassigned employees and thus compress our margins until we are able to reallocate our headcount.
We also had 7,268,641 shares of Class A common stock issuable in respect of outstanding restricted stock units, including awards with market conditions, granted under the 2021 Omnibus Incentive Plan. Additionally, we have 9,132,323 shares of Class A common stock available for grant under our Omnibus Incentive Plan.
We also had 7,237,736 shares of Class A common stock issuable in respect of outstanding restricted stock units, including awards with market conditions, granted under the 2021 Omnibus Incentive Plan. Additionally, we have 7,371,346 shares of Class A common stock available for grant under our 2021 Omnibus Incentive Plan.
Our top five clients accounted for 44% of our revenue for the fiscal year ended December 31, 2022. Our top client accounted for an aggregate of 22% of our revenue for the fiscal year ended December 31, 2022, across multiple service offerings.
Our top five clients accounted for 41% of our revenue for the fiscal year ended December 31, 2023. Our top client accounted for an aggregate of 19% of our revenue for the fiscal year ended December 31, 2023, across multiple service offerings.
Additionally, the U.S. Department of Labor has issued regulations increasing the minimum threshold for overtime “exempt” employees, and additional increases may be proposed, which could result in a substantial increase in our payroll expense.
Department of Labor has issued regulations increasing the minimum threshold for overtime “exempt” employees, and additional increases may be proposed, which could result in a substantial increase in our payroll expense or other changes to our employment practices.
As of December 31, 2022, we had 7,723,711 shares of Class A common stock issuable in respect of outstanding stock options granted under the 2019 Stock Incentive Plan and the 2021 Omnibus Incentive Plan with a weighted average exercise price of $12.98 per share.
As of December 31, 2023, we had 7,523,971 shares of Class A common stock issuable in respect of outstanding stock options granted under the 2019 Stock Incentive Plan and the 2021 Omnibus Incentive Plan with a weighted average exercise price of $14.19 per share.
Our profitability is also a function of our ability to control our costs and improve our efficiency. As we increase the number of our employees and grow our business, we may not be able to manage a significantly larger and more geographically diverse workforce and our profitability may suffer.
As we increase the number of our employees and grow our business, we may not be able to manage a significantly larger and more geographically diverse workforce and our profitability may suffer.
Our business prospects will suffer if we are unable to continue to anticipate our clients’ needs by adapting to market and technology trends, investing in technology as it develops, and adapting our services and solutions to changes in technology and client expectations. The use of technology in our industry has and is expected to continue to expand and change rapidly.
Our business prospects will suffer if we are unable to continue to anticipate our clients’ needs by adapting to market and technology trends, investing in technology as it develops, and adapting our services and solutions to changes in technology and client expectations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe operate from time to time in temporary sites to accommodate growth before new sites are available. We lease all of our properties and do not own any real property. We intend to procure additional space in the future as we continue to add employees and expand geographically. Item 3.
Biggest changeWe operate from time to time in temporary sites to accommodate growth before new sites are available. We lease all of our properties and do not own any real property. We intend to procure additional space in the future as we continue to add employees and expand geographically.
Item 2. Properties As of December 31, 2022 , we leased approximately 1.5 million square feet of office space around the world, including our designated corporate headquarters located in New Braunfels, Texas. Our leases usually have a range of expiration dates from two to five years, and typically include a renewal option for an additional term.
Item 2. Properties As of December 31, 2023 , we leased approximately 1.6 million square feet of office space around the world, including our designated corporate headquarters located in New Braunfels, Texas. Our leases usually have a range of expiration dates from two to five years, and typically include a renewal option for an additional term.
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Legal Proceedings The information required with respect to this item can be found under Note 10, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements included in this Annual Report and is incorporated by reference into this Item 3. Item 4. Mine Safety Disclosures Not applicable. 40 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+2 added−1 removed5 unchanged
Biggest changePurchases of Equity Securities by the Issuer During the three months ended December 31, 2022, our purchases Class A common stock were as follows: Period Total number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) October 1, 2022 through October 31, 2022 665,397 $ 19.57 665,397 $ 73,275 November 1, 2022 through November 30, 2022 245,623 $ 17.27 245,623 $ 69,033 December 1, 2022 through December 31, 2022 — — — $ — Total 911,020 911,020 (1) On September 7, 2022, our board of directors authorized the commencement of a share repurchase program, which authorizes us to purchase up to $100.0 million of shares of our Class A common stock from time to time through open market purchases, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act.
Biggest changeIssuer Purchases of Equity Securities During the three months ended December 31, 2023, our purchases of Class A common stock were as follows: Period Total number of Shares Purchased (1) Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in thousands) October 1, 2023 through October 31, 2023 1,236,503 $ 8.88 1,236,503 $ 65,515 November 1, 2023 through November 30, 2023 695,971 10.83 695,971 57,974 December 1, 2023 through December 31, 2023 59,151 12.09 59,151 57,260 Total 1,991,625 $ 9.66 1,991,625 (1) On May 8, 2023, the Company announced that the Board of Directors of the Company authorized a $100.0 million increase to the Company's share repurchase program, increasing the total authorization to $200.0 million, with the total amount remaining available after the increase being exclusive of any commissions, fees or excise taxes.
Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. As of December 31, 2022, there were seven stockholders of record of our Class B common stock.
Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. As of December 31, 2023, there were seven stockholders of record of our Class B common stock.
The graph assumes that $100 was invested (with reinvestment of all dividends) at the market close on June 11, 2021, the date our common stock began trading on the 41 Table of Contents Nasdaq, in our Class A common stock, the S&P 500 Index and the S&P IT Consulting and Other Services Index.
The graph assumes that $100 was invested (with reinvestment of all dividends) at the market close on June 11, 2021, the date our common stock began trading on the Nasdaq, in our Class A common stock, the S&P 500 Index and the S&P IT Consulting and Other Services Index.
The stock price performance of the following graph is not necessarily indicative of future stock price performance. Item 6. [Reserved] 42 Table of Contents
The stock price performance of the following graph is not necessarily indicative of future stock price performance. Item 6. [Reserved] 46 Table of Contents
Our Class B common stock is not listed on any stock exchange nor traded on any public market. Holders of Record As of December 31, 2022, there were 129 stockholders of record of our Class A common stock, and the closing price of our Class A common stock was $16.90 per share as reported on the Nasdaq.
Our Class B common stock is not listed on any stock exchange nor traded on any public market. Holders of Record As of December 31, 2023, there were 110 stockholders of record of our Class A common stock, and the closing price of our Class A common stock was $13.07 per share as reported on the Nasdaq.
The repurchase program terminates on December 31, 2024, and may be modified, suspended or discontinued at any time at our discretion. The program does not obligate the Company to acquire any amount of Class A common stock. (2) Average price paid per share includes costs associated with the repurchases. Recent Sale of Unregistered Securities and Use of Proceeds None.
The repurchase program terminates on December 31, 2024, and may be modified, suspended or discontinued at any time at our discretion. The program does not obligate the Company to acquire any amount of Class A common stock. (2) Average price paid per share excludes commissions and other costs associated with the repurchases.
Stock Performance Graph This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act, or the Exchange Act.
Stock Performance Graph This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act, or the Exchange Act. 45 Table of Contents The following graph shows a comparison of the cumulative total return for our Class A common stock, the Standard & Poor’s (“S&P”) 500 Index and the S&P IT Consulting and Other Services Index.
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The following graph shows a comparison of the cumulative total return for our Class A common stock, the Standard & Poor’s (“S&P”) 500 Index and the S&P IT Consulting and Other Services Index.
Added
Pursuant to our share repurchase program, we may repurchase shares of our Class A common stock from time to time through open market purchases, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act.
Added
Recent Sale of Unregistered Securities and Use of Proceeds None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeProvision for (Benefit From) Income Taxes Provision for (benefit from) income taxes consists primarily of income taxes related to U.S. federal and state income taxes and income taxes in foreign jurisdictions in which we conduct business. 46 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 The following table sets forth our consolidated statement of income information for the years ended December 31, 2022 and 2021: Year ended December 31, Period over Period Change (in thousands) 2022 2021 ($) (%) Service revenue $ 960,489 $ 760,703 $ 199,786 26.3 % Operating expenses: Cost of services 558,761 431,736 127,025 29.4 % Selling, general, and administrative expense 260,003 335,312 (75,309) (22.5) % Depreciation 37,915 29,038 8,877 30.6 % Amortization of intangible assets 19,882 18,847 1,035 5.5 % Loss on disposal of assets 31 52 (21) (40.4) % Total operating expenses 876,592 814,985 61,607 7.6 % Operating income (loss) 83,897 (54,282) 138,179 NM Other expense 7,443 177 7,266 NM Financing expenses 11,921 6,504 5,417 83.3 % Income (loss) before income taxes 64,533 (60,963) 125,496 NM Provision for (benefit from) income taxes 24,111 (2,265) 26,376 NM Net income (loss) $ 40,422 $ (58,698) $ 99,120 NM NM: not meaningful Service revenue Service revenue for the years ended December 31, 2022 and 2021 was $960.5 million and $760.7 million, respectively.
Biggest changeProvision for (Benefit From) Income Taxes Provision for (benefit from) income taxes consists primarily of income taxes related to U.S. federal and state income taxes and income taxes in foreign jurisdictions in which we conduct business. 50 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table sets forth certain historical consolidated financial information for the years ended December 31, 2023 and 2022: Year ended December 31, Period over Period Change (in thousands) 2023 2022 ($) (%) Service revenue $ 924,365 $ 960,489 $ (36,124) (3.8) % Operating expenses: Cost of services 538,745 558,761 (20,016) (3.6) % Selling, general, and administrative expense 228,523 260,003 (31,480) (12.1) % Depreciation 40,391 37,915 2,476 6.5 % Amortization of intangible assets 20,346 19,882 464 2.3 % Loss on disposal of assets 1,322 31 1,291 NM Total operating expenses 829,327 876,592 (47,265) (5.4) % Operating income 95,038 83,897 11,141 13.3 % Other expense (income), net (1,711) 7,443 (9,154) NM Financing expenses 21,717 11,921 9,796 82.2 % Income before income taxes 75,032 64,533 10,499 16.3 % Provision for income taxes 29,342 24,111 5,231 21.7 % Net income $ 45,690 $ 40,422 $ 5,268 13.0 % NM: not meaningful Service revenue Service revenue by service offering The following table presents the breakdown of our service revenue by service offering for each period: Year ended December 31, Period over Period Change (in thousands) 2023 2022 ($) (%) Digital Customer Experience $ 605,943 $ 637,587 $ (31,644) (5.0) % Trust and Safety 186,742 178,409 8,333 4.7 % AI Services 131,680 144,493 (12,813) (8.9) % Service revenue $ 924,365 $ 960,489 $ (36,124) (3.8) % Digital Customer Experience was primarily driven by a decrease from existing clients in FinTech, Social Media, On Demand Travel + Transportation and HealthTech.
Overview We are a provider of outsourced digital services and next-generation customer experience to the world’s most innovative companies, helping our clients represent, protect and grow their respective brands. We serve our clients to support their end customers’ urgent needs, navigate an increasingly-complex compliance landscape, handle sensitive tasks, including online content moderation and enable artificial intelligence technology and automation.
Overview We are a provider of outsourced digital services and next-generation customer experience to the world’s most innovative companies, helping our clients represent, protect and grow their brands. We serve our clients to support their end customers’ urgent needs, navigate an increasingly-complex compliance landscape, handle sensitive tasks, including online content moderation and enable artificial intelligence technology and automation.
We were in compliance with all debt covenants as of December 31, 2022. Substantially all assets of our direct wholly owned subsidiary TU MidCo, Inc., its wholly owned subsidiary TU BidCo, Inc. and its material wholly owned domestic subsidiaries are pledged as collateral under the 2022 Credit Agreement, subject to certain customary exceptions.
We were in compliance with all debt covenants as of December 31, 2023. Substantially all assets of our direct wholly owned subsidiary TU MidCo, Inc., its wholly owned subsidiary TU BidCo, Inc. and its material wholly owned domestic subsidiaries are pledged as collateral under the 2022 Credit Agreement, subject to certain customary exceptions.
Depreciation Depreciation is computed on the straight-line basis over the estimated useful life of our property and equipment assets, generally three to five years or, for leasehold improvements, over the term of the lease, whichever is shorter.
Depreciation Depreciation is computed on a straight-line basis over the estimated useful life of our property and equipment assets, generally three to five years or, for leasehold improvements, over the term of the lease, whichever is shorter.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, provision for income taxes, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.
The preparation of these consolidated financial statements requires us to make estimates and assumptio ns that affect the reported amounts of assets, liabilities, revenue, costs and expenses, provision for income taxes, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.
Our strategy is to win new clients and further grow with our existing ones in order to achieve meaningful client and revenue diversification over time. 50 Table of Contents Foreign Currency As a global company, we face exposure to movements in foreign currency exchange rates.
Our strategy is to win new clients and further grow with our existing ones in order to achieve meaningful client and revenue diversification over time. 53 Table of Contents Foreign Currency As a global company, we face exposure to movements in foreign currency exchange rates.
Net cash provided by operating activities for the year ended December 31, 2022 reflects net income of $40.4 million, as well as the add back for non-cash charges totaling $112.8 million, primarily driven by $69.0 million in stock-based compensation expense, $37.9 million of depreciation and $19.9 million of amortization of intangible assets, partially offset by deferred taxes of $11.8 million.
Net cash provided by oper ating activities for the year ended December 31, 2022 reflects the net income of $40.4 million, as well as the add back for non-cash charges totaling $112.8 million, primarily driven by $69.0 million in stock-based compensation expense, $37.9 million of depreciation and $19.9 million of amortization of intangible assets, partially offset by deferred taxes of $11.8 million.
As of December 31, 2022, our Headcount included approximately 500 contractor and agency teammates who support our heloo operations. (2) “Net revenue retention rate” is an important metric we calculate annually to measure the retention and growth in the use of our services by our existing clients.
As of December 31, 2023 and 2022, our Headcount included approximately 350 and 500, respectively, of contractor and agency teammates who support our heloo operations. (2) “Net revenue retention rate” is an important metric we calculate annually to measure the retention and growth in the use of our services by our existing clients.
On September 7, 2022, we entered into the 2022 Credit Agreement (as defined below) and the total outstanding debt under the 2019 Credit Facilities of $267.2 million was fully repaid. 2022 Credit Agreement On September 7, 2022, we entered into a credit agreement (the “2022 Credit Agreement”) with both new and existing lenders which amended and restated the 2019 Credit Agreement.
On September 7, 2022, we entered into the 2022 Credit Agreement (as defined below) and the total outstanding debt under the 2019 Credit Facilities of $267.2 million was fully repaid. 58 Table of Contents 2022 Credit Agreement On September 7, 2022, we entered into a credit agreement (the “2022 Credit Agreement”) with both new and existing lenders which amended and restated the 2019 Credit Agreement.
The following discussion provides a narrative of our financial condition and results of operations for the fiscal year ended December 31, 2022 compared to the fiscal year ended December 31, 2021 .
The following discussion provides a narrative of our financial condition and results of operations for the fiscal year ended December 31, 2023 compared to the fiscal year ended December 31, 2022 .
General and administrative expenses consist of personnel costs and related expenses for technology, human resources, legal, finance, global shared services, and executives including, professional fees, insurance premiums, cloud-based capabilities and other corporate expenses.
General and administrative expenses consist of personnel costs and related expenses for technology, human resources, legal, finance, global shared services, and executives as well as professional fees, insurance premiums, cloud-based capabilities and other corporate expenses.
Revenue by Top Clients The table below sets forth the percentage of our total service revenue derived from our largest clients for the years ended December 31, 2022 and 2021: Year ended December 31, 2022 2021 Top ten clients 58 % 62 % Top twenty clients 72 % 76 % Our clients are part of the rapidly growing Digital Economy and they rely on our suite of digital solutions to drive their continued success.
Revenue by Top Clients The table below sets forth the percentage of our total service revenue derived from our largest clients for the years ended December 31, 2023 and 2022: Year ended December 31, 2023 2022 Top ten clients 55 % 58 % Top twenty clients 68 % 72 % Our clients are part of the rapidly growing Digital Economy and they rely on our suite of digital solutions to drive their continued success.
Other solutions include customer care services for new product or market launches, trust & safety solutions and customer acquisition solutions. • Trust and Safety: Principally consists of review and disposition of user and advertiser generated visual, text and audio content for purposes which include removal or labeling of policy violating, offensive or misleading content.
Other solutions include learning experience and customer care services for new product or market launches and customer acquisition solutions. 49 Table of Contents • Trust and Safety: Principally consists of review and disposition of user and advertiser generated visual, text and audio content for purposes which include removal or labeling of policy violating, offensive or misleading content.
These changes were partially offset by changes in operating assets and liabilities of $6.1 million.
These changes were partially offset by changes in operating assets and liabilities of $12.1 million.
Indebtedness As of December 31, 2022, our total indebtedness, net of debt financing fees was $267.6 million . 2019 Credit Agreement On September 25, 2019, we entered into a credit agreement (the “2019 Credit Agreement”) that included a $210.0 million term loan (the “2019 Term Loan Facility”) and a $40.0 million revolving credit facility (the “2019 Revolving Credit Facility” and, together with the 2019 Term Loan Facility, the “2019 Credit Facilities”) .
Indebtedness As of December 31, 2023, our total indebtedness, net of debt financing fees was $264.2 million . 2019 Credit Agreement On September 25, 2019, we entered into a credit agreement (the “2019 Credit Agreement”) that included a $210.0 million term loan (the “2019 Term Loan Facility”) and a $40.0 million revolving credit facility (the “2019 Revolving Credit Facility” and, together with the 2019 Term Loan Facility, the “2019 Credit Facilities”) .
The voluntary attrition rate for employees who were employed by TaskUs for more than 180 days was 26.0% for the year ended December 31, 2022 . Foreign currency fluctuations We are subject to foreign currency exposure, primarily related to costs from the international locations in which we have operations.
The voluntary attrition rate for employees who were employed by TaskUs for more than 180 days was 25.2% for the year ended December 31, 2023 . Foreign currency fluctuations We are subject to foreign currency exposure, primarily related to costs from the international locations in which we have operations.
Key Operational Metrics We regularly monitor the below operating metrics in order to measure our current performance and estimate our future performance: Year ended December 31, 2022 2021 Headcount (approx. at period end) (1) 49,500 40,100 Net revenue retention rate (2) 114 % 141 % (1) “Headcount” refers to the total number of TaskUs teammates globally as of the end of a given measurement period.
Key Operational Metrics We regularly monitor the below operating metrics in order to measure our current performance and estimate our future performance: Year ended December 31, 2023 2022 Headcount (approx. at period end) (1) 48,200 49,500 Net revenue retention rate (2) 89 % 114 % (1) “Headcount” refers to the total number of TaskUs teammates globally as of the end of a given measurement period.
The interest rate in effect for the 2022 Term Loan Facility as of December 31, 2022 was 6.667% per annum. 56 Table of Contents The 2022 Credit Agreement contains a financial covenant requiring compliance with a maximum total net leverage ratio and certain other covenants, including, among other things, covenants restricting additional borrowings, investments (including acquisitions) and distributions.
The interest rate in effect for the 2022 Term Loan Facility as of December 31, 2023 was 7.705% per annum. The 2022 Credit Agreement contains a financial covenant requiring compliance with a maximum total net leverage ratio and certain other covenants, including, among other things, covenants restricting additional borrowings, investments (including acquisitions) and distributions.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in Part II, Item 8 of this Annual Report.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in Part II, Item 8 of this Annual Report on Form 10-K (this “Annual Report”).
As of December 31, 2022, we served over 150 clients spanning established and emerging industry segments, including e-commerce, FinTech, food delivery and ride sharing, gaming, Technology, HealthTech, social media and streaming media.
As of December 31, 2023, we served nearly 200 clients spanning established and emerging industry segments, including e-commerce, FinTech, food delivery and ride sharing, gaming, Technology, HealthTech, social media and streaming media.
The 5.5% growth in Trust and Safety was primarily driven by an increase from existing clients in Entertainment + Gaming, Retail + E-Commerce and FinTech, partially offset by a decrease from Social Media and On Demand Travel + Transportation. 47 Table of Contents Service revenue by delivery geography The majority of our service revenues are derived from contracts with clients who are either located in the United States, or with clients who are located outside of the United States but whereby the contract specifies payment in United States Dollars.
AI Services was primarily driven by a decrease from existing clients in Social Media and On Demand Travel + Transportation, partially offset by an increase from existing clients in Entertainment + Gaming. 51 Table of Contents Service revenue by delivery geography The majority of our service revenues are derived from contracts with clients who are either located in the United States, or with clients who are located outside of the United States but whereby the contract specifies payment in United States Dollars.
A discussion regarding our financial condition and results of operations for the fiscal year ended December 31, 2021 compared to the fiscal year ended December 31, 2020, other than the comparison of service revenue by delivery geography, can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 9, 2022, which is incorporated herein by reference.
A discussion regarding our financial condition and results of operations for the fiscal year ended December 31, 2022 compared to the fiscal year ended December 31, 2021 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 6, 2023, which is incorporated herein by reference.
Our global, omni-channel delivery model is focused on providing our clients three key services – Digital Customer Experience (“Digital CX”), Trust and Safety (formerly known as Content Security) and Artificial Intelligence (“AI”) Services (formerly known as AI Operations). 92% of our revenue for the year ended December 31, 2022 was delivered from non-voice, digital channels or omni-channel services which allow us to utilize resources efficiently, thereby driving higher profitability.
Our global, omni-channel delivery model is focused on providing our clients three key services – Digital Customer Experience (“Digital CX”), Trust and Safety and Artificial Intelligence (“AI”) Ser vices. 88% of our revenue for the year ended December 31, 2023 was delivered from non-voice, digital channels or omni-channel services which allow us to utilize resources efficiently, thereby driving higher profitability.
We believe clients choose TaskUs in part because they view our company culture as aligned with their own, which enables us to act as a natural extension of their brands and gives us an advantage in the recruitment of highly engaged frontline teammates who produce better results. Business Highlights We continued to grow revenue, despite challenging macroeconomic developments during 2022.
We believe clients choose TaskUs in part because they view our company culture as aligned with their own, which enables us to act as a natural extension of their brands and gives us an advantage in the recruitment of highly engaged frontline teammates who produce better results.
During the periods presented, we excluded from Adjusted Net Income amortization of intangible assets, transaction costs, earn-out consideration, the effect of foreign currency gains and losses, gains and losses on disposals of assets, COVID-19 related expenses, severance costs, natural disaster costs, one-time payments associated with the IPO, stock-based compensation expense and employer payroll tax associated with equity-classified awards and the related effect on income taxes of certain pre-tax adjustments, which include costs that are required to be expensed in accordance with GAAP.
During the periods presented, we excluded from Adjusted Net Income amortization of intangible assets, transaction costs, earn-out consideration, the effect of foreign currency gains and losses, gains and losses on disposals of assets, non-recurring severance costs, stock-based compensation expense and associated employer payroll tax and the related effect on income taxes of certain pre-tax adjustments, which include costs that are required to be expensed in accordance with GAAP.
Cash Flows The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated: Year ended December 31, (in thousands) 2022 2021 Net cash provided by (used in) operating activities $ 147,095 $ (32,674) Net cash used in investing activities (67,993) (59,363) Net cash provided by (used in) financing activities (4,035) 54,390 Operating Activities Net cash provided by operating activities for the year ended December 31, 2022 was $147.1 million compared to net cash used in operating activities of $32.7 million for the year ended December 31, 2021.
Cash Flows The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated: Year ended December 31, (in thousands) 2023 2022 Net cash provided by operating activities $ 143,670 $ 147,095 Net cash used in investing activities (31,995) (67,993) Net cash used in financing activities (119,085) (4,035) 59 Table of Contents Operating Activities Net cash provided by operating activities for the year ended December 31, 2023 was $143.7 million compared to net cash provided by operating activities of $147.1 million for the year ended December 31, 2022.
(11) Net Income (Loss) Margin represents net income (loss) divided by service revenue and Adjusted Net Income Margin represents Adjusted Net Income divided by service revenue.
(7) Net Income Margin represents net income divided by service revenue and Adjusted Net Income Margin represents Adjusted Net Income divided by service revenue.
We expect some or all of these factors to continue to impact our operations in the near term; however, we believe that the increased cost focus also creates meaningful opportunities with both new and existing clients.
These factors contributed to a deceleration in our revenue growth rate and an increase in our operating costs. We expect some or all of these factors to continue to impact our operations in the near term; however, we believe that the increased cost focus also creates meaningful opportunities with both new and existing clients.
Our management believes that the inclusion of supplementary adjustments to earnings per share applied in presenting Adjusted EPS are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. 52 Table of Contents The following table reconciles GAAP diluted EPS, the most directly comparable GAAP measure, to Adjusted EPS for the years ended December 31, 2022 and 2021 : Year ended December 31, 2022 2021 GAAP diluted EPS $ 0.39 $ (0.62) Per share adjustments to net income (loss) (1) 1.00 1.98 Per share adjustments for GAAP anti-dilutive shares (2) — (0.10) Adjusted EPS $ 1.39 $ 1.26 Weighted-average common stock outstanding – diluted 102,603,179 94,832,137 GAAP anti-dilutive shares (2) — 7,476,384 Adjusted weighted-average shares outstanding 102,603,179 102,308,521 (1) Reflects the aggregate adjustments made to reconcile net income (loss) to Adjusted Net Income, as noted in the above table, divided by the GAAP diluted weighted-average number of shares outstanding for the relevant period.
Our management believes that the inclusion of supplementary adjustments to earnings per share applied in presenting Adjusted EPS are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. 55 Table of Contents The following table reconciles GAAP diluted EPS, the most directly comparable GAAP measure, to Adjusted EPS for the years ended December 31, 2023 and 2022 : Year ended December 31, 2023 2022 GAAP diluted EPS $ 0.48 $ 0.39 Per share adjustments to net income (1) 0.84 1.00 Adjusted EPS $ 1.32 $ 1.39 Weighted-average common stock outstanding – diluted 96,173,071 102,603,179 (1) Reflects the aggregate adjustments made to reconcile net income to Adjusted Net Income, as noted in the above table, divided by the GAAP diluted weighted-average number of shares outstanding for the relevant period.
Digital Customer Experience contributed 9.9% of the total increase primarily driven by clients in Technology, On Demand Travel + Transportation, Entertainment + Gaming and HealthTech, partially offset by clients in FinTech and Social Media. AI Services contributed 4.3% of the total increase primarily driven by clients in On Demand Travel + Transportation, partially offset by clients in Retail + E-Commerce.
AI Services reduced 0.4% of the total increase primarily driven by clients in Social Media and On Demand Travel + Transportation, partially offset by clients in HealthTech, Retail + E-Commerce, Entertainment + Gaming and Technology.
(2) Represents earn-out consideration recognized as compensation expense related to the acquisition of heloo. (3) Realized and unrealized foreign currency losses (gains) include the effect of fair market value changes of forward contracts and remeasurement of U.S. dollar-denominated accounts to foreign currency. (4) Represents incremental expenses incurred that are directly attributable to the COVID-19 pandemic.
(2) Represents earn-out consideration recognized as compensation expense related to the acquisition of heloo. (3) Realized and unrealized foreign currency losses include the effect of fair market value changes of forward contracts and remeasurement of U.S. dollar-denominated accounts to foreign currency.
(2) Represents earn-out consideration recognized as compensation expense related to the acquisition of heloo. (3) Realized and unrealized foreign currency losses (gains) include the effect of fair market value changes of forward contracts and remeasurement of U.S. dollar-denominated accounts to foreign currency. (4) Represents incremental expenses incurred that are directly attributable to the COVID-19 pandemic.
(2) Represents earn-out consideration recognized as compensation expense related to the acquisition of heloo. (3) Realized and unrealized foreign currency losses include the effect of fair market value changes of forward contracts and remeasurement of U.S. dollar-denominated accounts to foreign currency.
Adjusted EPS Adjusted EPS is a non-GAAP profitability measure that represents earnings available to shareholders excluding the impact of certain items that are considered to hinder comparison of the performance of our business on a period-over-period basis or with other businesses.
Adjusted EPS Adjusted EPS is a non-GAAP profitability measure that represents earnings available to shareholders excluding the impact of certain items that are considered to hinder comparison of the performance of our business on a period-over-period basis or with other businesses. Adjusted EPS is calculated as Adjusted Net Income divided by our diluted weighted-average number of shares outstanding.
Financing Activities Net cash used in financing activities for the year ended December 31, 2022 was $4.0 million compared to net cash provided by financing activities of $54.4 million for the year ended December 31, 2021.
Financing Activities Net cash used in financing activities for the year ended December 31, 2023 was $119.1 million compared to net cash used in financing activities of $4.0 million for the year ended December 31, 2022.
During the periods presented, we excluded from Adjusted EBITDA transaction costs, earn-out consideration, the effect of foreign currency gains and losses, gains and losses on disposals of assets, COVID-19 related expenses, severance costs, natural disaster costs, one-time payments associated with the IPO and stock-based compensation expense and employer payroll tax associated with equity-classified awards, which include costs that are required to be expensed in accordance with GAAP.
During the periods presented, we excluded from Adjusted EBITDA transaction costs, earn-out consideration, the effect of foreign currency gains and losses, gains and losses on disposals of assets, non-recurring severance costs, stock-based compensation expense and associated employer payroll tax and interest income, which include costs that are required to be expensed in accordance with GAAP.
Many of the companies operating in the Digital Economy are well-known for their obsession with creating a world-class employee experience.
At TaskUs, culture is at the heart of everything we do. Many of the companies operating in the Digital Economy are well-known for their obsession with creating a world-class employee experience.
Additional funds from financing arrangements may not be available on terms favorable to us or at all. 55 Table of Contents As market conditions warrant, we and certain of our equity holders, including Blackstone and their respective affiliates, may from time to time seek to purchase our outstanding debt securities or loans, including borrowings under our 2022 Credit Facilities, in privately negotiated or open market transactions, by tender offer or otherwise.
As market conditions warrant, we and certain of our equity holders, including Blackstone and their respective affiliates, may from time to time seek to purchase our outstanding debt securities or loans, including borrowings under our 2022 Credit Facilities, in privately negotiated or open market transactions, by tender offer or otherwise.
Additionally, cost of services includes expenses related to sites and technology costs that can be directly attributed to the delivery of services. Selling, General, and Administrative Selling expenses consist of personnel costs, travel expenses, and other expenses for our client services, sales and marketing teams. Additionally, it includes costs of marketing and promotional events, corporate communications, and other brand-building activities.
Selling, General, and Administrative Selling expenses consist of personnel costs, travel expenses, and other expenses for our client services, sales and marketing teams. Additionally, it includes costs of marketing and promotional events, corporate communications, and other brand-building activities.
Other Expense (Income) Other expense (income) primarily consists of gains and losses resulting from changes in the fair value of the foreign currency exchange rate forward contracts that we are party to. Our forward contracts are not designated as hedging instruments.
Other Expense (Income), Net Other expense (income), net primarily consists of gains and losses resulting from changes in the fair value of our foreign currency exchange rate forward contracts which are not designated as hedging instruments. Other income also includes gains and losses resulting from the remeasurement of U.S.-denominated accounts to foreign currency and interest income.
As of December 31, 2022, we had $190.0 million of borrowing available under the 2022 Revolving Credit Facility.
As of December 31, 2023, we had no balance outstanding and $190.0 million of borrowing availability under the 2022 Revolving Credit Facility.
AI Services contributed 33.1% of the total increase primarily driven by clients in Social Media, as well as HealthTech, On Demand Travel + Transportation and Retail + E-Commerce, partially offset by clients in FinTech. Trust and Safety contributed 9.1% of the total increase primarily driven by clients in Social Media, partially offset by clients in FinTech.
AI Services contributed 4.6% of the total decrease primarily driven by clients in Social Media, On Demand Travel + Transportation and Retail + E-Commerce, partially offset by clients in HealthTech. India: Trust and Safety contributed 15.2% of the total increase primarily driven by clients in On Demand Travel + Transportation and Social Media.
Due to market uncertainty and potential recession or other economic challenges, many of our customers are shifting their focus from growth to cost reduction resulting in certain customers electing to shift work from our onshore locations to our offshore delivery centers or reduce vendor spend across the board.
Due to market uncertainty and potential recession or other economic challenges, many of our customers have increased their focus on cost reduction resulting in certain customers electing to shift work from our onshore locations to our offshore delivery locations, partnering with service providers to find cost-efficient arrangements, or reducing vendor spend across the board.
Digital Customer Experience contributed 15.4% of the total increase primarily driven by clients in On Demand Travel + Transportation, FinTech and Entertainment + Gaming. Trust and Safety contributed 7.4% of the total increase primarily driven by clients in Social Media and Retail + E-Commerce.
Digital Customer Experience contributed 23.4% of the total decrease primarily driven by clients in FinTech, Social Media and Entertainment + Gaming, partially offset by clients in On Demand Travel + Transportation and Technology. Trust and Safety contributed 13.1% of the total decrease primarily driven by clients in Social Media and FinTech.
Growth in the Rest of World was led by Latin America and Europe.
Growth in the Rest of World was driven by Latin America, as well as consistent growth across Asia and Europe.
In addition, over 99% of our revenues in 2022 were from recurring revenue contracts. As our clients grow in size and the complexity of their outsourcing needs increases, we believe we have an opportunity to increase the addressable spend available to TaskUs through enhanced penetration of current services as well as cross-selling new services.
As of December 31, 2023 , we served nearly 200 of the world’s leading technology companies. As our clients grow in size and the complexity of their outsourcing needs increases, we believe we have an opportunity to increase the addressable spend available to TaskUs through enhanced penetration of current services as well as cross-selling new services.
Our management believes that the inclusion of supplementary adjustments to net income (loss) applied in presenting Adjusted Net Income are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. 51 Table of Contents The following table reconciles net income, the most directly comparable GAAP measure, to Adjusted Net Income for the years ended December 31, 2022 and 2021: Year ended December 31, Period over Period Change (in thousands, except %) 2022 2021 ($) (%) Net Income (loss) $ 40,422 $ (58,698) $ 99,120 NM Amortization of intangible assets 19,882 18,847 1,035 5.5 % Transaction costs (1) 953 6,969 (6,016) (86.3) % Earn-out consideration (2) 9,729 — 9,729 100.0 % Foreign currency losses (3) 7,967 809 7,158 NM Loss on disposal of assets 31 52 (21) (40.4) % COVID-19 related expenses (4) — 6,105 (6,105) (100.0) % Severance costs (5) 821 — 821 100.0 % Natural disaster costs (6) — 442 (442) (100.0) % Phantom shares bonus (7) — 129,362 (129,362) (100.0) % Teammate IPO bonus (8) — 4,361 (4,361) (100.0) % Stock-based compensation expense (9) 69,452 46,384 23,068 49.7 % Tax impacts of adjustments (10) (6,442) (25,244) 18,802 (74.5) % Adjusted Net Income $ 142,815 $ 129,389 $ 13,426 10.4 % Net Income (loss) Margin (11) 4.2 % (7.7) % Adjusted Net Income Margin (11) 14.9 % 17.0 % NM = not meaningful (1) Represents non-recurring professional service fees primarily related to the acquisition of heloo in 2022 and the preparation for public offerings that have been expensed during the period in 2021.
Our management believes that the inclusion of supplementary adjustments to net income applied in presenting Adjusted Net Income are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. 54 Table of Contents The following table reconciles net income, the most directly comparable GAAP measure, to Adjusted Net Income for the years ended December 31, 2023 and 2022: Year ended December 31, Period over Period Change (in thousands, except %) 2023 2022 ($) (%) Net income $ 45,690 $ 40,422 $ 5,268 13.0 % Amortization of intangible assets 20,346 19,882 464 2.3 % Transaction costs (1) 245 953 (708) (74.3) % Earn-out consideration (2) 7,863 9,729 (1,866) (19.2) % Foreign currency losses (3) 431 7,967 (7,536) (94.6) % Loss on disposal of assets 1,322 31 1,291 NM Severance costs (4) 1,852 821 1,031 125.6 % Stock-based compensation expense (5) 53,179 69,452 (16,273) (23.4) % Tax impacts of adjustments (6) (4,386) (6,442) 2,056 (31.9) % Adjusted Net Income $ 126,542 $ 142,815 $ (16,273) (11.4) % Net Income Margin (7) 4.9 % 4.2 % Adjusted Net Income Margin (7) 13.7 % 14.9 % NM = not meaningful (1) Represents professional service fees primarily related to the acquisition of heloo in 2022 and other non-recurring transactions.
We plan to continue expanding our geographic footprint to drive growth with both existing and new clients, which may result in one-time costs that may impact profitability. 44 Table of Contents As we enter new geographies and make new capabilities available, clients may elect to move current work with TaskUs in one geography to another geography to optimize cost or to provide additional business continuity to their operations.
As we enter new geographies and make new capabilities available, clients may elect to move current work with TaskUs in one geography to another geography to optimize cost or to provide additional business continuity to their operations.
Free Cash Flow Free Cash Flow is a non-GAAP liquidity measure that represents our ability to generate additional cash from our business operations. Free Cash Flow is calculated as net cash provided by operating activities in the period minus cash used for purchase of property and equipment in the period.
Free Cash Flow is calculated as net cash provided by operating activities in the period minus cash used for purchase of property and equipment in the period.
For the years ended December 31, 2022 and 2021, we generated 22% and 27%, respectively, of our service revenue from our largest client, and we generated less than 10% and 11%, respectively, of our service revenue from our second largest client. We continue to identify and target high growth industry verticals and clients.
For our existing clients, we benefit from our ability to grow as they grow and to cross sell new solutions, further deepening our entrenchment. For the years ended December 31, 2023 and 2022, we generated 19% and 22%, respectively, of our service revenue from our largest client. We continue to identify and target high growth industry verticals and clients.
Our management believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. 53 Table of Contents The following table reconciles net income, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the years ended December 31, 2022 and 2021: Year ended December 31, Period over Period Change (in thousands, except %) 2022 2021 ($) (%) Net Income (loss) $ 40,422 $ (58,698) 99,120 NM Provision for (benefit from) income taxes 24,111 (2,265) 26,376 NM Financing expenses 11,921 6,504 5,417 83.3 % Depreciation 37,915 29,038 8,877 30.6 % Amortization of intangible assets 19,882 18,847 1,035 5.5 % EBITDA 134,251 (6,574) 140,825 NM Transaction costs (1) 953 6,969 (6,016) (86.3) % Earn-out consideration (2) 9,729 — 9,729 100.0 % Foreign currency losses (3) 7,967 809 7,158 NM Loss on disposals of assets 31 52 (21) (40.4) % COVID-19 related expenses (4) — 6,105 (6,105) (100.0) % Severance costs (5) 821 — 821 100.0 % Natural disaster costs (6) — 442 (442) (100.0) % Phantom shares bonus (7) — 129,362 (129,362) (100.0) % Teammate IPO bonus (8) — 4,361 (4,361) (100.0) % Stock-based compensation expense (9) 69,452 46,384 23,068 49.7 % Adjusted EBITDA $ 223,204 $ 187,910 $ 35,294 18.8 % Net Income Margin (10) 4.2 % (7.7) % Adjusted EBITDA Margin (10) 23.2 % 24.7 % NM = not meaningful 54 Table of Contents (1) Represents non-recurring professional service fees primarily related to the acquisition of heloo in 2022 and the preparation for public offerings that have been expensed during the period in 2021.
Our management believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. 56 Table of Contents The following table reconciles net income, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the years ended December 31, 2023 and 2022: Year ended December 31, Period over Period Change (in thousands, except %) 2023 2022 ($) (%) Net income $ 45,690 $ 40,422 5,268 13.0 % Provision for income taxes 29,342 24,111 5,231 21.7 % Financing expenses 21,717 11,921 9,796 82.2 % Depreciation 40,391 37,915 2,476 6.5 % Amortization of intangible assets 20,346 19,882 464 2.3 % EBITDA 157,486 134,251 23,235 17.3 % Transaction costs (1) 245 953 (708) (74.3) % Earn-out consideration (2) 7,863 9,729 (1,866) (19.2) % Foreign currency losses (3) 431 7,967 (7,536) (94.6) % Loss on disposals of assets 1,322 31 1,291 NM Severance costs (4) 1,852 821 1,031 125.6 % Stock-based compensation expense (5) 53,179 69,452 (16,273) (23.4) % Interest income (6) (1,581) — (1,581) (100.0) % Adjusted EBITDA $ 220,797 $ 223,204 $ (2,407) (1.1) % Net Income Margin (7) 4.9 % 4.2 % Adjusted EBITDA Margin (7) 23.9 % 23.2 % NM = not meaningful (1) Represents professional service fees related to the acquisition of heloo in 2022 and other non-recurring transactions.
Service revenue from fixed-price contracts is recognized monthly as service revenue is earned and obligations are fulfilled.
Service revenue from fixed-price contracts is recognized monthly as service revenue is earned and obligations are fulfilled. Service revenue from outcome oriented contracts is recognized when it is reasonably certain that the desired outcome has been achieved.
We have elected to use the extended transition period until we are no longer an emerging growth company or until we choose to affirmatively and irrevocably opt out of the extended transition period. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.
We have elected to use the extended transition period until we are no longer an emerging growth company or until we choose to affirmatively and irrevocably opt out of the extended transition period.
Critical Accounting Estimates Our consolidated financial statements and the related notes included elsewhere in this Annual Report are prepared in accordance with accounting principles generally accepted in the United States.
As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies. 60 Table of Contents Critical Accounting Estimates Our consolidated financial statements and the related notes included elsewhere in this Annual Report are prepared in accordance with accounting principles generally accepted in the United States.
While we incurred certain one-time costs during the year, including severance in some cases, we believe these actions will have long-term benefits to the goal of enabling our future growth and profitability. Hiring and retention of employees In order to efficiently and effectively provide services to our clients, we must be able to quickly hire, train and retain employees.
While we incurred certain costs associated with these changes, including severance in some cases, we believe these actions will have long-term benefits to the goal of enabling our future growth and profitability.
Cost management and financial flexibility During 2022, we enhanced our focus on cost management and financial flexibility. We conducted a comprehensive review of our cost structure in order to drive efficiencies across functions.
Cost management and financial flexibility During the year ended December 31, 2023 , we continued to focus on cost management and financial flexibility. We reviewed our cost structure in order to drive efficiencies across functions.
We have designed our platform to enable us to rapidly scale and benefit from our clients’ growth. We believe our ability to deliver “ridiculously good” outsourcing will enable us to continue to grow our client base. At TaskUs, culture is at the heart of everything we do.
We have designed our platform to enable us to rapidly scale and benefit from our clients’ growth. We believe our ability to deliver “ridiculously good” outsourcing will enable us to continue to grow our client base. We use our strong reputation and expertise serving the digital economy to attract new innovators and enterprise-class brands looking to transform.
Changes in other expense are primarily driven by our exposure to foreign currency exchange risk resulting from our operations in foreign geographies, primarily the Philippines, offset by economic hedges using foreign currency exchange rate forward contracts. Financing expense Financing expense for the years ended December 31, 2022 and 2021 was $11.9 million and $6.5 million, respectively.
Other expense (income), net Changes are primarily driven by our exposure to foreign currency exchange risk resulting from our operations in foreign geographies, primarily the Philippines and India, offset by economic hedges using foreign currency exchange rate forward contracts . The remaining increase is associated with higher interest income.
In September 2022, our board of directors approved a share repurchase program of up to $100.0 million of shares of our Class A common stock. During the year ended December 31, 2022, we repurchased 1,649,931 shares of our Class A common stock under the share repurchase program for $31.0 million, which we funded principally with available cash.
In September 2022, our Board of Directors approved a share repurchase program of up to $100.0 million of shares of our Class A common stock.
Additionally, costs related to the issuance of stock-based compensation and costs related to the acquisition of heloo within the provision for (benefit from) income taxes calculation are adjusted for Non-GAAP purposes.
Provision for income taxes Our effective tax rate for the years ended December 31, 2023 and 2022 was 39.1% and 37.4%, respectiv ely. Costs related to the issuance of stock-based compensation, the acquisition of heloo and severance within the provision for income taxes calculation are adjusted for Non-GAAP purposes.
The following table summarizes our contractual obligations as of December 31, 2022 : Payments Due by Period (in thousands) Total Current Noncurrent Long-term debt obligations $ 269,325 $ 3,712 $ 265,613 Operating lease obligations 49,560 13,528 36,032 Technology solution obligations 37,954 17,042 20,912 Total $ 356,839 $ 34,282 $ 322,557 Technology solution obligations relate mainly to third-party cloud infrastructure agreements and subscription arrangements used to facilitate our operations at the enterprise level.
Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2023 : Payments Due by Period (in thousands) Total Current Noncurrent Long-term debt obligations $ 265,613 $ 8,438 $ 257,175 Operating lease obligations 52,993 18,292 34,701 Technology solution obligations 25,372 14,760 10,612 Total $ 343,978 $ 41,490 $ 302,488 Technology solution obligations relate mainly to third-party cloud infrastructure agreements and subscription arrangements used to facilitate our operations at the enterprise level.
Adjusted Net Income for the year ended December 31, 2022 increased 10.4% to $142.8 million from $129.4 million for the year ended 43 Table of Contents December 31, 2021. Adjusted EBITDA for the year ended December 31, 2022 increased 18.8% to $223.2 million from $187.9 million for the year ended December 31, 2021.
Adjusted Net Income for the year ended December 31, 2023 decreased 11.4% to $126.5 million from $142.8 million for the year ended December 31, 2022. Adjusted EBITDA for the year ended December 31, 2023 decreased 1.1% to $220.8 million from $223.2 million for the year ended December 31, 2022.
Service revenue from outcome oriented contracts is recognized when it is reasonably certain that the desired outcome has been achieved. 45 Table of Contents Operating Expenses Cost of Services Cost of services consists primarily of costs related to delivery of services, and consists primarily of personnel costs like salaries and wages, employee welfare, employee engagement, recruiting, professional development and stock-based compensation expense.
Operating Expenses Cost of Services Cost of services consists primarily of costs related to delivery of services, and consists primarily of personnel costs like salaries and wages, employee welfare, employee engagement, recruiting, professional development and stock-based compensation expense. Additionally, cost of services includes expenses related to sites and technology costs that can be directly attributed to the delivery of services.
(9) Represents stock-based compensation expense associated with equity-classified awards, as well as associated payroll tax. (10) Represents tax impacts of adjustments to net income (loss) which resulted in a tax benefit during the period, including phantom shares bonus related to the IPO, and stock-based compensation expense and earn-out consideration after the IPO.
(4) Represents severance payments as a result of certain cost optimization measures we undertook during the period to restructure support roles. (5) Represents stock-based compensation expense, as well as associated payroll tax. (6) Represents tax impacts of adjustments to net income which resulted in a tax benefit during the period, including stock-based compensation expense and earn-out consideration.
Trust and Safety contributed 5.2% of the total increase primarily driven by clients in Entertainment + Gaming, partially offset by clients in On Demand Travel + Transportation. Growth in the Rest of World was led by Europe and Latin America.
Rest of World: Digital Customer Experience contributed 45.6% of the total increase primarily driven by clients in FinTech, On Demand Travel + Transportation, Entertainment + Gaming, Retail + E-Commerce and HealthTech, partially offset by clients in Social Media. Trust and Safety and AI Services contributed 0.9% and 0.5%, respectively, of the total increase.
The following table reconciles net cash provided by (used in) operating activities, the most directly comparable GAAP measure, to Free Cash Flow for the years ended December 31, 2022 and 2021: Year ended December 31, 2022 2021 Net cash provided by (used in) operating activities $ 147,095 $ (32,674) Purchase of property and equipment (43,758) (59,363) Free Cash Flow $ 103,337 $ (92,037) Conversion of Adjusted EBITDA (1) 46.3 % (49.0) % (1) Conversion of Adjusted EBITDA represents Free Cash Flow divided by Adjusted EBITDA.
The following table reconciles net cash provided by operating activities, the most directly comparable GAAP measure, to Free Cash Flow for the years ended December 31, 2023 and 2022: Year ended December 31, 2023 2022 Net cash provided by operating activities $ 143,670 $ 147,095 Purchase of property and equipment (30,995) (43,758) Free Cash Flow $ 112,675 $ 103,337 Conversion of Adjusted EBITDA (1) 51.0 % 46.3 % (1) Conversion of Adjusted EBITDA represents Free Cash Flow divided by Adjusted EBITDA 57 Table of Contents Liquidity and Capital Resources As of December 31, 2023, our principal sources of liquidity were cash and cash equivalents totaling $125.8 million, which were held for working capital purposes, as well as the available balance of our 2022 Credit Facilities, described further below.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. Revenue Recognition We recognize revenue as services are performed and amounts are earned. Determining the method and amount of revenue to recognize requires us, at times, to make judgments and estimates.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. Income Taxes Income taxes are accounted for under the asset and liability method.
The increase in amortization is due to the acquisition of heloo on April 15, 2022. See Note 3, "Business Combination" in the Notes to Consolidated Financial Statements included in this Annual Report. Other expense Other expense for the years ended December 31, 2022 and 2021 was $7.4 million and $0.2 million, respectively.
Depreciation The increase in depreciation is a result of capital expenditures for leasehold improvements associated with site expansions. Amortization of intangible assets The increase in amortization is due to our acquisition of heloo on April 15, 2022. See Note 3, "Business Combination" in the Notes to Consolidated Financial Statements included in this Annual Report.
The 31.0% growth in Digital Customer Experience was primarily driven by an increase from existing clients in On Demand Travel + Transportation, FinTech, Entertainment + Gaming and Technology and new clients in On Demand Travel + Transportation, as well as new clients as a result of the acquisition of heloo.
These decreases were partially offset by an increase from existing clients in Technology, as well as new clients in Retail + E-Commerce, HealthTech and On Demand Travel + Transportation. Trust and Safety was primarily driven by an increase from existing clients in On Demand Travel + Transportation, Technology and Entertainment + Gaming, as well as new clients in FinTech.
Expanding geographically We expanded our presence from 23 sites in ten countries as of December 31, 2021 to 27 sites in 13 countries as of December 31, 2022 . During 2022, we nearly doubled our Headcount in the Rest of World from approximately 2,200 employees as of December 31, 2021 to approximately 4,100 as of December 31, 2022.
Expanding geographically We expanded our presence from 27 sites in 13 countries as of December 31, 2022 to 28 sites in 12 countries as of December 31, 2023.
These changes were partially offset by the add back for non-cash charges totaling $88.8 million, primarily driven by $46.2 million in stock-based compensation expense, $29.0 million of depreciation and $18.8 million of amortization of intangible assets, partially offset by deferred taxes of $11.5 million.
Net cash provided by operating activities for the year ended December 31, 2023 reflects net income of $45.7 million, as well as the add back for non-cash charges totaling $110.0 million, primarily driven by $52.8 million in stock-based compensation expense, $40.4 million of depreciation and $20.3 million of amortization of intangible assets, partially offset by deferred taxes of $8.0 million.
Investing Activities Net cash used in investing activities for the year ended December 31, 2022 was $68.0 million compared to net cash used in investing activities of $59.4 million for the year ended December 31, 2021. The increase in net cash used from investing activities was primarily driven by the acquisition of heloo, net of cash received .
These changes were partially offset by changes in operating assets and liabilities of $6.1 million. Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $32.0 million compared to net cash used in investing activities of $68.0 million for the year ended December 31, 2022.
See Note 3, "Business Combination" in the Notes to Consolidated Financial Statements included in this Annual Report. Macroeconomic Trends Macroeconomic factors, including global economic and geopolitical developments, increased inflation rates, interest rate increases, and foreign currency exchange rate changes, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify.
For definitions and reconciliations to net income, the most directly comparable measure in accordance with GAAP, see " — Non-GAAP Financial Measures below." Our operating results in any period are not necessarily indicative of the results that may be expected for any future period. 47 Table of Contents 2023 Developments Macroeconomic Trends Macroeconomic factors, including global economic and geopolitical developments, increased inflation rates, interest rate changes, and foreign currency exchange rate changes, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify.
The 37.7% growth in AI Services was driven by an increase from existing clients in Social Media and On Demand Travel + Transportation, partially offset by a decrease from Retail + E-Commerce.
AI Services contributed 0.2% of the total increase primarily driven by clients in On Demand Travel + Transportation and Social Media, mostly offset by clients in HealthTech and Retail + E-Commerce. Digital Customer Experience reduced 2.5% of the total increase primarily driven by clients in On Demand Travel + Transportation, partially offset by clients in Technology and Retail + E-Commerce.
New client wins and growing with our current clients We won 40 new clients in 2022, and we achieved a 43% new client win rate for every dollar of new client opportunities we pursued. As of December 31, 2022 , we served over 150 of the world’s leading technology companies.
Trends and Factors Affecting our Performance There are a number of key factors and trends affecting our results of operations. New client wins and growing with our current clients We won 47 new clients in 2023, and we achieved a 35% new client win rate for every dollar of new client opportunities we pursued.
If those costs are removed, the provision for income taxes would have been $30.6 million and $23.0 million and the effective tax rate would have been 21.4% and 20.0% for the years ended December 31, 2022 and December 31, 2021, respectively. 49 Table of Contents Comparison of the Years Ended December 31, 2021 and 2020 Service revenue India, which was previously included in Rest of World, is now reported separately within revenue disaggregation by geographical location.
If those costs are removed, the provision for income taxes would have bee n $33.7 million and $30.6 million and the effective tax rate would have been 24.5% and 21.4% for the years ended December 31, 2023 and December 31, 2022, respectively.
We won 40 new clients in 2022, achieving a 43% new client win rate, and 63 current clients signed new statements of work with us. Recent Financial Highlights For the year ended December 31, 2022, we recorded service revenue of $960.5 million, a 26.3% increase from $760.7 million for the year ended December 31, 2021.
Recent Financial Highlights For the year ended December 31, 2023, we recorded service revenue of $924.4 million, a 3.8% decrease from $960.5 million for the year ended December 31, 2022.
Other income also includes gains and losses resulting from the remeasurement of U.S.-denominated accounts to foreign currency and interest income. Financing Expenses Financing expenses primarily consist of interest expenses related to our term loan and revolving credit facility in addition to commitment fees related to the undrawn delayed draw loan and revolver borrowings.
Financing Expenses Financing expenses primarily consist of interest expenses related to our term loan as well as commitment fees related to the undrawn revolving credit facility.
We also work closely with current and potential clients to develop offerings that we believe align with our core competencies and present an attractive market opportunity. This approach has earned us the opportunity to support some of the most innovative companies in history (often before anyone else) and has enabled significant expansion opportunities with large global enterprises.
In 2023, 58 current clients signed new statements of work with us. 48 Table of Contents Expanded service offerings We closely watch trends and work closely with current and potential clients to develop offerings that we believe align with our core competencies and present an attractive market opportunity.
Changes in financing expense are primarily driven by the rate of SOFR and LIBOR used to calculate the interest rate of our debt, the additional $32.5 million draw on our Revolving Credit Facility on April 12, 2022 to fund cash payments relating to our acquisition of heloo and the Refinancing.
Financing expense Changes in financing expense are primarily driven by increases in the rate of SOFR and LIBOR used to calculate the interest rate of our deb t, as well as additional borrowings in 2022. See “—Liquidity and Capital Resources—Indebtedness—2019 Credit Agreement” and “—2022 Credit Agreement” for additional information.
(5) Represents severance payments as a result of certain cost optimization measures we undertook during the period to restructure support roles. (6) Represents one-time costs associated with emergency housing, transportation costs and bonuses for our employees in connection with the natural disaster related to the severe winter storm in Texas in February 2021.
(4) Represents severance payments as a result of certain cost optimization measures we undertook during the period to restructure support roles. (5) Represents stock-based compensation expense, as well as associated payroll tax. (6) Represents interest income earned on short-term savings and time-deposit funds beginning in 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn order to mitigate our exposure to foreign currency fluctuation risks and minimize the earnings and cash flow volatility associated with forecasted transactions denominated in certain foreign currencies, and economically hedge our intercompany balances and other monetary assets and liabilities denominated in currencies other than functional currencies, we enter into foreign currency forward contracts.
Biggest changeBased upon our level of operations during the year ended December 31, 2023, and excluding any forward contract arrangements that we had in place during that period, a 10% appreciation/depreciation in the Indian rupee against the U.S. dollar would have increased or decreased our expenses incurred and paid in the Indian rupee by approximately $9.0 million or $7.3 million, respectively, in the year ended December 31, 2023. 61 Table of Contents In order to mitigate our exposure to foreign currency fluctuation risks and minimize the earnings and cash flow volatility associated with forecasted transactions denominated in certain foreign currencies, and economically hedge our intercompany balances and other monetary assets and liabilities denominated in currencies other than functional currencies, we enter into foreign currency forward contracts.
These derivatives have not been designated as hedges under ASC Topic 815, Derivatives and Hedging (“ASC 815”). Changes in the fair value of these derivatives are recognized in the consolidated statements of income and are included in other expense.
These derivatives have not been designated as hedges under ASC Topic 815, Derivatives and Hedging (“ASC 815”). Changes in the fair value of these derivatives are recognized in the consolidated statements of income and are included in other expense (income), net.
Although substantially all of our revenues are denominated in U.S. dollars, a substantial portion of our expenses were incurred and paid in the Philippine peso and Indian rupee in the year ended December 31, 2022. We also incur expenses in U.S. dollars, and currencies of the other countries in which we have operations.
Although substantially all of our revenues are denominated in U.S. dollars, a substantial portion of our expenses were incurred and paid in the Philippine peso and Indian rupee in the year ended December 31, 2023. We also incur expenses in U.S. dollars, and currencies of the other countries in which we have operations.
The exchange rates among the Philippine peso and the U.S. dollar have changed substantially in recent years and may fluctuate substantially in the future.
The exchange rates among the Philippine peso, Indian rupee and the U.S. dollar have changed substantially in recent years and may fluctuate substantially in the future.
Interest Rate Risk Our exposure to market risk is influenced by the changes in interest rates paid on any outstanding balance on our borrowings, mainly under our 2022 Credit Facilities. All of our borrowings outstanding under the 2022 Credit Facilities as of December 31, 2022 accrue interest at SOFR plus 2.25%.
Interest Rate Risk Our exposure to market risk is influenced by the changes in interest rates paid on any outstanding balance on our borrowings, mainly under our 2022 Credit Facilities. All of our borrowings outstanding under the 2022 Credit Facilities as of December 31, 2023 accrue interest at SOFR pl us 2.25%.
Based upon our level of operations during the year ended December 31, 2022, and excluding any forward contract arrangements that we had in place during that period, a 10% appreciation/depreciation in the Philippine peso against the U.S. dollar would have increased or decreased our expenses incurred and paid in the Philippine peso by approximately $36.6 million or $30.0 million, respectively, in the year ended December 31, 2022.
Based upon our level of operations during the year ended December 31, 2023, and excluding any forward contract arrangements that we had in place during that period, a 10% appreciation/depreciation in the Philippine peso against the U.S. dollar would have increased or decreased our expenses incurred and paid in the Philippine peso by approximately $37.1 million or $30.3 million, respectively, in the year ended December 31, 2023.
Our total principal balance outstanding as of December 31, 2022 was $269.3 million. Based on the outstanding balances and interest rates under the 2022 Credit Facilities as of December 31, 2022 , a hypothetical 10% increase or decrease in SOFR would cause an increase or decrease in interest expense of $1.2 million over the next 12 months.
Our total principal balance outstanding as of December 31, 2023 was $265.6 million. Based on the outstanding balances and interest rates under the 2022 Credit Facilities as of December 31, 2023, a hypothetical 10% increase or decrease in SOFR would cause an increase or decrease in interest expense of $1.4 million over the next 12 months.
The forward contract receivable (payable) resulting from change in fair value was recorded under prepaid expenses (accounts payable and accrued 60 Table of Contents liabilities). For the years ended December 31, 2022 and 2021, unrealized losses (gains) on the forward contracts of $(4.6) million and $4.6 million, respectively, were included within other expense (income).
The forward contract receivable (payable) resulting from change in fair value was recorded under prepaid expenses and other current assets (accounts payable and accrued liabilities). For the years ended December 31, 2023 and 2022, unrealized losses (gains) on the forward contracts of $2.5 million and $(4.6) million, respectively, were included within other expense (income), net.
For the years ended December 31, 2022 and 2021, we realized losses of $13.3 million and $0.4 million, respectively, resulting from the settlement of forward contracts were included within other expense (income). For the years ended December 31, 2022 and 2021, we had outstanding forward contracts.
For the years ended December 31, 2023 and 2022, we realized losses (gains) of $(2.6) million and $13.3 million, respectively, resulting from the settlement of forward contracts were included within other expense (income), net. For the years ended December 31, 2023 and 2022, we had outstanding forward contracts.
The average exchange rate of the Indian rupee against the U.S. dollar increased from 73.91 rupees during the year ended December 31, 2021 to 78.51 rupees during the year ended December 31, 2022, representing a depreciation of the Indian rupee of 6.2%.
The average exchange rate of the Indian rupee against the U.S. dollar increased from 78.51 rupees during the year ended December 31, 2022 to 82.58 rupees during the year ended December 31, 2023, representing a depreciation of the Indian rupee of 5.2%.
The average exchange rate of the Philippine peso against the U.S. dollar increased from 49.27 pesos during the year ended December 31, 2021 to 54.49 pe sos during the year ended December 31, 2022, representing a depreciation of the Philippine peso of 10.6%.
The average exchange rate of the Philippine peso against the U.S. dollar increased from 54.49 pesos during the year ended December 31, 2022 to 55.61 pe sos during the year ended December 31, 2023, representing a depreciation of the Philippine peso of 2.1%.
Credit Risk As of December 31, 2022, we had accounts receivable, net of allowance for doubtful accounts, of $178.7 million, of which $54.6 million was owed by two of our clients. Collectively, these clients represented 30% of our gross accounts receivable as of December 31, 2022. 61 Table of Contents
Credit Risk As of December 31, 2023, we had accounts receivable, net of allowance for credit losses, of $176.8 million, of which $49.8 million was owed by two of our clients. Collectively, these clients represented 28% of our gross accounts receivable as of December 31, 2023. 62 Table of Contents
Removed
Based upon our level of operations during the year ended December 31, 2022, a 10% appreciation/depreciation in the Indian rupee against the U.S. dollar would have increased or decreased our expenses incurred and paid in the Indian rupee by approximately $7.9 million or $6.5 million, respectively, in the year ended December 31, 2022.

Other TASK 10-K year-over-year comparisons