Good afternoon, and welcome to the Tasco Second Quarter 2021 Investor Call. My name is Josh, and I will be your conference facilitator today. Introduce Barry Hutton, Managing Director of Investor Relations. Barry, you may begin.
For the TaskUs Second Quarter 2021 Earnings Call. Joining me on the call today are Bryce Mattock, Co Founder and Chief Executive Officer of TaskUs operator and Balaji Saqqar, Chief Financial Officer. Full details of our results and additional management commentary are available in our earnings release, which can be found on the Investor Relations section of the website at ir. Taskdesk.com. Please note that this call will be simultaneously web guest on the Investor Relations section of the company's corporate website.
Before we start, I would like to remind you that the following discussion contains forward looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding Tasgov's future financial results and management's expectations and plans for the business. These statements are neither promises nor guarantees conference call and involve risks and uncertainties that may cause the 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 the forward looking statements can be found in our prospectus dated June 10, 2021, filed with the SEC on June 14, 2021, which is at casks.com, as may be supplemented in subsequent periodic reports we file with the SEC. Any forward looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, operator, and TaskUs assumes no obligation to update or revise them whether as a result of new developments or otherwise, except as required by law.
Of financial measures to the most directly comparable GAAP metric. Please see our earnings press release, which is available in the IR section on our website at ir. Taskus.com. Now I will turn the call over to Bryce, Co Founder and Chief Executive Officer of TaskUs.
Early investor call as a public company. Before we begin, I want to take a moment to thank our teammates around the globe who continue to show up day and us on this journey and helping us to complete a very successful IPO in June. All of this has taken place against the background of an ongoing global pandemic. At TaskUs, the health and safety of our teammates and the communities we serve remain our top on approximately 91% of Tasca's teammates around the globe are working from home. My deepest sympathies go out to our teammates and their families who've been affected by this pandemic.
Despite the losses and tragedies many of our teammates have endured, they have delivered a remarkable performance in for our first ever public quarter. In Q2, our team delivered strong growth and profitability. Our 2nd quarter revenue grew 57 point 4 percent year on year to $180,000,000 It's important to note that this growth is completely organic just like all of our growth to date. And operator of getting to know Tascus. I'm going to provide a brief overview of our business before going a bit deeper into our Q2 results.
Hafsus was founded in 2,008. That year, my best friend Jasper Weir and I had just graduated from college into the middle of the worst reception in recent memory. Struggling to find jobs, we decided to invest our combined life savings to launch TaskUs.
While all of the
digital economy. Most TASSC clients have three things in common. They are truly customer obsessed, they've grown faster than nearly every other company in history and their success has led to massive operational challenges that can put their customer experience at risk. That's where we come in. TASCUS provides the specialized services these companies rely on to scale their business and deliver for for customers.
Today, we provide 3 primary specialized services: digital customer experience, content security, official intelligence operations. We've been fortunate enough to be the chosen outsourcing partner of many of the companies that have defined this era of digital is simply massive. The total addressable market across the specialized services we deliver is over $100,000,000,000 and demand for some of these services is growing up to 50% annually. So we are just getting started. We have 5 The third is expanding our global delivery footprint.
The 4th is adding new clients. Besides our current success with high growth disruptors. We're focused on Big Tech and supporting the digital transformation of Fortune 500 Companies. Analyst capabilities. So with that as background, let me share a few more details on our performance in the first half of twenty twenty one and Q2 more if I could.
In the first half of the year, we closed a record amount of business from both new and existing clients. We saw call. Significant new client wins and existing client expansions in our FinTech business, which includes digital banking clients, online exchanges and cryptocurrency call. Our e commerce segment had a very strong start to the year, signing 4 exciting new clients who are seeing significant growth due to changes in online on buying behavior driven by the pandemic. We signed a major online gaming company, one of the hottest mobile dating in the world and a European health tech provider, all of which are new clients at Atascos.
Finally, one of our most exciting new on tracks in the autonomous vehicle space where our AI operations team is helping to enable the future of self driving of growth in each of the 8 countries from which we deliver these services. For our 2 largest verticals by for the company. On demand transportation and food delivery, we saw continued double digit year on year growth. Our social media revenue growth was and transportation and food delivery revenue grew significantly even when compared to an unbelievably strong Q2 2020 in which we saw a surge of driven by our investment in strategic vertical markets. Most notably, our FinTech business delivered over $10,000,000 in sequential quarter over quarter growth and grew for an astounding 300% year over year.
In FinTech, we see strong demand for our specialized services in the areas of anti money laundering and know your customer. Our HealthTech and High-tech businesses grew revenues in the high double digits and our retail and e commerce vertical delivered triple to growth from our top two clients, while revenue concentration from our largest client continued to improve in the quarter. Our largest client, which represented 32% of for 2020 revenues and 29% of our Q1 2021 revenues delivered 27% of our Q2 revenues. Strategy because attracting and retaining world class talent is what enables us to deliver specialized services at scale. Assured that every TASSCUS teammate benefited from our IPO, paying a cash bonus or equity award to every one of our employees.
Conference. We paid for the private education of 755 of our teammates' children through the TAFTAs Scholars Program, and we held over 3,000 Connect in the call. These are 1 to 1 video conference calls between our senior leaders and frontline teammates. This platform, which was built by TaskUs to serendipitous meetings we used to have in office randomly pairs 2 people for a 15 minute conversation about anything. This quarter, I got to meet a technical operator working on-site for a big tech client of ours in the Bay Area, a member of our software development team in India and a teammate supporting a video conferencing from the Philippines.
So while the competition for talent has never been more intense, we are continuing to scale successfully. In Q2, We added over 4,000 new TaskUs teammates and delivered an on time hiring SLA of over 98%. Our Glassdoor rating was 4.7 stars as of June 30. And while we have seen a slight increase in attrition from 2020, this year's numbers remain well below those of 2019. Our team's success signing and scaling new business in the first half of the year puts us in a great position to provide our first ever revenue and EBITDA guidance.
And for that, I'll hand it over to Balaji.
Thanks, Bryce, and good afternoon, everyone. Operator. I'm going to discuss our financial results for the Q2 of 2021. Please note that some of these items are non GAAP measures, and the relevant reconciliations are attached to the press release we issued earlier today. In the second quarter, operator.
We earned total revenues of $180,000,000 an increase of 57.4 percentage over operator. As Bryce outlined, we generated revenues from 3 specialized service offerings. In the Q2, our digital customer experience business generated $113,600,000 agent for revenues of $23,500,000 Our total cost of services are The cost of service as a percentage of revenues is not heavily influenced by the service offering mix. Instead, it is primarily influenced by the geographic location from which services are provided. We expect our geolific mix to be fairly stable in the near term.
In the second quarter, we generated 53.1 percentage of our revenues in the Philippines, 32.7 percentage of our revenues in the United States and 14.1 percentage of our revenues from rest of the world, mainly driven by our operations in India and Mexico. Operator, compared to 66.1 percentage in the prior year. The increase was primarily driven by a 4.5 percentage appreciation in the Philippine peso and additional charges that we incurred in Q2 of 2021 to enable a virtual operating call. We expect our cost of service as a percentage of revenues to remain flat for the remainder of the year. Made in connection with our IPO, a $6,800,000 for non recurring teammate IPO bonus and other IPO related expenses.
Was $35,900,000 or 20 percent of revenues compared to $25,700,000 or 22.5 percentage of revenues in the prior year. The current quarter included some public company expenses of $0.09 Included in our GAAP net income was an income tax benefit of $7,000,000 resulting from non recurring deductions related to expenses incurred in the IPO, which lowered our full year taxable host. In the Q2 of 2020, we had an expense of $1,600,000 In the Q2, we earned an adjusted net income of $31,400,000 of $17,000,000 and adjusted EPS of $0.18 Now moving on to the balance As of December 31, 2020, total available cash and cash equivalents was $107,700,000 conference call. I would like to highlight 2 other key cash flow related items in the 2nd quarter. Conference call from Company Cash and we received gross IPO proceeds of $120,700,000 in June 2021.
Computer equipment due to increased headcount. Our capital expenditure will continue to expand in the for the Q2 as we catch up on our facility expansion from last year and the first half of this year as part of our return to analyst. At this point, I will outline our Q3 and full year 2021 financial outlook. For the Q3 of 2021, we expect total revenues in the range of $182,000,000 to $186,000,000 call, representing year over year growth of 50.3 percentage at the midpoint. We expect to earn Q3 adjusted EBITDA margin of 23.1 percentage to 23.5 percentage.
Looking forward, operator. The above outlook includes our anticipation that our cost of service as a percentage of revenues will remain roughly flat.
And I will be your conference call. As you
mentioned, each year, TASCUS offers an opportunity for
teammates to apply to have one of their children's school tuition paid for by the company. Program which began in 2012 with just 3 scholars will send 755 children to great schools this operator. Delia was a Tasca's teammate for 9 years. As a single mother in the Philippines, she worked hard to care for her son, in high school and university, John decided to move back home to care for his mother in retirement. Delia told John there was no better place to start his career in TaskUs.
John applied and was hired and today John is a TaskUs teammate supporting a fast growing logistics marketplace. In his early 20s, John analyst already started saving for his own retirement through the Caskos retirement program. Delia and John are great examples of the way line for a question and answer session. Operator?
Guest about your full year guidance and your 2Q guidance. I know it implies a pretty minimal quarter over quarter growth for, respectively, for the Q3 and Q4, from that kind of 50% plus you guys delivered in 2Q. I just wanted to know, is that just an element of conservatism host. Are there other dynamics in play there?
Kathy, thanks so much for the question. So clearly, the year is off to a very strong start. In the first half of the year. We saw organic revenue growth of over 53%, and we signed a number of major contracts in the Q1 that ramped into the Q2. That kind of early success can result in some difficult sequential quarter over quarter comps,
at 27%.
Okay, super helpful. And just one quick follow-up for me then. It's nice to see that the client concentration decreased. Just host. Curious, I know you guys said the top one client was 27%.
How big was the top two client? And overall, Are these top 2 growing much faster than the overall client portfolio? Are you kind of seeing growth being driven from sort of maybe the non top, call it, 20 clients going forward. Thank you.
Yes. Thanks again, Cassie. So, as I said, our largest customer saw improved revenue concentration, which was 32% in 2020. In Q1 of 2021, it was 29% and then in Q2 of 2021, it was 27%. So while that client is continuing to grow, very aggressively, the rest of the business is outpacing their growth.
As far as our 2nd largest client, they represented 12% of our Q2 2021 revenues, which is roughly consistent with where they were in Q1 of 2021 as well.
Okay, perfect. Thanks guys. Congrats again.
Thank you. Our next question comes from Puneet Jain with JPMorgan. You may proceed with your question.
Hey, thanks for taking my question and very This was easily the highest ever sequential increase in revenue for Tascus. Operator. So given that, can you talk about your ability to replenish the pipeline and backlog, specifically pipeline for new clients,
strong. We're on pace to exceed the records that we set in 2020 for both new client wins and in particular. And the recent wins and the pipeline momentum are giving us a lot of confidence as we begin to look at the next fiscal year. Clearly, as I said on the answer to the previous question, Q1 saw a few CFO for the year.
Understood. And you added like about 4,000 employees in this quarter, hiring market supply challenges, which lot of peers have talked about. It seems like your attrition was still below 2019. So what are you doing that is keeping attrition low and helping you hire in such large numbers despite challenges elsewhere?
Yes. Thanks for that question Puneet. In Q2, we had an on time global hiring SLA of over 90 8%. And as you pointed out, we added 4,000 net new positions. We added 100 of new roles in the in the Philippines and over 1,000 new roles in India.
So we're really proud of the success of our recruitment organization. Ultimately, we think this comes down to our employer brand, which is, we believe, amongst the strongest in the industry, in particular, in the markets that we've been in for a very long time, like the Philippines. We are seeing some recruitment challenges in particular in the United States, and that's something that we're being very vigilant as we head into the back half of the year.
Got you. Thank you.
Thank you. Our next question comes from Maggie Nolan with William Blair. You may proceed with your question.
Thank you. Congrats. I'm wondering are there any new client additions in this segment or any other factors that are giving you confidence that you're building some good momentum in that segment?
Maggie, thank you so much for that question. We've seen both organic growth inside existing customers for whom we're delivering operations as well as some exciting new wins. We had an existing autonomous vehicle customer where we were providing some consulting services, add our AI operations services, and our teams there are now really helping to shape the future of self driving cars, as we have done for other customers in the past. So it's a very exciting segment to watch and obviously one that is growing very quickly for TaskUs.
Okay. And Historically, you've focused on clients that are quite disruptive, often tech companies, and that's something that's distinguished you from your peers. When you think about things like cultural compatibility and being able to deploy employees across different Tasiast accounts.
Yes, it's incredibly important. So we're looking to acquire businesses that will either expand our geographic delivery footprint, add specialized service capabilities for get us deeper into our existing end markets. And obviously, we want these acquisitions to be accretive. So we're looking for assets that are as close to us as possible in terms of growth, profitability and digital work mix. But the thing that we absolutely will not compromise on is culture.
I've told the team that we are only going to do acquisitions that are culturally accretive. And given those factors, we're going to be very selective about the acquisitions that we choose
maker. All
right. Thank you so much. Great quarter.
Thanks Maggie. Thank you. Our next question comes from Matt Tanzi with BTIG. You may proceed with your question.
Nice job of the Q1 out of the gates here. Wanted to dig in a little bit in terms of some of the new business Whether in Colombia or in Greece, in addition to the India strength that you mentioned?
Yes. Thanks so much for that question, Matt. So we've seen really rapid uptake in Colombia. It's a market that were new to TaskUs as well as adding Spanish language capabilities to existing TaskUs customers. In Greece, the same thing has happened.
We've had multiple new clients enter the Greek market with us in Q2. On some of those are new logos to TaskUs, but the vast majority are expansions from existing customers who are looking to add European language capabilities.
And then as we think about the ability to, I guess, continue to ramp through the end of the year, were there any major deals that were closed near the very end of the quarter that we should think about ramping into the back half of the year operator, similar to what you mentioned happened in the Q1. And maybe zooming out a little bit from that, manager. How do you feel about in terms of the total visibility into the second half revenue? How much has sort of already been booked and how much Should we think about is still out to be closed in the back half? Thanks.
So Brian, do you want to go first and then I'll answer the second question?
Yes, absolutely. So I think that the second quarter was a very strong quarter from a sales perspective, call. Nearly as strong as the quarter we saw in Q1, and we expect to see ongoing ramps from both existing and new clients that were signed in the Q2. We're very confident in the guidance that we've provided that we will get to 705 to $709,000,000 in revenue this year.
Yes. And just to add on to what Bryce said, we have very good visibility, like you said, in terms of the closure that we had from on your business perspective in Q1 and the greater than 40 7 percentage growth that we're estimating. We're starting with a very good we started the year with great visibility and we're starting this quarter with great visibility.
All right. Wonderful. Thank you. Great job on the quarter, guys.
Thanks, Matt.
You may proceed with your question.
Yes, good evening. It's Matt Roswell on for Dan. Congratulations on your next quarter. When it comes to winning new business, are you generally part of a sort of request for proposal process or is it operator. Hi, I'm coming to you.
And if you could talk a little bit about what win rates look like in the quarter?
Nat, thank you so much for that question. So TASKUS has long been seen as a disruptive outsourcing service provider and we're often the 1st outsourced service provider that our fast growing technology clients turn to. So in those cases, there are typically not formal RFP processes. We may key competitive processes, but generally we try to use our relationships to get in early and be the provider of choice as these fast technology companies begin to outsource some of their specialized services. Increasingly, We are seeing our disruptive clients have grown to become public companies themselves.
And with that maturation does come procurement teams and organizations that dedicated to mitigating risk. So the biggest question that we've heard from those companies in recent years is actually, if we do business with you. What's to say you're not going to get bought by 1 of the traditional players? And so one of the nicest things for us in going public is that it is a communication to our customers and to the market that we absolutely intend to remain independent and is really helping us to win business from some of those newly public companies. As far as win rates, we're going to break out both on new client wins and win rates on an annual basis.
But as I said before, we're on pace to exceed our record setting new at wins and win rates from 2020.
Excellent. And then just a quick follow-up with Annette. What was the FX impact on the revenue for us in the quarter? You mentioned that the peso hit on the cost of services. I was wondering if there's anything on the revenue line.
Yes. So I'll take that. So the opportunity for us, majority of our revenues is built in U. S. Dollars.
So we actually do not see any ForEx impact from a revenue perspective, but we do see impact from a cost perspective when we do the translation from, let's say, as an example, peso to U. S. Dollars. And that was the peso appreciated by about 4.5% conference year on year from Q2 of last year to Q2 of current year. So that did impact our cost of service line and also SG and A as we kind of translate those,
Thank you. Our next question comes from Dave coning with Baird. You may proceed with your question.
Yes. Hey, guys. Congrats on a huge quarter.
Thanks, Dave.
Yes. So I mean it looks sequentially like you grew as much as you did revenue just a few years ago per quarter. You grew that much in 1 quarter, so it's pretty impressive. But I guess when we think about how big this year is going to be. Can you still do your 25% growth off of what just seems like such a massive comp this year?
Absolutely. We guided in our IPO process to think about 25% year on year revenue growth in the medium term and we absolutely intend to deliver on that for 2022 and beyond.
Got you. All right. Great. And then I guess one just quick kind of financial thing. What was the normalized diluted share count in Q2?
It got a little hard to tell Because of the GAAP loss? And then I guess what should it be in Q3 as well?
Yes. So let me just pull up that number. Just give me one minute. So the nominal share count as of the end of June will be about 92,092,000,000, 957,493,000,000. But in terms of the additional stock grant that we would be giving in the following quarter, that number is going to change.
So that is something is not currently estimatable because the diluted shares will change once we start granting new shares. But it will be in that I'll probably say in that ballpark.
Okay. That's great. And maybe if I can just sneak one more in. It looks like Q4 margins kind of imply 22%, 23%. Is that a good place to kind of start for next year just to think about 2022, 2023
Yes. So let me answer the question in 2 parts. One is in terms of what I mentioned earlier. As far as the EBITDA in H2 is concerned, we're going to be incurring full quarter public company costs in Q3 and Q4, which we did not incur in Q2. It was only just a couple of weeks that we were public in Q2.
And the second is we're going to incur some expenses in investments in digital and preparing our teammates to go back into the office. But I believe that in a short term perspective, 23% would be a good adjusted EBITDA number for this business to deliver. And for this year, At the midpoint, we will deliver about 23.9 percentage in 2021.
Got you. Yes, great job. Thanks so much.
Thanks, Dave.
Thank you. Our next question comes from James Faucette with Morgan Stanley. You may proceed with your question.
Thank you so much and apologies for the background noise if it's loud. But I wanted to ask, you mentioned kind of recruitment challenges in the U. S. And Are you seeing any potential for wage inflation? And how are you thinking about your ability to pass that on to end customers?
Operator. And if you what your ability to do that and what kind of lag there may be if you do have some wage inflation?
Yes, Jim, it's a really important question. With differentiated benefits like our healthcare program, retirement plan and our world class facilities. So we have seen wage pressure in the United states and we've got a wage review and increased process which is designed to respond to those pressures in every geography that we're operating in. Order. We achieved an on time hiring SLA of 98% globally, and we actually exceeded that number in the United States.
It's good to hear. And then separately, I wanted to ask just about acquisitions. You kind of mentioned So you're looking at doing different types of acquisitions, including geographic expansion. But I'm wondering if you can give a little color on the types of capabilities you may be looking to add as well.
Team together the financial service work that we're doing in the areas of any money laundering and know your customer with and even in some cases financial crimes investigations. So we're very interested in that general area as the next line specialist that we'll be able to break out. So the type of companies that we would look to acquire would be specialists in some of those services.
Operator.
Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Bryce Matta for any further remarks.
Tirelessly to deliver what we believe to be a very strong Q1 as a public company. I'd like to thank all of our new shareholders for joining us on this journey, and we will see you all next quarter for our Q3 investor call.