TaskUs, Inc. Price & Performance (TASK)

We have also posted supplemental information on our Web and an Excel based financial metrics file. Please note this call is being simultaneously webcast on the Investor Relations section of our website. Before we start, I want to remind you that the following discussions contain forward looking statements within the meaning of the federal securities laws including, but not limited to, statements regarding our future financial results, and management's expectations and plans for the business. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here. You should not place undue reliance on any forward looking statements. Factors that could cause actual results to differ from these forward looking statements can be found in our annual report on Form 10 ks which was filed with the SEC on 03/08/2024.

This filing is accessible on the SEC's website and our Investor Relations website and may be supplemented with subsequent periodic reports we file with the SEC.

We expect our twenty twenty four ten ks to be filed with the SEC no later than 03/17/2025.

Any forward looking statements made on today's conference call including responses to questions, are based on current expectations as of today, and TaskUs assumes no obligation to update or revise them whether as a result of new developments or otherwise, except as required by law. The following discussion contains non GAAP financial measures. For a reconciliation of these non GAAP financial measures to the most directly comparable GAAP metric, please see our earnings press release, which is available in the IR section of our Web [indiscernible] Now, I will turn the call over to Bryce Maddock, our Co Founder and Chief Executive Officer. [indiscernible] Thank you, Trent.

Afternoon, everyone, and thank you for joining us.

In the fourth quarter, we delivered $274,200,000 in revenue, outperforming the top end of our guidance of $269,300,000 by $4,900,000 or nearly 2%.

This result marks the second consecutive quarter of record breaking revenue and reflects 17.1% year over year revenue growth. In 2024, we delivered on our goal of returning the company to growth. In the back half of the year, we exceeded expectations by delivering double digit growth. As we look to 2025, we intend to continue this trend. In terms of profitability, we delivered $53,800,000 in adjusted EBITDA in the quarter for an adjusted EBITDA margin of 19.6%. 150 basis points below our guidance of 21.1%. Our top line revenue performance and outlook for 2025 again required higher than anticipated investments in operations, facilities, hiring and training, which impacted our margins.

Additionally, Q4 revenue and costs were negatively impacted by certain business disruptions. Ology will discuss these impacts in more detail For the full year 2024, delivered $995,000,000 in revenue, and $209,900,000 in adjusted EBITDA representing an adjusted EBITDA margin of 21.1%. We also delivered $107,400,000 in adjusted free cash flow in 2024, slightly below our guidance of approximately $110,000,000 primarily due to increased capital investments required by twenty twenty five's anticipated revenue On behalf of the entire Taskus leadership team, want to express my gratitude for our teammates who show up to work every day to deliver for our clients. It is their operational excellence and execution that has driven robust client demand. This demand has positioned us and adjusted EBITDA in 2025. While it's still early, 2025 is off to a strong start. We're increasing our investments to ensure that Taskus remains the service provider of choice.

This includes investments in AGENTIC AI technologies, and generative AI services. Sales and marketing talent, and facility expansions in new and existing countries We believe this strategy will allow us to continue to drive revenue growth that is among the best in our industry. We also aspire to deliver adjusted EBITDA margins that are among the industry's best. In twenty twenty five, we plan to drive incremental efficiency into our business through further operational optimization and AI driven automation. Under this plan, we expect our margins to expand over the course of the year. Next, I'll recap some of the highlights before discussing our 2025 outlook. Ology will then walk through our financials and 2025 guidance in greater detail.

Q4 revenues were $274,200,000 a 17.1% increase on a year over year basis 13.2% growth Our sales and client service teams once again delivered remarkable performance in Q4, positioning us for a solid start to 2025. Approximately 55% of our signings were driven by wins from existing This was down from 83% in Q3 We saw a significant uptick in new logo signings Additionally, our existing client signings were less weighted towards our largest client, resulting in overall sales being well balanced across our client portfolio and industry verticals. In Q4, we again saw a year over year increase in clients utilizing more than one of our service lines. Revenue from these clients grew approximately 29% year over year in Q4, again demonstrating the success of our strategy of cross selling our suite of specialized services to our clients.

Turning to our service lines. After returning to year over year revenue growth, in all three service lines in Q3, we performed even better in Q4. Delivering accelerating year over year revenue growth in each service line. Q4 digital customer experience revenue increased by 8.5% compared to Q4 of twenty twenty three, an improvement over the 6.3% growth we delivered in Q3. [indiscernible] DCX saw its strongest growth from new clients primarily in our financial services and healthcare verticals. Again benefiting from our strategic focus to add new enterprise clients. Given our 2024 performance, and client signing trends in DCX, we're optimistic that DCX revenue growth can accelerate into the low double digits in Q1 of twenty twenty five.

I'm also pleased to report that Taskus was recently named a major contender in Everest Group's B2B sales, services peak matrix assessment for 2024. This industry recognition reflects TASKUS' strategic focus on expanding our suite of specialized DCX services into more complex solutions including sales, revenue generation, and customer success motions. In terms of DCX signings in Q4, we signed a meaningful expansion with a provider of smart home security and automation solutions This new work in Mexico will further solidify this top 20 client relationship.

Once fully ramped, we'll have approximately 1,200 teammates supporting this client across three different countries. We signed multiple new statements of work with a financial services client that provides prepaid and debit cards cross border payments and loyalty solutions.

The trust we've earned from this client during our first year of operations is evidence of the best in class quality that our talented teammates consistently deliver. Notably, during Q4, we also signed and successfully ramped services with our first large U. S.-based enterprise healthcare payer We now provide voice based services to this marquee client from India anticipate further expansion of this important relationship during 2025. We also signed another contract with a healthcare client providing U. S.-based work from home member support. These and other Q4 healthcare wins are validation of our strategic decision to target clients in this regulated market. Moving on to Trust and Safety, this service line again delivered exceptional performance in Q4, with 34% year over year growth. This marked the fourth quarter in a row of more than 30% growth. We continue to invest in our content moderation and financial crime and compliance solutions. And believe that together the trust and safety service line can continue to deliver solid double digit revenue growth in 2025. Similar to Q3, we again signed multiple statements of work expanding the scope of the trust and safety solutions we provide to our largest social media client, This again included AI safety solutions that integrate both trust and safety and AI services.

Combined with the ongoing ramp of new business signed earlier in 2024 across each of our service lines, we expect this client to represent an increasing percentage of our overall revenue. Beyond our largest client, we also signed a contract to support a German headquartered retail and e commerce industry client operations from India. This win was an example of our cross selling strategy yielding results with a client originally acquired as a part of the Helu acquisition.

Lastly, we signed a contract with a new client providing financial crime and compliance investigation services from India to a provider of dispute and chargeback management software. Now turning to AI services, revenue growth in this specialized service line accelerated further in Q4 reaching 31% on a year over year basis.

We're pleased with the strong demand for AI services across nearly all of our verticals, which resulted in a further increase in the number of clients utilizing our AI services Driven by twenty twenty four's solid results, and early twenty twenty five successes, we anticipate AI Services year over year revenue growth will accelerate significantly in 2025, likely making it the fastest growing of all of our service lines. The quality and size of our Q4 AI service signings were strong and broad based across new and existing enterprise technology, social media and autonomous vehicle clients. We also saw continued demand from developers of multimodal generative AI [indiscernible] Including from our largest client and the world's leading large language model. I want to highlight a particular win from a new social media client that represented the culmination of nearly two years of effort one of our dedicated sales leaders.

We'll be providing AI services Malaysia and Greece in support of this client's global platform. Given this win, and early twenty twenty five demand signals from this new client, we anticipate they will quickly become a top 20 Taskus of client during 2025. Moving on from our service lines, I want to take a moment to outline our strategy for 2025. At the start of last year, I announced that we had a singular focus for 2024. Returning the company to growth. We accomplished that goal returning to year over year growth in Q2 and achieving accelerating double digit growth in Q3 and Q4. We feel confident that we will sustain this growth So for this year, our strategic focus will be reimagining our business for the AI era.

Over the next five years, AI is likely to fundamentally reshape our world.

There are considerable fears about what this means for the BPO industry. Our view is that our industry will have both winners and losers. BPOs that remain focused on simple repeatable customer interactions and processes will be automated into oblivion. While those that provide more complex services and develop new revenue streams support while preserving or even expanding At Tafka's, we intend to be an AI winner. In 2025, we're focused on three key initiatives to best position us First, we're increasing our investments in AI services. These are the human services required to develop AI models. The fastest growing area in this service line has been our work with generative AI products and foundation model developers.

Here, we collect, create and curate the data needed to develop next generation models. We also constantly evaluate these models both pre and post appointment to ensure their quality, and safety. Finally, we're supporting the development and deployment of AI across a variety of service areas, for all types of companies. From autonomous vehicles to sales and customer service. Our investments in AI service have already paid off As I just mentioned, we believe AI services will be our fastest growing service line for 2025. Second, we're deploying AI across our own and operations to drive efficiency. In 2023, we launched our Taskus GPP platform, By the end of twenty twenty four, thousands of Taskus teammates were using tools built on Cash Gbt each day. These tools improve the efficiency and quality we deliver for our clients. In 2025, we're rolling out a suite of tools aimed at making our internal support teams more productive. From recruitment to training, quality to business intelligence, workforce management to human resources, today, Taskus employees thousands of people to ensure our frontline teammates successfully deliver for our clients. By the end of the year, all of our support functions will be using tools built on Task GPT to improve their efficiency.

We believe this will allow us to drive down support ratios and the cost of these support services as a percentage of our revenues. Thus improving our margins. Finally, we're proud to announce [indiscernible] This group will partner with leading Agentic AI companies focused on automating customer support interactions and business processes. We will leverage Taskus' expertise to enhance our clients' workflows facilitating the complex integration and model training required to realize the promise of these technologies [indiscernible] and back office platforms. By reselling, implementing and maintaining these tools for our clients, continuing to provide services for processes that cannot be automated, we will create an enduring revenue stream from the AI revolution. Over the next three quarters, I'll do a deep dive on one element of this three part strategy. This quarter, I want to focus on our investments in AI services. Let me start by saying that demand for AI services has transformed faster than any service I have ever seen.

When we started this practice a decade ago, we were focused exclusively on autonomous vehicle development. Tagging images of streets, to teach cars how to drive. Over the past few years, the development of foundation models has exploded. Leading to a transformation in demand for AI services. Companies are now seeking people who can create write and rate LLM questions and answers. As these models have improved, the complexity of this demand has also grown. With many organizations looking to source masters and PhD level expertise, across nearly every subject matter area. As AI safety has become a critical concern, the demand for AI red teaming has also surged. In this process, our diverse and specialized teams rigorously test AI models, probing for weaknesses biases and potential misuse. They use adversarial techniques to stress test the models attempting to elicit responses that violate terms of service or enable harmful behaviors. Effective Red Teaming requires a unique combination of deep technical expertise and an understanding of cultural ethical and customer specific policy considerations. With our years of experience in AI services and trust and safety, TaskUs is particularly well positioned to provide effective Red Teaming services to help clients to develop more secure, responsible and resilient AI models.

Today, we provide services focused on Gen AI safety to the world's leading large language model as well as the world's largest social media platform. We recently launched our first AgenTek AI client, Here we're training agents to automatically solve simple customer challenges. We've helped a different foundation model developer expand the languages that users can interact with We support another of the world's largest social media platforms to improve their models ability to automatically remove violating content.

And we helped ML Commons, an open engineering consortium, to develop a first of its kind benchmark to measure the safety of large language models in text to text AI interactions. We expect year over year revenue growth from this service line to materially accelerate in the first half of this year. Making AI services our fastest growing service offering. Within AI services, the work we are doing supporting generative AI is growing faster any other solution we provide.

In 2025, we expect this trend to continue with generative AI workflows growing at rates that are materially accretive our consolidated revenue growth rate.

We are excited about this first element of our strategy to ensure that Tafkis is well positioned for BPO's AI centric future. And look forward to providing more details about the other pillars of this strategy on future calls.

In addition to reimagining our services for the AI era, we are focused on three core initiatives to ensure Taskus remains the service provider of choice for clients with complex service needs in 2025. First, we will continue to take share from the competition through operational excellence. We made strong progress on this initiative in 2024, by successfully taking tens of millions of dollars of business from our direct competitors across 48 clients. Including 13 of our top 20 clients. And we're not done yet. We have meaningful opportunities with new and existing clients were simply tired of mediocre BPO services. We're confident that we can continue to take share not by being the cheapest provider, but by being the best. Next, we will continue expanding our specialized services that are less likely to be automated. We're moving up the value chain into services and industries that are AI resistant or where we can displace incumbent providers who are slow or unwilling to embrace AI centric solutions. This includes combining innovative technology partnerships with our talented teammates to grow our trust and safety, financial crimes and compliance, sales and customer success, and complex customer experience solutions. Lastly, we will continue to deepen our expertise and expand our reach with enterprise clients in regulated industries such as financial services and healthcare.

The recent wins and rapid multimillion dollar expansions of the healthcare relationships I discussed earlier in the call are emblematic of the impact this strategy is having on our growth. We intend to maintain this momentum in 2025. Before handing it over to Boblogy, for more details on our Q4 results, I want to quickly outline our Q1 and full year 2025 revenue outlook. In Q1, we expect to deliver revenues between $270,000,000 and $272,000,000 representing year over year revenue growth of approximately 19% at the midpoint. This reflects continued acceleration of our growth rate on a year over year basis.

On a sequential basis, Q1 will be impacted by two factors. First, we have an approximately $9,000,000 negative revenue impact from two fewer working days in the quarter. And second, as we've experienced in past years, we have a decline in seasonal revenues of approximately $6,000,000 Combined, this is a total sequential impact of approximately $15,000,000 compared to Q4 of twenty twenty four.

This will also impact our adjusted EBITDA margins which we expect to be 20% for the first quarter. We expect to deliver full year 2025 revenue of $1,110,000,000 at the midpoint of our guidance range of $1,095,000,000 point one two five billion dollars We expect margins to expand over the course of 2025 resulting in anticipated full year adjusted EBITDA margins of approximately 21% roughly flat with our full year 2024 results. With that, I'll hand it over to Balaji to go through the Q4 financials and our 2025 guidance in more detail.

Thank you, Bryce, and good afternoon, everyone. In the fourth quarter, we earned total revenues of $274,200,000 once again beating our guidance range of $267,300,000 to $269,300,000 Revenue increased by 17.1% compared to the previous year exceeding our expectation of 14.5% growth at the midpoint of our guidance. Our performance reflected strong accelerating year over year growth across all three of our service lines, and higher than expected volumes from both new and existing clients, across a broad range of verticals. Full year 2024 revenue increased year over year by 7.6 to $995,000,000 well above the top end of our guidance range of $990,000,000 In Q4 of twenty twenty four, we earned adjusted EBITDA of $53,800,000 a 19.6% margin versus our guidance of $56,600,000 and 21.1% at the midpoint.

For the full year, we achieved $209,900,000 in adjusted EBITDA and an adjusted EBITDA margin of 21.1% below our guidance of 21.5%. As Bryce previously mentioned, our strong Q4 revenues and double digit 2025 revenue growth forecast has necessitated increased investments in operations facilities, Hiding and training which impacted our Q4 margins. Additionally, this quarter's revenue and margins were negatively impacted by security incidents. In response to one event, we suspended our impacted operations out of an abundance of caution. In order to take care of our people, we chose to retain and pay the impacted teammates. During the suspension period. I'm proud of our team's decisive action and happy to report that we have now fully restored the suspended operations. In response, we are hardening our defenses by investing more in information and physical security. We've included these investments in the guidance we are providing today. Now moving on to service lines. In the fourth quarter, our DCX offering generated $164,800,000 for a year over year increase of 8.5%. This service line growth was primarily attributable to new client revenue, which represented approximately 87% of growth this quarter. Our strategic focus on clients in the financial services healthcare and professional services verticals again produced solid revenue results.

We also saw growth coming from existing clients primarily in our financial services and entertainment and gaming verticals. Our Trust and Safety business, which includes our content moderation and financial crime and compliance services grew by 34% compared to Q4 of twenty twenty three resulting in $70,000,000 of revenue. Here, growth was predominantly driven by increased revenue from existing clients in our social media retail and e commerce and financial services verticals. We continue to be excited about the growth opportunities in this specialized service line [indiscernible] strong alignment between our trust and safety operational excellence and increasing demand from developers of generative AI solutions, looking for AI safety services. Our AI services service line growth further accelerated to 31% year over year in Q4 delivering $39,400,000 in revenue. This was primarily a result of growth from new and existing social media and professional services clients requiring support for their generative AI development training and testing initiatives. We expect our AI services growth rate to climb further and be our fastest growing service line in 2025, as a result of recent wins and ongoing demand. We ended the year approximately 200 total clients of which more than 50% generated revenue in excess of $1,000,000 We continue to have a strong relationship with our largest client, which represented 25% of total revenues in Q4 compared to 23% in Q3 of twenty twenty four and nineteen percent in Q4 of twenty twenty three.

In Q4, our top 10 and top 20 clients accounted for 769% of our revenue respectively compared to 5566% in the previous year. We saw growth across all of our client cohorts for both Q4 and the year including clients outside of our top 20, which grew nearly 8% for the quarter. [indiscernible] was stable compared with Q3 and approximated 4% of total revenue during Q4. In the fourth quarter, we generated 54% of our revenues in The Philippines 13% of our revenues in The United States 13% of our revenues from India and 20% of our revenues from the rest of the world.

Q4 new business signings were strongest in India followed by The Philippines and Mexico. From a delivery region perspective, we again saw strong growth in Latin America which grew approximately 35% during Q4 as well as Europe which grew in excess of 43%. Our Asia Pacific region primarily driven by India and The Philippines, grew approximately 15% year over year during Q4 continuing the improvement we saw in Q3, As anticipated in our Q3 calls, we delivered growth across all of our major delivery regions including The United States, which grew 10% on a year over year basis in Q4. Cost of service as a percentage of revenue was 61.9% in the fourth quarter compared to 58.6% in the prior year. The year over year increase was driven by a number of factors including costs associated with the previously discussed security incidents, annual wage and benefits cost inflation and incremental hiring, training and facilities costs related to stronger growth. These factors were partially offset by gains from the stronger dollar. In the fourth quarter, SG and A expenses were $67,800,000.0 or 24.7% of revenue compared to $48,900,000 or 20.9% of revenue in the prior year. The increase was primarily driven by certain litigation costs.

The remaining increases include higher personnel costs including our investments in sales, marketing and technology, and increased bonus expense associated with higher revenue attainment. Adjusted net income for the quarter was $28,500,000 and adjusted EPS was $0.31 By comparison, in the year ago period, we earned adjusted net income of $32,200,000 and adjusted EPS of $0.35 Our weighted average share count for Q4 twenty twenty four was higher than Q4 of twenty twenty three as a result of share repurchases during the year, being more than offset by increasing the dilutive effect of shares issued under our equity compensation plans. For the full year, adjusted net income was $118,700,000 and adjusted EPS was $1.29 This compares to adjusted net income of $126,500,000 and $1.32 of adjusted EPS for full year 2023. Our adjusted EPS included the impact of our lower share count resulting from our stock repurchase program. The decrease in adjusted net income was primarily due to the increase in SG and A expenses that I explained earlier.

Now moving on to our balance sheet and cash flow.

Cash and cash equivalents were $192,200,000 As of 12/31/2024, compared with the 12/31/2023 balance, of $125,800,000 Our adjusted net debt leverage ratio continues to be very healthy at 0.3 times of adjusted EBITDA at the end of Q4. As a reminder, we calculate this ratio as total debt less cash divided by adjusted EBITDA for the trailing twelve month period. At the end of twenty twenty four, we had approximately $39,600,000 of authorization left on our share repurchase plan. Given its programmatic design, we repurchased approximately $2,200,000 in Q4 at an average cost of $11.83 Cash generated from operations for the full year 2024 was $138,900,000 as compared to $143,700,000 at the end of twenty twenty three. For the full year, CapEx was $39,100,000 or 3.9% of revenue compared with $31,000,000 or 3.4% of revenue in 2023. This full year increase was driven largely by CapEx spend tied to revenue growth and facility expansions. For the full year, adjusted free cash flow which excludes payments for litigation related expenses, was $107,400,000 slightly below our guidance of approximately $110,000,000 This shortfall was primarily the result of working capital increases and capital expenditures required to support our higher outlook for 2025 revenues and our Q4 adjusted EBITDA decrease compared to guidance.

This represents a conversion rate of 51.2% of adjusted EBITDA for the full year. In terms of our financial outlook for the full year, we anticipate full year 2025 total revenues to be in the range of 1.095 to $1,125,000,000 a midpoint of $1,110,000,000 We expect to earn of approximately 21%. This margin captures the impact of current ForEx rates the additional investments we are making to embrace generative AI and agentic AI technologies security infrastructure, operational ramp costs supporting our expected revenue growth and typical wage inflation in excess of our ability to pass fees on to our clients.

We expect to achieve approximately $100,000,000 in adjusted free cash flow for 2025. We anticipate capital expenditures will increase significantly in 2025 due to the timing of payments for facility expansions that started in 2024, new facility expansions in 2025 and refresh of technology assets. For the first quarter of twenty twenty five, we anticipate revenues to be in the range of $270,000,000 to $272,000,000 and we expect to earn an adjusted EBITDA margin of approximately 20%.

First quarter revenue and adjusted EBITDA margin will be impacted by lower seasonal revenues and two fewer working days in the quarter compared to Q4 of twenty twenty four a combined negative impact of approximately million dollars along with the investments in facilities and technology. During Q3 twenty twenty four, TASTEZ adopted hedge accounting with maturities beginning in 2025. As a result, realized gains and losses from hedges will be included in our results of operation and calculations of non GAAP metrics including EBITDA and adjusted EBITDA. Our guidance for the quarter and full year is based on current ForEx rate estimates So in each change to currency rates, to the extent not hedged, would impact our margins. As a reminder, the majority of our revenue is billed and collected in U. S. Dollars so we do not see the impact of U. S. Dollar fluctuations I will now hand it back to Bryce.

Thank you, Balaji. Before we take questions, I want to take a moment to highlight the incredible impact our teams made in our communities around the world last year. At TaskUs, our vision goes beyond supporting the world's most innovative brands It's about making a meaningful difference in the lives of the people we connect with and the communities we operate in. One of the most powerful ways we do this is by fostering a culture of service. We believe that when employees actively engage with their communities, they bring fresh perspectives deeper empathy and a stronger sense of purpose back into the workplace. In 2023, as part of our fifth we established Together We Serve a company wide initiative that empowers employees to volunteer for causes whether it's community cleanups, animal rescues, social justice initiatives, environmental campaigns or educational programs our employees are stepping up to create a positive change. In 2024, we set an ambitious goal of reaching 10,000 volunteer hours across all TaskCast locations. But even that goal was not ambitious enough. By the end of the year, our employees collectively contributed over 26,000 hours of volunteer work with nearly 5,000 employees participating. Together, we supported the three seventy three nonprofit organizations around the world.

Behind these numbers are real stories of Tasks employees who are making a meaningful impact in their communities. In The Philippines, Vina Pagliikawa Senior Director of Wellness and Resiliency dedicated fifty six hours to providing free coaching for young people public school teachers, local government officials and female leaders and professionals in her community. In India, Bhadna Singh, Senior Manager of People Strategy volunteered one hundred hours providing resources for local schools, and supporting animal welfare initiatives. She helped improve access to clean food and water for children, while also ensuring the well-being of stray and community animals. Here in The U. S, Lori Castle, our Global Editor in Chief, contributed sixty four hours to the Brook Healy Foundation. Where she played a key role in planning a gala to benefit families finding pediatric cancer. The Together We Serve program has helped us better understand the diverse needs of the communities we work in. Foster deeper empathy and create a more culturally aware workforce. With that, I'll ask the operator to open the line for our question and answer session. Operator?

Thank you. At this time, we'll conduct the question and answer session. And our first question comes from the line of Jim Schneider of Goldman Sachs. Your line is now open.

Good afternoon. Thanks for taking my question. Was wondering if you could give us a bit of an update on your largest customer, Meta, and understanding that you do not participate in the fact checking work, which the company did Maybe give us a sense about as the company revisits its fact checking and content moderation policies, how you're thinking about the potential risks to task existing business and how you plan to mitigate them?

Yes, Jim, thanks so much for the question. So we continue to have a very strong relationship with our largest client. In 2024, we expanded global operations supporting this client adding operations in two new countries while growing our operations in the three existing countries where we were doing business with them. We're supporting this client's integrity operations. Financial crimes and compliance workflows, And obviously, they're growing investments in generative AI. So as you mentioned, we don't provide back checking services to our largest client or any other client for that matter. Generally, our Trust and Safety business is focused on solutions to ensure content posted complies with client policies. So what does that mean? Well, we work to remove illegal content such as terrorism activity and child endangerment We also Taskus toxic content that could include bullying, graphic violence, and sexually explicit material So we will continue to be a go to partner for our largest client on these most critical initiatives. And I'll note that like the rest of our business, we expect to see significant growth in AI services from this client in 2025. As far as the risk, at this stage, we don't see any significant risk.

Revenue from this client grew faster than the overall business in 2024, We expect that revenue with this client will grow even faster in 2025. By the end of 2025, the relationship with our largest client will actually be about 70% larger than it was in 2023. And with all that, I'll just note that we continue to see an uptick in both new logo sales and sales to other existing customers. Which we mentioned in Q4. So we expect ongoing healthy growth from across the rest of our business as well.

That's helpful. Thanks And then maybe as a follow-up, just on the margin front. Balaji, maybe you can give us a sense of the shape or profile of margins as you head throughout the year? Where might margins end the year in Q4? And maybe give us a sense about where margins could go prospectively beyond then? Thank you.

Yes. So, Hiv, thanks for the question. So while we don't provide guidance on margins on our a quarterly basis what we are guiding to currently for Q1 is about 20% adjusted EBITDA. And then what we are saying is for the full year, we will deliver adjusted EBITDA margins of about 21%. You'll see that we'll continue to see sequential improvement in the margin starting Q1 getting into Q3. And then in Q4, we might see some reduction, see [indiscernible] some seasonal costs as an example holiday pay that you see every year. So there will be a small dip in Q4. But we would see an increase in margins starting Q2. And then in terms of some of the key drivers from a margin perspective that I spoke about earlier, is the investments that we're going to be making from a generating AI perspective, the investments in security infrastructure, and then we will continue to incur ramp costs that we saw in 2024 as we went through the growth phase and we are calling for double digit growth rates in 2025. So we expect to see continued ramp cost in terms of facilities cost, training and recruitment. And then the guidance that we have provided today also factors in typical wage inflation that we see a bigger.

Thank you. One moment for our next question. Our next question comes from the line of Kathy Chan of Bank of America Securities Hey guys. Thanks for taking my question. First, just wanted to ask about the first quarter revenue growth of 19%. That's really strong and only a sequential decline of about 1%. Quarter over quarter despite some of the headwinds you mentioned. From the fewer billable days and seasonality. I just wanted to Taskus that pull forward of revenue from maybe something from the back half of the year and the math kind of implies growth decelerating to is it fair to say high single digit or call it 10% is still exiting 2025? Is that conservatism or are there other factors that we should take into account as we think about the shape of the rest of the year? Just given the strong first quarter guidance you gave?

Yes. Thanks, Cassie. So obviously, it's the start of the New Year and we always want to provide guidance that we feel confident we can meet or beat So today, we're providing guidance for between 1013% year over year growth in 2025. And I'll just note that to get to the top half of that range, we're contemplating a demand environment that doesn't change materially from 2024. And that means that things don't get worse, but it also means things don't get better. So we do think there's upside potential on these numbers. To simply get to 12% to 13% growth is very achievable. 2024, we saw both increased bookings and a reduction those trends have continued into 2025.

We've got very good next quarter visibility and our results thus far in Q1 give us confidence that we will meet or beat our Q1 guidance. You mentioned the headwinds, it's a significant headwind, dollars 15,000,000 when compared to Q4. And even with that headwind, we're contemplating revenues that are nearly flat quarter over quarter. So clearly, feel like we're off to a pretty good start So for the remainder of 2025, if we keep our head down successfully recruit ramp and retain our large clients, then we feel very confident in our ability to meet or beat the guidance we're providing. And to be clear, our goal is enduring double digit revenue growth.

Okay, super helpful. And then just a quick follow-up You guys mentioned the security incidents that impacted the fourth quarter. Is there any way you can quantify the impact on that on revenues and margins? Anything lingering into maybe first quarter And I guess you talked about some reinvestments in the business as well. Any way to quantify how much is going to both of those own internal security measures versus the investments in building out those AI tools that you continue to see strong demand for [indiscernible] etcetera, just those different buckets as well. Thank you.

Yes. So I'll start and Balaji, if you want to add anything, feel free. I mean, security has always been a top priority for TASKUS. And unfortunately, our industry has been targeted by an increasing number of these types of events. So what happened in Q4 was not at all unique to TaskUs. What is perhaps unique is how quickly our team of of the response of our team We suspended operations out of an abundance of caution. We continue to pay our employees during the suspension period and we've now fully restored those suspended operations. We actually expect our relationship with the client in this case to grow in twenty twenty five. When we combine the impact of the security incident with the impact of increased investments to meet our growth targets for 2025. So those ramp costs that biology related had both of those things not happened, we would have met our EBITDA guidance. So we were a few million dollars short on a dollar basis from our EBITDA guidance in Q4. So that can give you a sense of kind of what the the size of that impact is. As far as ongoing investments we are going to continue to invest millions of dollars in our AI initiatives.

And we will also be investing millions of dollars in improving our security posture. We have done that historically, but given the experience we had in Q4, we've set a goal of becoming the most secure provider in the industry. And so we've set out an investment agenda that will we think position us to accomplish that.

But all of those investments have been factored in the guidance. As Balaji said, we expect EBITDA margins for the full year to be roughly flat with 2024.

But we expect those margins to grow over the course of the year.

Thank you. Great. Thank you.

Thank you. One moment for next question. Our next question comes from the line of Jonathan Lee of Guggenheim Partners Your line is now open.

Great. Thanks for taking our question. How should we think about your market position in AI services, particularly What gives you confidence that clients would look to task us for that type of service versus using perhaps in house talent or competitor?

Yes. Thanks so much for the question, Jonathan. So broadly based, when we look at AI services, we're seeing a significant increase in demand from generative AI and foundational models We're also seeing a significant increase in demand for these services from large social media companies. The Agentic AI practice that we mentioned on the call, which we're just kicking off is going to be a partnership with the leading Agentix AI companies, these are companies that are using LOMs with a goal of automating certain aspects of customer support. As we've said, historically, we believe that simple and support interactions span to be automated. We got our own cash GPT platform, which makes our teammates significantly significantly more productive when responding to customers. But there are contact types that we believe we can just completely automate in partnerships with these Agentech AI technology providers. And so as we're looking to this year, we're excited about partnerships. We have some partnerships that we'll be announcing publicly shortly. And we expect to begin to deploy these tools across a number of our clients. Again, this is going to create an enduring revenue stream because we'll be making money from the implementation and the ongoing automation We think we're very well positioned because we've got teammates who have been trained on these work flows and deeply understand the policies of our customers.

And we can use that knowledge to train and maintain these AgenTek AI systems. And then of course, As we've said, we think there is a huge portion of work that is not likely to be automated anytime soon. These are the more complex customer interactions They may involve sales, revenue generation, customer success, Tier two and Tier three Taskus support workflows. Taskus will continue to be a vendor of choice for our clients for those workflows.

So it's a multi pronged approach, but really that AgenTek AI practice is going to primarily focus on the future of our customer experience business.

Thank you. One moment for our next question. Our next question comes from the line of David Koning of Baird. Your line is now open. Yes. Hey guys. Nice job. And I guess my question when we look at employee growth and nice job, big growth sequentially this quarter.

But when we look at that, it grew faster year over year than revenue all through the year. And I'm sure that has to do with [indiscernible] But when will we see a time when you kind of get the efficiencies where you're actually disconnecting where revenue starts growing faster than employees?

Yes. So I'll comment conceptually and then biology can maybe add a few more details. Clearly, this year, we've seen a mix shift.

I'm really proud that we got back to double digit growth in The U. S. In Q4.

That was not the case for most of the year. For most of the year, our revenue in The U. S. Was declining and obviously The U. S. Is the region in which we drive the highest revenue per employee. And so as we look at growth being driven in The Philippines and India and increasingly in new regions like Colombia and and even parts of Europe, revenue per employee is just lower than it was in The U. S. Business. We think that this year we will begin to see an increase in revenue per employee driven by stabilization in the geographic mix, and by the fact that we're going to continue to automate large portions of our work The Digentic AI practice I was just talking about gives us an opportunity to take a teammate who's supporting customer support workflows and make them significantly more productive to handle more cases on an hourly basis than they would historically and that should revenue per employee. Ajay, anything to quickly add there?

Yes. Just a couple of things I'll add is David, if you kind of look at revenue yield per employee, which is revenue divided by the end of the quarter headcount, Compared to 2023, we do see a reduction in 2024, but it's been fairly [indiscernible] because the mix is kind of fairly stable in 2024 when compared to 2023.

Because we started to digest the impact of this mix shift from onshore to offshore.

Shore. So it's been fairly stable in 2024. And like Bryce said, as we start selling some of these specialized service lines, we would start to see improvement from a yield perspective.

Thank you. One moment for our next question. And our next question comes from the line of Maggie Nolan of William Blair. Your line is now open. Thank you. You made a comment in your prepared remarks, Bryce, that you were planning to expand specialized that are less likely to be [indiscernible] Can you talk about maybe what service areas in particular you're investing in, how the mix might change what that means in terms of your three service types that you report and margin profiles associated with them?

Yes. So this we are focused on both services and verticals where we think there's an AI resistance and not AI resistance because people don't want to use AI, but AI resistance because of either complexity or regulatory concerns. So on the service line side, we believe that trust and safety, risk and response, certainly and somewhat ironically AI services themselves are more AI resistant We also think that the work we're doing in sales and lead gen and more complex workflows in customer success are more AI resistant. It's the the commoditized repeatable interactions that we think are going to be automated first and we fully intend to lead the charge on that automation with our Agentic AI consulting practice. As far as verticals, really focused on financial services and healthcare because we continue to see strong growth rates in both of those verticals across the BPO industry and a lot of those services we think are more resistant to automation. We also mentioned that we're going to go after enterprise clients where we think our existing customers are slow to attempt to automate, and we'll be taking an AI first offering to try to disrupt those competitors. So it's a multi pronged approach but I appreciate the question, Maggie.

Thank you. One moment for our next question. Our next question comes from the line of James Faucette of Morgan Stanley. Your line is now open.

Thanks for the question guys. It's Antonio on for James. I wanted to ask more on the pace of bookings like revenue conversion. How has that trended? And then how has demand trended as well?

Thanks for the question, Antonio. So as we mentioned on the call, Q4 was a great quarter, both in that we saw a significant up tick in new logo sales and the existing client sales were less concentrated with our largest customer. As I mentioned, we've seen incredible growth with our largest customer and we anticipate to see sustained growth with them in 2025. In Q4, we were able to drive even more growth outside of the largest customer and we think that will show up in revenue growth rates outside of our largest customer accelerating over the course of 2025.

I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.