TaskUs : Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

About this update from Taskus, Inc.

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 the unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this "Quarterly Report"), the financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "Annual Report"), as filed with the Securities and Exchange Commission (the "SEC") and the information included under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report. In addition to historical data, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in our forward-looking statements as a result of various factors, including but not limited to those discussed under "Cautionary Note Regarding Forward-Looking Statements" in this Quarterly Report and under Part I, Item 1A, "Risk Factors" in the Annual Report. This Quarterly Report includes certain historical consolidated financial and other data for TaskUs, Inc. ("we," "us," "our" or the "Company"). The following discussion provides a narrative of our results of operations and financial condition for the three months ended March 31, 2026 and 2025. Overview We deliver outsourced digital services that power the companies shaping the future. By combining specialized human talent and intelligent technology, we solve complex operational challenges for global category leaders within Artificial Intelligence ("AI"), autonomous vehicles, robotics, social media, financial services, healthcare, and beyond. We enable our clients to elevate their customer experience, protect their platforms, and grow their brands. Our global, omnichannel delivery model is focused on providing our clients with three key services - Digital Customer Experience, Trust & Safety, and AI Services. 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 growing 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. 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. 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. 2026 Developments Special Dividend, Debt Refinancing and Equity Adjustment On February 25, 2026, our Board of Directors declared a special cash dividend of $3.65 per share, totaling $332.8 million, which was paid on March 25, 2026 (the "Special Dividend"). On March 11, 2026, we entered into the 2026 Credit Agreement, which included the $500.0 million 2026 Term Loan Facility and the $100.0 million 2026 Revolving Credit Facility (the ("Refinancing"). The proceeds of the 2026 Term Loan Facility, and cash on the Company's balance sheet, were used to repay all borrowings under the 2022 Credit Facilities, pay related fees and expenses, and fund the Special Dividend. As required by the 2019 TaskUs, Inc. Stock Incentive Plan and TaskUs, Inc. 2021 Omnibus Incentive Plan, we made proportionate adjustments to the terms of outstanding awards in conjunction with the Special Dividend (the "Equity Adjustment"). The Equity Adjustment resulted in $1.2 million stock-based compensation expense, recognized primarily in selling, general and administrative expense on the condensed consolidated statements of income for the three months ended March 31, 2026, and a reclassification of $6.7 million from additional paid-in capital to accrued payroll and employee-related liabilities. See Note 7, "Long-Term Debt" and Note 10, "Stock-Based Compensation" in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report for additional information. Recent Financial Highlights For the three months ended March 31, 2026, we recorded service revenue of $306.3 million, a 10.3% increase from $277.8 million for the three months ended March 31, 2025. Net income for the three months ended March 31, 2026 increased to $24.3 million from $21.1 million for the three months ended March 31, 2025. This increase is due primarily to revenue growth and foreign currency gains, partially offset by higher cost of services. Adjusted Net Income for the three months ended March 31, 2026 decreased 8.9% to $32.8 million from $35.9 million for the three months ended March 31, 2025. Adjusted EBITDA for the three months ended March 31, 2026 decreased 1.2% to $58.6 million from $59.3 million for the three months ended March 31, 2025. Adjusted Net Income and Adjusted EBITDA are non-GAAP financial measures. For definitions and reconciliations to net income, the most directly comparable measure in accordance with GAAP, see "Non-GAAP Financial Measures." Our operating results in any period are not necessarily indicative of the results that may be expected for any future period. Results of Operations Comparison of the Three Months Ended March 31, 2026 and 2025 The following tables set forth certain historical consolidated financial information for the three months ended March 31, 2026 and 2025: Three months ended March 31, Period over Period Change (in thousands, except %) 2026 2025 ($) (%) Service revenue $ 306,266 $ 277,792 $ 28,474 10.3 % Operating expenses: Cost of services 197,790 171,181 26,609 15.5 % Selling, general and administrative expense 58,284 57,424 860 1.5 % Depreciation 11,029 10,003 1,026 10.3 % Amortization of intangible assets 5,006 4,976 30 0.6 % Gain on disposal of assets (51) (30) (21) 70.0 % Total operating expenses 272,058 243,554 28,504 11.7 % Operating income 34,208 34,238 (30) (0.1) % Other income, net (7,326) (173) (7,153) NM Financing expenses 5,268 4,663 605 13.0 % Income before income taxes 36,266 29,748 6,518 21.9 % Provision for income taxes 11,934 8,600 3,334 38.8 % Net income $ 24,332 $ 21,148 $ 3,184 15.1 % 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: Three months ended March 31, Period over Period Change (in thousands, except %) 2026 2025 ($) (%) Digital Customer Experience $ 168,490 $ 159,862 $ 8,628 5.4 % Trust & Safety 75,835 72,407 3,428 4.7 % AI Services 61,941 45,523 16,418 36.1 % Service revenue $ 306,266 $ 277,792 $ 28,474 10.3 % Digital Customer Experience was primarily driven by an increase from existing clients, mainly in Entertainment & Gaming, Mobility, Logistics & Travel, Healthcare and Technology, partially offset by a decrease in Financial Services and Retail & eCommerce. The remaining increase was primarily driven by new clients, mainly in Technology. Trust & Safety was primarily driven by an increase from new clients, mainly in Technology. The remaining increase was primarily driven by existing clients, mainly in Technology and Social Media, partially offset by a decrease in Retail & eCommerce. AI Services was primarily driven by an increase from existing clients, mainly in Mobility, Logistics & Travel. The remaining increase was primarily driven by new clients, mainly in Mobility, Logistics & Travel and Technology. Service revenue by delivery geography We deliver our services from multiple locations around the world; however, the majority of our service revenues are derived from contracts that require payment in United States dollars, regardless of whether the clients are located in the United States. The following table presents the breakdown of our service revenue by geographical location, based on where the services are provided, for each period: Three months ended March 31, Period over Period Change (in thousands, except %) 2026 2025 ($) (%) Philippines $ 160,000 $ 151,717 $ 8,283 5.5 % United States 41,213 33,221 7,992 24.1 % India 40,178 35,428 4,750 13.4 % Rest of World 64,875 57,426 7,449 13.0 % Service revenue $ 306,266 $ 277,792 $ 28,474 10.3 % Philippines: Digital Customer Experience contributed 3.5% of the total increase primarily driven by clients in Technology, Financial Services and Mobility, Logistics & Travel. Trust & Safety contributed 1.4% of the total increase primarily driven by clients in Technology and Social Media, partially offset by clients in Retail & eCommerce. AI Services contributed 0.6% of the total increase primarily driven by clients in Mobility, Logistics & Travel and Technology, partially offset by clients in Social Media. United States: AI Services contributed 46.3% of the total increase primarily driven by clients in Mobility, Logistics & Travel. The increase was partially offset by an 18.9% decrease contributed by Digital Customer Experience, primarily driven by clients in Mobility, Logistics & Travel, Healthcare and Technology, and by a 3.3% decrease contributed by Trust & Safety primarily driven by clients in Social Media, partially offset by clients in Financial Services. India: Digital Customer Experience contributed 28.7% of the total increase primarily driven by clients in Mobility, Logistics & Travel, Healthcare and Technology. These increases were partially offset by a 10.3% decrease contributed by Trust & Safety primarily driven by clients in Social Media, and by a 5.0% decrease contributed by AI Services primarily driven by clients in Mobility, Logistics & Travel. Rest of World: Trust & Safety contributed 10.5% of the total increase primarily driven by clients in Social Media and Financial Services. AI Services contributed 3.6% of the total increase primarily driven by clients in Mobility, Logistics & Travel and Social Media. These increases were partially offset by a 1.1% decrease contributed by Digital Customer Experience primarily driven by clients in Mobility, Logistics & Travel and Financial Services, partially offset by clients in Entertainment & Gaming. Growth in the Rest of World was led by Latin America. Operating expenses Cost of services The increase was primarily driven by higher personnel costs of $19.5 million associated with increased headcount. The remaining increase included facilities costs associated with site expansion and enhanced security measures. Selling, general and administrative expense The increase was primarily driven by transaction costs of $1.1 million and software costs associated with enhanced security measures. These increases were partially offset by lower personnel costs of $0.9 million, due to a $2.3 million reduction in stock-based compensation expense, partially offset by increased headcount, and a reduction of operational efficiency costs of $0.3 million. Depreciation The increase was primarily driven by site expansions and the acquisition of technology hardware to support increased headcount. Other income, net Changes are driven by our exposure to foreign currency exchange risk resulting from our operations in foreign geographies, primarily the Philippines, including economic hedges using foreign currency exchange rate forward contracts. See Part I, Item 3., "Quantitative and Qualitative Disclosures About Market Risk" in this Quarterly Report for additional information on how foreign currency impacts our financial results. Financing expenses The increase was primarily driven by a higher outstanding principal balance and interest rate following the Refinancing. Additionally, financing expenses included a $0.2 million loss on debt extinguishment related to the write-off of unamortized debt issuance costs. Provision for income taxes The effective tax rate for the three months ended March 31, 2026 and 2025 was 32.9% and 28.9%, respectively. Costs related to the issuance of stock-based compensation, operational efficiency costs, transactions costs and severance within the provision for income taxes calculation are adjusted for Non-GAAP purposes. If those costs are removed, the provision for income taxes would have been $11.0 million and $10.3 million and the effective tax rate would have been 24.8% and 25.7% for the three months ended March 31, 2026 and 2025, respectively. Revenue by Top Clients The table below sets forth the percentage of our total service revenue derived from our largest clients for the three months ended March 31, 2026 and 2025: Three months ended March 31, 2026 2025 Top ten clients 63 % 57 % Top twenty clients 75 % 70 % For the three months ended March 31, 2026 and 2025, we generated 24% and 26%, respectively, of our service revenue from our largest client. Many of our clients are part of the rapidly growing digital economy and they rely on our suite of digital solutions to drive their continued success. For our existing clients, we benefit from our ability to cross sell new solutions and provide service in multiple geographies, further deepening our entrenchment. We continue to identify and target high growth industry verticals and clients. 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. Foreign Currency As a global company, we face exposure to movements in foreign currency exchange rates. Fluctuations in foreign currencies impact the amount of total assets, liabilities, revenue, operating expenses and cash flows that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. See Part I, Item 3., "Quantitative and Qualitative Disclosures About Market Risk" in this Quarterly Report for additional information on how foreign currency impacts our financial results. Non-GAAP Financial Measures We use Adjusted Net Income, Adjusted Earnings Per Share ("EPS"), EBITDA, Adjusted EBITDA, Free Cash Flow and Conversion of Adjusted EBITDA to Free Cash Flow, as key measures to assess the performance of our business. Each of the measures are not recognized under accounting principles generally accepted in the United States of America ("GAAP") and do not purport to be an alternative to net income or cash flow as a measure of our performance. Such measures have limitations as analytical tools, and you should not consider any of such measures in isolation or as substitutes for our results as reported under GAAP. Additionally, Adjusted Net Income, Adjusted EPS, EBITDA, and Adjusted EBITDA exclude items that can have a significant effect on our profit or loss and should, therefore, be used in conjunction with profit or loss for the period. Our management compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, these measures may not be comparable to other similarly titled measures of other companies. Adjusted Net Income Adjusted Net Income is a non-GAAP profitability measure that represents net income or loss for the period before the impact of amortization of intangible assets and certain items that are considered to hinder comparison of the performance of our businesses on a period-over-period basis or with other businesses. During the periods presented, we excluded from Adjusted Net Income amortization of intangible assets , transaction costs, operational efficiency costs , the effect of foreign currency gains and losses, gains and losses on disposals of assets, certain 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. 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. The following table reconciles net income, the most directly comparable GAAP measure, to Adjusted Net Income for the three months ended March 31, 2026 and 2025: Three months ended March 31, Period over Period Change (in thousands, except %) 2026 2025 ($) (%) Net income $ 24,332 $ 21,148 $ 3,184 15.1 % Amortization of intangible assets 5,006 4,976 30 0.6 % Transaction costs (1) 1,146 - 1,146 100.0 % Operational efficiency costs (2) - 303 (303) (100.0) % Foreign currency losses (gains) (3) (5,603) 1,310 (6,913) NM Gain on disposal of assets (51) (30) (21) 70.0 % Severance costs (4) 72 679 (607) (89.4) % Stock-based compensation expense (5) 6,923 9,218 (2,295) (24.9) % Tax impacts of adjustments (6) 929 (1,666) 2,595 NM Adjusted Net Income $ 32,754 $ 35,938 $ (3,184) (8.9) % Net Income Margin (7) 7.9 % 7.6 % Adjusted Net Income Margin (7) 10.7 % 12.9 % NM = not meaningful (1) Represents non-recurring professional fees related to the Refinancing and Special Dividend. (2) Represents professional service fees related to certain efforts to enhance efficiency of client delivery and operations support. (3) Realized and unrealized foreign currency losses and gains include the effect of fair market value changes of forward contracts not designated as hedging instruments and remeasurement of U.S. dollar-denominated accounts to foreign currency. (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, transaction costs, operational efficiency costs and severance. After these adjustments, we applied a non-GAAP effective tax rate of 24.8% and 25.7% for the three months ended March 31, 2026 and 2025, respectively, to non-GAAP income before income taxes. (7) Net Income Margin represents net income divided by service revenue and Adjusted Net Income Margin represents Adjusted Net Income divided by service revenue. 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. 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. The following table reconciles GAAP diluted EPS, the most directly comparable GAAP measure, to Adjusted EPS for the three months ended March 31, 2026 and 2025: Three months ended March 31, 2026 2025 GAAP diluted EPS $ 0.26 $ 0.23 Per share adjustments to net income (1) 0.09 0.15 Adjusted EPS $ 0.35 $ 0.38 Weighted-average common shares outstanding - diluted 93,094,002 93,655,539 (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. EBITDA and Adjusted EBITDA EBITDA is a non-GAAP profitability measure that represents net income or loss for the period before the impact of the benefit from or provision for income taxes, financing expenses, depreciation, and amortization of intangible assets. EBITDA eliminates potential differences in performance caused by variations in capital structures (affecting financing expenses), tax positions (such as the availability of net operating losses against which to relieve taxable profits), the cost and age of tangible assets (affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization expense). Adjusted EBITDA is a non-GAAP profitability measure that represents EBITDA before certain items that are considered to hinder comparison of the performance of our business on a period-over-period basis or with other businesses. During the periods presented, we excluded from Adjusted EBITDA transaction costs, operational efficiency costs, the effect of foreign currency gains and losses, gains and losses on disposals of assets, certain 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. 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. The following table reconciles net income, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the three months ended March 31, 2026 and 2025: Three months ended March 31, Period over Period Change (in thousands, except %) 2026 2025 ($) (%) Net income $ 24,332 $ 21,148 $ 3,184 15.1 % Provision for income taxes 11,934 8,600 3,334 38.8 % Financing expenses 5,268 4,663 605 13.0 % Depreciation 11,029 10,003 1,026 10.3 % Amortization of intangible assets 5,006 4,976 30 0.6 % EBITDA $ 57,569 $ 49,390 $ 8,179 16.6 % Transaction costs (1) 1,146 - 1,146 100.0 % Operational efficiency costs (2) - 303 (303) (100.0) % Foreign currency losses (gains) (3) (5,603) 1,310 (6,913) NM Gain on disposal of assets (51) (30) (21) 70.0 % Severance costs (4) 72 679 (607) (89.4) % Stock-based compensation expense (5) 6,923 9,218 (2,295) (24.9) % Interest income (6) (1,496) (1,598) 102 (6.4) % Adjusted EBITDA $ 58,560 $ 59,272 $ (712) (1.2) % Net Income Margin (7) 7.9 % 7.6 % Adjusted EBITDA Margin (7) 19.1 % 21.3 % NM = not meaningful (1) Represents non-recurring professional fees related to the Refinancing and Special Dividend. (2) Represents professional service fees related to certain efforts to enhance efficiency of client delivery and operations support. (3) Realized and unrealized foreign currency losses and gains include the effect of fair market value changes of forward contracts not designated as hedging instruments and remeasurement of U.S. dollar-denominated accounts to foreign currency. (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 earned on short-term savings, time-deposits and money market funds. (7) Net Income Margin represents net income divided by service revenue and Adjusted EBITDA Margin represents Adjusted EBITDA divided by service revenue. 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. Our management believes that the inclusion of this non-GAAP measure, when considered with our GAAP results, provides management and investors with an additional understanding of our ability to generate additional cash for ongoing business operations and other capital deployment. The following table reconciles net cash provided by operating activities, the most directly comparable GAAP measure, to Free Cash Flow for the three months ended March 31, 2026 and 2025: Three months ended March 31, 2026 2025 Net cash provided by operating activities $ 46,304 $ 36,276 Purchase of property and equipment (10,205) (14,480) Free Cash Flow $ 36,099 $ 21,796 Conversion of Adjusted EBITDA to Free Cash Flow (1) 61.6 % 36.8 % (1) Conversion of Adjusted EBITDA to Free Cash Flow represents Free Cash Flow divided by Adjusted EBITDA. Liquidity and Capital Resources As of March 31, 2026, our principal sources of liquidity were cash and cash equivalents totaling $152.3 million, which were held for working capital purposes, as well as the borrowing availability under the 2026 Revolving Credit Facility of $100.0 million. On March 11, 2026, the Company entered into the 2026 Credit Agreement, which provided for the $500.0 million 2026 Term Loan Facility and the $100.0 million 2026 Revolving Credit Facility. The proceeds of the 2026 Term Loan Facility, and cash on the Company's balance sheet, were used to repay all borrowings under the 2022 Credit Facilities, pay related fees and expenses, and fund a $332.8 million special cash dividend. As of March 31, 2026, our total indebtedness, net of debt financing fees was $491.6 million. The interest rate in effect for the 2026 Term Loan Facility as of March 31, 2026 was 6.412% per annum. We were in compliance with all covenants under the 2026 Credit Agreement as of March 31, 2026. See Note 7, "Long-Term Debt" in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report for additional information regarding our debt. Historically, we have financed our operations and made investments in supporting the growth of our business primarily through cash provided by operations. We expect to continue to make similar investments in the future. We believe our existing cash and cash equivalents and our 2026 Credit Facilities will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all. If we are unable to raise additional funds when desired, our business, financial condition and results of operations could be adversely affected. Cash Flows The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the periods indicated: Three months ended March 31, (in thousands) 2026 2025 Net cash provided by operating activities $ 46,304 $ 36,276 Net cash used in investing activities (10,205) (14,480) Net cash used in financing activities (88,809) (17,955) Operating Activities Net cash provided by operating activities for the three months ended March 31, 2026 was $46.3 million compared to net cash provided by operating activities of $36.3 million for the three months ended March 31, 2025. Net cash provided by operating activities for the three months ended March 31, 2026 reflects net income of $24.3 million and the add back for non-cash charges totaling $23.1 million, partially offset by changes in operating assets and liabilities of $1.1 million. Non-cash charges primarily consisted of $11.1 million of depreciation, $6.6 million in stock-based compensation expense and $5.0 million of amortization related to intangibles. Net cash provided by operating activities for the three months ended March 31, 2025 reflects net income of $21.1 million and the add back for non-cash charges totaling $24.2 million, partially offset by changes in operating assets and liabilities of $9.1 million. Non-cash charges primarily consisted of $10.0 million of depreciation, $8.7 million in stock-based compensation expense and $5.0 million of amortization related to intangibles. Investing Activities Net cash used in investing activities for the three months ended March 31, 2026 was $10.2 million compared to net cash used in investing activities of $14.5 million for the three months ended March 31, 2025. Purchase of property and equipment decreased primarily due to lower site build-out costs and a reduction in technology hardware purchases. Financing Activities Net cash used in financing activities for the three months ended March 31, 2026 was $88.8 million compared to net cash used by financing activities of $18.0 million for the three months ended March 31, 2025. The increase was due primarily to the $332.8 million distribution of dividends and $242.0 million in payments on long-term debt, as well as $9.0 million in payments for debt financing fees. These uses of cash were partially offset by $500.0 million in proceeds from long-term debt. During the three months ended March 31, 2026, there were no repurchases of common stock, compared to $9.7 million in stock repurchases during the three months ended March 31, 2025. Critical Accounting Estimates There have been no material changes to our critical accounting estimates as reported in our Annual Report. Recent Accounting Pronouncements For additional information regarding recent accounting pronouncements adopted and under evaluation, refer to Note 2, "Summary of Significant Accounting Policies" in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report.

View stock analysis, news, and events for Taskus, Inc.