TaskUs, Inc. 10-K

Item 8. Financial Statements and Supplementary Data TASKUS, INC. Index to Consolidated Financial Statements Page(s) Report of Independent Registered Public Accounting Firm ( KPMG LLP ; Los Angeles, California ; PCAOB ID 185 ) 63 Consolidated Balance Sheets 64 Consolidated Statements of Operations 65 Consolidated Statements of Comprehensive Income (Loss) 66 Consolidated Statements of Shareholders’ Equity 67 Consolidated Statements of Cash Flows 68 Notes to Consolidated Financial Statements 69 62 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors TaskUs, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of TaskUs, Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021 , the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022 , and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021 , and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022 , in conformity with U.S. generally accepted accounting principles. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2022 due to the adoption of Financial Accounting Standards Board’s Accounting Standards Update 2016-02, Leases (Topic 842). Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ KPMG LLP We have served as the Company’s auditor since 2015. Los Angeles, California March 6, 2023 63 Table of Contents TASKUS, INC. Consolidated Balance Sheets (in thousands, except share data) December 31, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 133,992 $ 63,584 Accounts receivable, net of allowance for doubtful accounts of $ 3,422 and $ 1,819 , respectively 178,678 162,895 Other receivables 1,383 597 Prepaid expenses 18,993 10,939 Income tax receivable 2,879 3,863 Other current assets 5,500 4,428 Total current assets 341,425 246,306 Noncurrent assets: Property and equipment, net 75,053 80,046 Operating lease right-of-use assets 41,510 — Deferred tax assets 6,165 1,441 Intangibles 212,993 221,448 Goodwill 217,382 195,735 Other noncurrent assets 7,487 5,022 Total noncurrent assets 560,590 503,692 Total assets $ 902,015 $ 749,998 Liabilities and Shareholders’ Equity Liabilities: Current liabilities: Accounts payable and accrued liabilities $ 37,062 $ 40,890 Accrued payroll and employee-related liabilities 48,663 36,670 Current portion of debt 3,334 51,135 Current portion of operating lease liabilities 11,614 — Current portion of income tax payable 5,730 2,416 Deferred revenue 3,481 4,095 Deferred rent — 735 Total current liabilities 109,884 135,941 Noncurrent liabilities: Income tax payable 2,293 2,886 Long-term debt 264,225 187,240 Operating lease liabilities 32,380 — Deferred rent — 2,749 Accrued payroll and employee-related liabilities 2,818 1,813 Deferred tax liabilities 34,514 40,235 Other noncurrent liabilities 288 — Total noncurrent liabilities 336,518 234,923 Total liabilities 446,402 370,864 Commitments and Contingencies (See Note 10) Shareholders’ equity: Class A common stock, $ 0.01 par value. Authorized 2,500,000,000 ; 29,257,651 issued and 27,607,720 outstanding and 27,431,264 shares issued and outstanding, respectively 293 275 Class B convertible common stock, $ 0.01 par value. Authorized 250,000,000 ; 70,032,694 and 70,032,694 shares issued and outstanding, respectively 700 700 Additional paid-in capital 631,908 556,418 Accumulated deficit ( 135,674 ) ( 176,096 ) Accumulated other comprehensive loss ( 10,647 ) ( 2,163 ) Treasury stock, at cost with 1,649,931 and no shares, respectively ( 30,967 ) — Total shareholders’ equity 455,613 379,134 Total liabilities and shareholders’ equity $ 902,015 $ 749,998 See accompanying notes to consolidated financial statements. 64 Table of Contents TASKUS, INC. Consolidated Statements of Operations (in thousands, except share and per share data) Year ended December 31, 2022 2021 2020 Service revenue $ 960,489 $ 760,703 $ 478,046 Operating expenses: Cost of services 558,761 431,736 270,510 Selling, general, and administrative expense 260,003 335,312 113,519 Depreciation 37,915 29,038 20,155 Amortization of intangible assets 19,882 18,847 18,847 Loss on disposal of assets 31 52 1,116 Contingent consideration — — 3,570 Total operating expenses 876,592 814,985 427,717 Operating income (loss) 83,897 ( 54,282 ) 50,329 Other expense (income) 7,443 177 ( 1,572 ) Financing expenses 11,921 6,504 7,482 Income (loss) before income taxes 64,533 ( 60,963 ) 44,419 Provision for (benefit from) income taxes 24,111 ( 2,265 ) 9,886 Net income (loss) $ 40,422 $ ( 58,698 ) $ 34,533 Net income (loss) per common share: Basic $ 0.41 $ ( 0.62 ) $ 0.38 Diluted $ 0.39 $ ( 0.62 ) $ 0.38 Weighted-average number of common shares outstanding: Basic 97,815,679 94,832,137 91,737,020 Diluted 102,603,179 94,832,137 91,737,020 See accompanying notes to consolidated financial statements. 65 Table of Contents TASKUS, INC. Consolidated Statements of Comprehensive Income (Loss) (in thousands) Year ended December 31, 2022 2021 2020 Net income (loss) $ 40,422 $ ( 58,698 ) $ 34,533 Retirement benefit reserves ( 98 ) ( 55 ) 329 Foreign currency translation adjustments ( 8,386 ) ( 5,524 ) 2,775 Comprehensive income (loss) $ 31,938 $ ( 64,277 ) $ 37,637 See accompanying notes to consolidated financial statements. 66 Table of Contents TASKUS, INC. Consolidated Statements of Shareholders’ Equity (in thousands, except share data) Capital stock and additional paid-in capital Accumulated deficit Accumulated other comprehensive income (loss) Total shareholders’ equity Class A common stock Class B convertible common stock Additional paid-in capital Treasury stock Shares Amount Shares Amount Shares Amount Balance as of December 31, 2019 — $ — 91,737,020 $ 917 $ 398,202 $ ( 101,931 ) $ 312 — $ — $ 297,500 Net income — — — — — 34,533 — — — 34,533 Other comprehensive income — — — — — — 3,104 — — 3,104 Balance as of December 31, 2020 — $ — 91,737,020 $ 917 $ 398,202 $ ( 67,398 ) $ 3,416 — $ — $ 335,137 Issuance of common stock in the initial public offering, net of offering costs 5,553,154 56 — — 116,636 — — — — 116,692 Conversion of common stock 21,704,326 217 ( 21,704,326 ) ( 217 ) — — — — — — Issuance of common stock for settlement of equity awards 275,588 3 — — ( 3 ) — — — — — Shares withheld related to net share settlement ( 101,804 ) ( 1 ) — — ( 4,606 ) — — — — ( 4,607 ) Stock-based compensation expense — — — — 46,189 — — — — 46,189 Distribution of dividends ($ 0.55 per share) — — — — — ( 50,000 ) — — — ( 50,000 ) Net loss — — — — — ( 58,698 ) — — — ( 58,698 ) Other comprehensive loss — — — — — — ( 5,579 ) — — ( 5,579 ) Balance as of December 31, 2021 27,431,264 $ 275 70,032,694 $ 700 $ 556,418 $ ( 176,096 ) $ ( 2,163 ) — $ — $ 379,134 Issuance of common stock for settlement of equity awards 1,819,740 18 — — 3,460 — — — — 3,478 Shares withheld related to net share settlement ( 193,456 ) ( 2 ) — — ( 4,143 ) — — — — ( 4,145 ) Shares issued in acquisition of heloo 200,103 2 — — 7,194 — — — — 7,196 Purchase of treasury stock — — — — — — — 1,649,931 ( 30,967 ) ( 30,967 ) Stock-based compensation expense — — — — 68,979 — — — — 68,979 Net income — — — — — 40,422 — — — 40,422 Other comprehensive loss — — — — — — ( 8,484 ) — — ( 8,484 ) Balance as of December 31, 2022 29,257,651 $ 293 70,032,694 $ 700 $ 631,908 $ ( 135,674 ) $ ( 10,647 ) 1,649,931 $ ( 30,967 ) $ 455,613 See accompanying notes to consolidated financial statements. 67 Table of Contents TASKUS, INC. Consolidated Statements of Cash Flows (in thousands) Year ended December 31, 2022 2021 2020 Cash flows from operating activities: Net income (loss) $ 40,422 $ ( 58,698 ) $ 34,533 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 37,915 29,038 20,149 Amortization of intangibles 19,882 18,847 18,847 Amortization of debt financing fees 569 526 457 Loss on disposal of assets 31 52 1,116 Provision for losses on accounts receivable 1,746 1,058 2,227 Unrealized foreign exchange losses (gains) on forward contracts ( 4,589 ) 4,573 84 Deferred taxes ( 11,755 ) ( 11,477 ) ( 6,496 ) Stock-based compensation expense 68,979 46,189 — Changes in operating assets and liabilities: Accounts receivable ( 15,052 ) ( 76,203 ) ( 32,006 ) Other receivables, prepaid expenses, and other current assets ( 7,131 ) ( 8,611 ) ( 3,768 ) Operating lease right-of-use assets 12,726 — — Other noncurrent assets ( 1,240 ) ( 2,380 ) ( 67 ) Accounts payable and accrued liabilities 1,822 4,493 13,535 Accrued payroll and employee-related liabilities 13,589 16,450 6,669 Operating lease liabilities and deferred rent ( 12,391 ) 1,195 ( 391 ) Income tax payable 3,826 1,013 1,381 Deferred revenue ( 623 ) 1,261 2,603 Other noncurrent liabilities ( 1,631 ) — — Net cash provided by (used in) operating activities 147,095 ( 32,674 ) 58,873 Cash flows from investing activities: Purchase of property and equipment ( 43,758 ) ( 59,363 ) ( 28,883 ) Acquisition, net of cash acquired ( 23,235 ) — — Investment in loan receivable ( 1,000 ) — — Net cash used in investing activities ( 67,993 ) ( 59,363 ) ( 28,883 ) Cash flows from financing activities: Proceeds from borrowings, Revolving credit facility 32,500 — 39,878 Proceeds from long-term debt 270,000 — — Payments on long-term debt ( 273,080 ) ( 6,563 ) ( 2,888 ) Payments for debt financing fees ( 1,821 ) ( 340 ) — Proceeds from issuance of common stock, net of underwriters’ fees — 120,698 — Proceeds from employee stock plans 3,478 — — Payments for offering costs — ( 4,798 ) — Payments for taxes related to net share settlement ( 4,145 ) ( 4,607 ) — Payments for treasury stock purchases ( 30,967 ) — — Distribution of dividends — ( 50,000 ) — Net cash provided by (used in) financing activities ( 4,035 ) 54,390 36,990 Increase (decrease) in cash and cash equivalents 75,067 ( 37,647 ) 66,980 Effect of exchange rate changes on cash ( 4,659 ) ( 6,497 ) 3,207 Cash and cash equivalents at beginning of period 63,584 107,728 37,541 Cash and cash equivalents at end of period $ 133,992 $ 63,584 $ 107,728 Supplemental cash flow information: Cash paid for interest $ 9,952 $ 5,907 $ 6,957 Cash paid for taxes, net of refunds $ 31,805 $ 7,487 $ 15,519 Noncash operating, investing and financing activities: Accrued capital expenditures $ 3,108 $ 7,817 $ 10,953 Noncash reclass for customer-billed equipment $ — $ 1,874 $ — See accompanying notes to consolidated financial statements. 68 Table of Contents TASKUS, INC. Notes to Consolidated Financial Statements 1. Description of Business and Organization TaskUs, Inc. (formerly known as TU TopCo, Inc.) (“TaskUs” and, together with its subsidiaries, the “Company,” “we,” “us” or “our”) was formed by investment funds affiliated with Blackstone Inc. (“Blackstone”) as a vehicle for the acquisition of TaskUs Holdings, Inc. (formerly known as TaskUs, Inc.) (“TaskUs Holdings”) on October 1, 2018 (the “Blackstone Acquisition”). Prior to the Blackstone Acquisition, TaskUs had no operations and TaskUs Holdings operated as a standalone entity. TaskUs, Inc. was incorporated in Delaware in July 2018, and is headquartered in New Braunfels, Texas. The Company is a provider of outsourced digital services and next-generation customer experience to the world’s most innovative companies, helping its clients represent, protect and grow their brands. The Company’s global, omni-channel delivery model is focused on providing its clients three key services - Digital Customer Experience, Trust and Safety (formerly known as Content Security) and Artificial Intelligence (“AI”) Services (formerly known as AI Operations). The Company has designed its platform to enable it to rapidly scale and benefit from its clients’ growth. Through its agile and responsive operational model, the Company delivers services from multiple delivery sites that span globally from the United States, Philippines, India and other parts of the world. The Company’s major service offerings are described in more detail below: • Digital Customer Experience : Principally consists of omni-channel customer care services, primarily delivered through digital (non-voice) channels. • Trust and Safety : Principally consists of review and disposition of user and advertiser generated visual, text and audio content for purposes which include removal or labeling of policy violating, offensive or misleading content. Also included in this area are our offerings for risk management, compliance, identity management and fraud. • AI Services : Principally consists of high-quality data labeling services, annotation, context relevance and transcription services performed for the purpose of training and tuning machine learning algorithms, enabling them to develop cutting-edge AI systems. 2. Summary of Significant Accounting Policies (a) Basis of Presentation The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The acquisition of Parsec d.o.o. and Q Experience d.o.o. (collectively, “heloo”) was completed on April 15, 2022; therefore, the Company’s consolidated financial statements only include heloo’s results since April 15, 2022. The accompanying financial statements and related notes to the financial statements give retroactive effect to the stock split for all periods presented. See Note 13, “Shareholders’ Equity” for additional information. The Company has made certain reclassifications to prior period consolidated financial statements to conform to current period presentation. India, which was previously included in Rest of World, is now reported separately within revenue disaggregation by geographical location and property and equipment by geographic location . (b) Use of Estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the determination of useful lives and impairment of fixed assets; allowances for doubtful accounts and other receivables; the valuation of deferred tax assets; the measurement of lease liabilities and right-of-use assets; valuation of forward contracts; valuation of stock-based compensation; valuation of acquired intangible assets and goodwill, as well as related impairment assessments, and reserves for income tax uncertainties and other contingencies. (c) Principles of consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company has no involvement with variable interest entities. 69 Table of Contents (d) Segments Operating segments are components of a company for which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding on how to allocate resources and in assessing performance. The Company’s CODM is the chief executive officer (“CEO”). The CEO reviews financial information presented on an entity level basis for purposes of making operating decisions and assessing financial performance. Therefore, the Company has determined that it operates in a single operating and reportable segment. (e) Concentration Risk Most of the Company’s customers are located in the United States. Customers outside of the United States are concentrated in Europe. For the years ended December 31, 2022, 2021 and 2020, the following customers represented greater than 10% of the Company’s service revenue: Service revenue percentage Year ended December 31, Customer 2022 2021 2020 A 22 % 27 % 32 % B Less than 10% 11 % 12 % For the years ended December 31, 2022 and 2021, the following customers represented greater than 10% of the Company’s accounts receivable: Accounts receivable percentage Customer December 31, 2022 December 31, 2021 A 17 % 22 % B 13 % 12 % The Company’s principal operations, including the majority of its employees and the fixed assets owned by its wholly owned subsidiaries, are located in the Philippines. (f) Business Combinations The Company accounts for business combinations in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. The purchase price of the acquisition is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over those fair values is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. (g) Leases At inception of a contract, the Company determines whether an arrangement is, or contains, a lease based on the substance of the arrangement. In determining whether a contract contains a lease, we consider whether (1) we have the right to obtain substantially all of the economic benefits from the use of the asset throughout the term of the contract, (2) we have the right to direct how and for what purpose the asset is used throughout the term of the contract and (3) we have the right to operate the asset throughout the term of the contract without the lessor having the right to change the terms of the contract. If a lease is identified, the Company determines whether it should be classified as an operating or finance lease at commencement. The Company has various leases for office spaces under operating lease agreements which have a range of expiration dates from one to ten years , and often include a renewal option for an additional term. Lease terms include the base, non-cancelable lease term, and any options to extend or terminate the lease when it is reasonably certain at commencement that the Company will exercise such options. Right-of-use (“ROU”) lease assets represent the Company’s right to use an underlying asset for the lease term and may include any advance lease payments made. ROU lease liabilities represent our obligation to make lease payments arising from the contractual terms of the lease. ROU lease assets and lease liabilities are recognized at the commencement of the lease and 70 Table of Contents are calculated using the present value of lease payments over the lease term. Typically, lease agreements do not provide sufficient detail to arrive at an implicit interest rate. Therefore, the Company uses its estimated incremental borrowing rates (“IBR”) based on information available at the commencement date of the lease to calculate the present value of the lease payments. In estimating its IBR, the Company considers it credit rating, the lease term, the currency of the lease payments and market rates of comparable collateralized borrowings for similar terms. The Company remeasures its lease liability and related ROU lease asset upon the occurrence of the following: lease modifications not accounted for as a separate contract; a triggering event that changes the certainty of the Company exercising an option to renew or terminate the lease, or purchase the underlying asset; or the resolution of a contingency upon which any variable lease payments are based such that those payments become fixed. (h) Translation of Non-U.S. Currency Amounts The Company is subject to foreign currency exposure due to its principal operations being located in the Philippines and operations in various other international locations. Assets and liabilities of non-U.S. subsidiaries whose functional currency is not the U.S. dollar are translated into U.S. Dollars at fiscal year-end exchange rates. Revenue and expense items are translated at weighted average foreign currency exchange rates prevailing during the fiscal year. Translation adjustments are included in other comprehensive income (loss). Realized and unrealized gains and losses arising from foreign currency transactions are recognized in other expense (income). For the years ended December 31, 2022, 2021 and 2020, realized and unrealized foreign currency losses (gains) were $( 0.8 ) million, $( 4.2 ) million and $ 3.5 million, respectively. (i) Cash and Cash Equivalents Cash and cash equivalents consist of cash on deposit with banks and highly liquid investments with maturities of 90 days or less from the date of purchase. (j) Accounts Receivable Accounts receivable are recorded as revenue and are recognized in accordance with the Company’s revenue recognition policy and bear interest. Most of our clients pay timely, which results in little to no interest. The Com pany maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. The Company reviews its allowance for doubtful accounts monthly. Past-due balances over 30 days and over a specified amount are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. (k) Debt Financing Fees Debt financing fees include costs incurred in connection with obtaining debt financing and are amortized using the straight-line method over the term of the related credit agreement. Straight line amortization approximates amortization under the effective interest method. The amortization is included in financing expenses in the consolidated statements of operations. On the consolidated balance sheets, the debt financing fees related to the term loan and revolver loan are classified as a discount against the associated debt. In instances when the revolver loan is undrawn, associated debt financing fees are included in other noncurrent assets. (l) Derivative Instruments and Hedging Activities ASC Topic 815, Derivatives and Hedging , establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. It requires the recognition of all derivative instruments as assets or liabilities on the Company’s consolidated balance sheets and measurement of those instruments at fair value. The accounting treatment of changes in fair value is dependent upon whether or not a derivative instrument is designated as a hedge and if so, the type of hedge. Gains and losses on derivative instruments not designated as hedges are included in earnings. The resulting cash flows are reported as cash from operating activities. As of December 31, 2022 , the Company was a party to non-deliverable foreign currency forward contract arrangements with two commercial banks which were not designated as hedges. (m) Revenue Recognition The Company recognizes revenue from its services in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenues for services for which control has transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. To determine revenue recognition for arrangements that are determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price 71 Table of Contents to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies its performance obligations. The Company accounts for a contract with a customer when the contract is legally enforceable and when collectability is probable. The Company has executed contracts with customers which detail, among others, the contract terms, obligations and rights of both parties and payment terms. Certain of the Company’s contracts include termination clauses, which the Company evaluates when determining the contract term (generally one to three years ) over which the parties have enforceable rights and obligations. A performance obligation is the unit of account under ASC 606 and represents the distinct services that are promised to the customer. Performance obligations are identified when the contract is created and based on agreed terms and business practices. The transaction price reflects the amount the Company expects to receive in exchange for services to the customer. The expected dollar amount is allocated to each performance obligation based on the standalone selling price agreed with the customer. The Company determines the standalone selling price based on the overall pricing objectives, taking into consideration market conditions, cost of performance obligations, and other factors including geographic locations. The Company’s performance obligations are related to providing services to its customers and its customers simultaneously receive and consume the benefits of those services. Therefore, revenue is recognized over time as performance obligations are satisfied and we have a “right to invoice.” We do not allocate transaction price to unsatisfied performance obligations. Certain of the Company’s contracts include clauses which guarantee that the services provided satisfy certain performance indicators. These performance guarantees do not create a performance obligation. The Company records a liability at the time payment under such clauses is both probable and reasonably estimable. Payments under performance guarantees were immaterial for the years ended December 31, 2022, 2021 and 2020. Differences in timing between the delivery of services, billings, and receipt of payment from customers can result in the recognition of certain contract assets and contract liabilities. Revenue recognized in excess of billings is recorded as accrued revenue, and is reported under accounts receivable, net of allowance for doubtful accounts on the consolidated balance sheet. Billings in excess of revenue recognized is recorded as deferred revenue until revenue recognition criteria are met. Client prepayments (even if nonrefundable) are recorded as deferred revenue on the consolidated balance sheet and recognized over future periods as services are delivered or performed. ASC 340-40, Other Assets and Deferred Costs—Contracts with customers (“ASC 340”), provides guidance for incremental costs of obtaining a contract with a customer or costs incurred in fulfilling a contract with a customer. Incremental costs to obtain a contract with a customer are required to be capitalized if an entity expects to recover those costs. Signing commissions that are paid to sales employees are considered incremental costs of obtaining a contract with a customer. These commissions are deferred and then amortized on a straight-line basis over the contract period, which is typically one year. Amortization expense is included in selling, general and administrative expense on the consolidated statements of income. The Company determines the period of benefit by taking into consideration its customer contracts, its technology, and other factors. Commissions paid to non-sales staff are also required to be capitalized if directly attributable to, and incremental from, obtaining a contract. (n) Advertising Expense Advertising costs are expensed as incurred and are included in selling, general, and administrative expense in the accompanying consolidated statements of operations. Advertising expense for the years ended December 31, 2022, 2021 and 2020 was $ 2.0 million, $ 1.9 million and $ 1.3 million, respectively. (o) Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization and any impairment in value. The cost of an asset comprises its purchase price and costs directly attributable to bringing the asset to working condition for its intended use. Expenditures for additions, major improvements, and renewals are capitalized, while expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is computed on the straight-line basis over the estimated useful life of the Company’s assets, generally three to five years or, for leasehold improvements, over five years or the remaining term of the lease, whichever is shorter. Construction in process represents property under construction and is stated at cost. This includes costs of construction and other direct costs. The account is not depreciated until such time that the assets are completed and available for use. Fully depreciated assets are retained in the accounts until they are no longer in use and no further depreciation is recognized in profit or loss. An item of property and equipment, including the related accumulated depreciation and amortization and any impairment losses, is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period the item is derecognized. During the year ended December 31, 2020, management conducted a review of the Company’s assets due to the shift in its operating model in response to the COVID-19 pandemic. As a result of this review, the Company extended the useful lives 72 Table of Contents of leasehold improvements from three years to the shorter of five years or lease term, considering the Company’s future use of the underlying real estate to which the leasehold improvements relate. The impact of this change in estimate for the year ended December 31, 2020 was a net increase of $ 2.5 million and $ 1.9 million in operating income and net income, respectively, and a net increase of $ 0.02 per share in earnings per share on a basic and diluted basis. Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets are grouped for recognition and measurement of impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. During the years ended December 31, 2022, 2021 and 2020, no impairment charges were recorded. (p) Intangibles Intangible assets consist of finite-lived intangible asset s acquired through the Company’s business combinations. Such amounts are initially recorded at fair value and subsequently amortized over their useful lives using the straight-line method, which reflects the pattern of benefit, and assumes no residual value. Finite-lived intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Finite-lived intangibles are grouped for recognition and measurement of impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. If circumstances require an asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset group to its carrying amount. If the carrying amount of the asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. During the years ended December 31, 2022, 2021 and 2020, no impairment charges were recorded. (q) Goodwill Goodwill is the amount by which the cost of the acquired net assets in a business combination exceeds the fair value of the identifiable net assets on the date of purchase. Goodwill is not amortized. The Company reviews goodwill for impairment annually on October 1, or more frequently when events or circumstances indicate goodwill may be impaired. Management may initially assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount (“Step 0”). If determined that it is more-likely-than-not the estimated fair value of a reporting unit is less than its carrying amount, a quantitative assessment is performed (“Step 1”). Under FASB Topic ASC 350 Intangibles—Goodwill and Other , entities have an unconditional option to bypass the qualitative assessment described in the preceding sentences for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. We have determined that we have a single reporting unit. Historically, the fair value of our reporting unit was estimated using a combination of the income approach, using a discounted cash flow methodology, and a market approach; the determination of discounted cash flows was based on the Company’s strategic plans and market conditions. Upon completion of the IPO, a public trading market for our common stock was established and, as a result, we consider our market capitalization (calculated as total common shares outstanding multiplied by the common equity price per share, as adjusted for a control premium factor, as necessary) to represent fair value. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recorded in an amount equal to that excess, but not more than the carrying value of goodwill. As of October 1, 2022, 2021 and 2020, we opted to bypass the qualitative assessment under Step 0 and proceeded directly to performing a quantitative goodwill impairment test under Step 1. A s a result of the quantitative assessment, we determined that the carrying value of the reporting unit did not exceed its fair value. (r) Other Assets Other current assets and other noncurrent assets consist primarily of refundable security deposits, goods and services taxes, implementation costs capitalized for hosting arrangements, deferred financing costs on the undrawn revolver loan and loan receivable. 73 Table of Contents (s) Share Repurchases The Company records its repurchases of Class A common stock at cost, including direct and incremental costs, as treasury stock within shareholders' equity on the consolidated balance sheet. (t) Share-based Compensation The Company accounts for its stock-based awards in accordance with provisions of ASC 718, Compensation - Stock Compensation (“ASC 718”). For equity awards total compensation cost is based on the grant date fair value. For liability awards, total compensation cost is based on the fair value of the award on the date the award is granted and is remeasured at each reporting date until settlement. Awards to employees contain service, performance and market conditions that affect vesting. The Company recognizes expense over the requisite service period using a graded vesting model. For unvested awards with performance conditions, the Company assesses the probability of attaining the performance conditions at each reporting period. Awards that are deemed probable of attainment are recognized in expense over the requisite service period. The Company accounts for forfeitures as they occur. (u) Employee Benefits Retirement benefit reserves represent the cumulative amount of remeasurement of the defined benefit liability arising from actuarial gains and losses due to experience and demographic assumptions. The Company also sponsors a 401(k) retirement plan in the U.S. whereby contributions made by eligible employees to the 401(k) are matched by the Company up to 4.0 % of compensation. Employer 401(k) expense is the amount of matching contributions and is recognized in expense. Expense recognized for the years ended December 31, 2022, 2021 and 2020 was $ 2.0 million, $ 1.7 million and $ 0.9 million, respectively. (v) Commitments and Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. (w) Earnings per share The computation of basic net income per share of common stock (“EPS”) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average number of shares outstanding plus the weighted-average number of common shares that would be issued assuming the exercise of all potentially dilutive common stock equivalents. Common stock equivalents consist of shares issuable upon the exercise of stock options and vesting of RSUs and PSUs . (x) Income Taxes Current tax liabilities and assets are recognized for the estimated taxes payable or refundable, respectively, on the tax returns for the current year. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The carrying value of the Company’s net deferred tax assets is based on whether it is more likely than not that the Company will generate sufficient future taxable income to realize the deferred tax assets. A valuation allowance is established for deferred tax assets, which the Company does not believe meet the “more likely than not” threshold. The Company’s judgments regarding future taxable income may change over time due to changes in market conditions, changes in tax laws, tax planning strategies, or other factors. If the Company’s assumptions and, consequently, its estimates, change in the future, the valuation allowance may materially increase or decrease, resulting in a decrease or increase, respectively, in income tax benefit and the related impact on the Company’s reported net income. The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50 percent likely of being realized and effectively settled. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and that may not accurately forecast actual outcomes. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as additional income taxes. 74 Table of Contents (y) Recent Accounting Pronouncements The Company currently qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Accordingly, the Company is provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. The Company has elected to adopt new or revised accounting guidance within the same time period as private companies. Recently adopted accounting pronouncements In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which supersedes ASC 840, Leases. The Company adopted this standard in the second quarter of 2022, effective as of January 1, 2022, using the modified retrospective method and the effective date as the date of initial application. The Company recorded right-of-use assets of $ 45.8 million and lease liabilities of $ 48.5 million, respectively, to the consolidated balance sheet. The Company elected the “package of practical expedients,” which permits the Company not to reassess under Topic 842 any prior conclusions about lease identification, lease classification and initial direct costs. The Company did not apply the short-term lease exception and will therefore recognize a right-of-use asset and lease liability for all leases. The adoption of the lease standard did not have a material impact on the Company’s consolidated statement of operations nor on its consolidated cash flows statements. In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires the company acquiring contract assets and contract liabilities obtained in a business combination to recognize and measure them in accordance with ASC 606, Revenue from Contracts with Customers. At the acquisition date, the company acquiring the business should record related revenue, as if it had originated the contract. Before the update such amounts were recognized by the acquiring company at fair value. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company early adopted ASU 2021-08 as of April 1, 2022. Recently issued accounting pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The revised standard relates to measurement of credit losses on financial instruments, and requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The guidance replaces the incurred loss model with an expected loss model referred to as current expected credit loss (CECL). The CECL model requires us to measure lifetime expected credit losses for financial instruments held at the reporting date using historical experience, current conditions and reasonable supportable forecasts. The guidance expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating credit losses and requires new disclosures of the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. This ASU will be effective for the Company beginning in fiscal year 2023 with early adoption permitted. The Company does not expect the adoption of ASU 2016-13 to have a material impact on the Company’s consolidated financial statements. 3. Business Combination On April 15, 2022 (the “Closing Date”), the Company completed the acquisition of 100 % of the equity interests of heloo, a Croatia-based Digital Customer Experience solutions provider to European technology companies supporting 20 languages across seven additional Eastern European countries, including Bosnia, Serbia, and Slovenia. The Company believes this acquisition will be complementary to the Company's growth strategy by expanding its global delivery footprint with a suite of multi-lingual, cost-competitive Digital Customer Experience services. 75 Table of Contents The acquisition date fair value of the consideration transferred was $ 35.4 million, consisting of the following: (in thousands) Cash consideration (1) $ 26,006 Holdback cash consideration (2) 2,164 Equity consideration (3) 7,196 Total consideration $ 35,366 (1) Represents cash consideration paid to the sellers to complete the acquisition. (2) Represents consideration, which was retained by the Company as security to satisfy sellers' obligations for potential future contractual claims arising under the terms of the purchase agreement; provided that the amount of the holdback shall not serve as any limitation on the indemnification obligations of the sellers under the purchase agreement. The holdback is payable to the sellers, net of any such claims, 18 months after the Closing Date except for a portion of the holdback related to potential tax claims, which is payable three years after the Closing Date, net of any tax claims. (3) Comprised of 200,103 shares of the Company's Class A common stock issued in relation to this acquisition. The fair value was determined on the basis of the closing market price of the Company's Class A common stock on the acquisition date. The following table summarizes the fair values of assets acq uired and liabilities assumed as of the date of acquisition: (in thousands) Preliminary Measurement Period Adjustments Final Cash and cash equivalents $ 2,771 $ — $ 2,771 Intangibles 11,198 — 11,198 Goodwill 21,582 326 21,908 Other assets acquired 3,947 ( 326 ) 3,621 Total assets $ 39,498 $ — $ 39,498 Total liabilities assumed $ 4,132 $ — $ 4,132 Net assets acquired $ 35,366 $ — $ 35,366 The goodwill is derived from anticipated operational synergies and assembled workforce. None of the goodwill recorded is deductible for tax purposes. The purchase price allocation includes $ 11.2 million of acquired identifiable intangible assets, consisting of the following: (in thousands, except useful lives) Estimated Fair Value Estimated Useful Life in Years Customer relationships $ 10,872 10 Trade name 326 2 Total $ 11,198 The fair values of the identifiable intangible assets have been estimated using the excess earnings and relief-from-royalty methods. The intangible assets are being amortized over their estimated useful lives on a straight-line basis that reflects the economic benefit of the assets. The determination of the useful lives is based upon various industry studies, historical acquisition experience, economic factors, and future forecasted cash flows of the Company following the acquisition of heloo. 76 Table of Contents Subject to heloo's EBITDA (as defined in the share purchase agreement for the acquisition) margin exceeding a minimum level, the former shareholders of heloo are eligible to receive contingent earn-out payments not to exceed € 20.0 million, based on a multiple of EBITDA in excess of certain prescribed EBITDA targets outlined in the purchase agreement during each of the one year periods beginning May 1, 2022 and May 1, 2023, which are payable after the first and second anniversaries from the Closing Date, respectively. The fair value of contingent earn-out payments was determined to be $ 14.9 million and $ 7.7 million as of December 31, 2022 and the acquisition date, respectively, based on a Monte Carlo simulation model, utilizing a discounted payout analysis based on probabilities and timing of achieving the prescribed targets. Since these payments are contingent on future service conditions, they will be recognized as compensation expense ratably over the required service period. For the year ended December 31, 2022, the Company recognized $ 9.7 million in compensation expense related to the contingent earn-out payments included in selling, general, and administrative expenses. During the year ended December 31, 2022, the Company recognized $ 0.6 million of costs, including legal, professional, and other fees related to the acquisition, included in selling, general, and administrative expenses on the statements of operations. The results of operations and the fair values of the assets acquired and liabilities assumed have been included in the financial statements from the date of acquisition. This acquisition was not material to the Company's consolidated financial statements for the current periods presented. Supplemental pro forma financial information has not been provided as the historical results of heloo were not material to the Company. 4. Revenue from Contracts with Customers Disaggregation of Revenue The Company’s revenues are derived from contracts with customers related to business outsourcing services that it provides. The following table presents the breakdown of the Company’s revenues by service offering: Year ended December 31, (in thousands) 2022 2021 2020 Digital Customer Experience $ 637,587 $ 486,679 $ 300,424 Trust and Safety 178,409 169,080 127,657 AI Services 144,493 104,944 49,965 Service revenue $ 960,489 $ 760,703 $ 478,046 The majority of the Company’s revenues are derived from contracts with customers who are located in the United States. However, the Company delivers its services from geographies outside of the United States. The following table presents the breakdown of the Company’s revenues by geographical location, based on where the services are provided from: Year ended December 31, (in thousands) 2022 2021 2020 Philippines $ 504,361 $ 402,340 $ 267,687 United States 252,457 246,642 171,476 India 102,561 56,216 16,069 Rest of World 101,110 55,505 22,814 Service revenue $ 960,489 $ 760,703 $ 478,046 Contract Balances Accounts receivable, net of allowance for doubtful accounts includes $ 80.8 million and $ 75.5 million of unbilled revenues as of December 31, 2022 and 2021, respectively. Activity in the Company’s allowance for doubtful accounts consisted of the following: Year ended December 31, (in thousands) 2022 2021 2020 Balance, beginning of year $ 1,819 $ 2,294 $ 75 Provision for credit losses 1,746 1,058 2,227 Uncollectible receivables written-off ( 143 ) ( 1,533 ) ( 8 ) Balance, end of year $ 3,422 $ 1,819 $ 2,294 77 Table of Contents 5. Forward Contracts The Company transacts business in various foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency exchange rate risk. During 2022 and 2021, the Company entered into foreign currency exchange rate forward contracts, with two commercial banks as the counterparty, with maturities of generally 12 months or less, to reduce the volatility of cash flows primarily related to forecasted costs denominated in Philippine pesos. In addition, the Company utilizes foreign currency exchange rate contracts to mitigate foreign currency exchange rate risk associated with foreign currency-denominated assets and liabilities, primarily intercompany balances. The Company does not use foreign currency exchange rate contracts for trading purposes. The exchange rate forward contracts entered into by the Company are not designated as hedging instruments. Any gains or losses resulting from changes in the fair value of these contracts are recognized in other expense (income) in the consolidated statements of operations. The forward contract receivable (payable) resulting from changes in fair value was recorded under prepaid expenses (accounts payable and accrued liabilities). The following table presents the Company’s settled and outstanding forward contracts and the related realized and unrealized losses (gains): Year ended December 31, (in thousands) 2022 2021 2020 Total notional amount of settled forward contracts $ 194,013 $ 109,200 $ 88,000 Realized losses (gains) from settlement of forward contracts $ 13,336 $ 446 $ ( 5,138 ) Total notional amount of outstanding forward contracts $ 175,050 $ 127,200 $ 109,200 Unrealized foreign exchange losses (gains) on forward contracts $ ( 4,589 ) $ 4,573 $ 84 By entering into derivative contracts, the Company is exposed to counterparty credit risk, or the failure of the counterparty to perform under the terms of the derivative contract. For the periods presented, the non-performance risk of the Company and the counterparties did not have a material impact on the fair value of the derivative instruments. The Company has implemented the fair value accounting standard for those assets that are re-measured and reported at fair value at each reporting period. This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value based on inputs used, and requires additional disclosures about fair value measurements. This standard applies to fair value measurements already required or permitted by existing standards. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset and include situations where there is little, if any, market activity for the asset. For financial statement presentation purposes, we offset assets and liabilities for forward contracts with the same counterparty that we intend to net settle upon maturity; however, we do not offset assets and liabilities under master netting arrangements that we do not intend to net settle. The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2022 and 2021 and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value: December 31, 2022 Fair value measurements using Total Gross Fair Value Effect of Counter-party Netting Net Amounts on Balance Sheet Effect of Master Netting Arrangements Net Amounts (in thousands) Level 1 inputs Level 2 inputs Level 3 inputs Assets Money market funds $ 6,069 $ — $ — $ 6,069 $ — $ 6,069 $ — $ 6,069 Forward contract receivable $ — $ 4,845 $ — $ 4,845 $ ( 518 ) $ 4,327 $ ( 1,778 ) $ 2,549 Liabilities Forward contract payable $ — $ 3,049 $ — $ 3,049 $ ( 518 ) $ 2,531 $ ( 1,778 ) $ 753 78 Table of Contents December 31, 2021 Fair value measurements using Total Gross Fair Value Effect of Counter-party Netting Net Amounts on Balance Sheet Effect of Master Netting Arrangements Net Amounts (in thousands) Level 1 inputs Level 2 inputs Level 3 inputs Liabilities Forward contract payable $ — $ 2,793 $ — $ 2,793 $ — $ 2,793 $ — $ 2,793 The Company’s derivatives are carried at fair value using various pricing models that incorporate observable market inputs, such as interest rate yield curves and currency rates, which are Level 2 inputs. Derivative valuations incorporate credit risk adjustments that are necessary to reflect the probability of default by the counterparty or by the Company. 6. Property and Equipment, net The components of Property and equipment, net at December 31, 2022 and 2021 were as follows: (in thousands) December 31, 2022 December 31, 2021 Leasehold improvements $ 53,950 $ 38,024 Technology and computers 95,189 81,679 Furniture and fixtures 6,173 4,814 Construction in process 4,640 10,892 Other property and equipment 10,828 8,405 Property and equipment, gross 170,780 143,814 Accumulated depreciation ( 95,727 ) ( 63,768 ) Property and equipment, net $ 75,053 $ 80,046 The Company’s principal operations are in the Philippines where the majority of property and equipment resides under its wholly owned subsidiaries. The table below presents the Company’s total property and equipment by geographic location as of December 31, 2022 and 2021: (in thousands) December 31, 2022 December 31, 2021 Philippines $ 42,153 $ 49,825 United States 9,136 10,273 India 15,482 15,662 Rest of World 8,282 4,286 Property and equipment, net $ 75,053 $ 80,046 7. Goodwill and Intangibles On April 15, 2022, the Company completed the acquisition of heloo. As a result of the acquisition, the Company recorded approximately $ 21.9 million of goodwill and $ 11.2 million of other identifiable intangible assets. See Note 3, “Business Combination” for additional information . The changes in the carrying amount of goodwill during the period were as follows: (in thousands) Balance as of December 31, 2020 $ 195,735 Balance as of December 31, 2021 195,735 Acquisition of heloo 21,908 Foreign currency translation ( 261 ) Balance as of December 31, 2022 $ 217,382 The results of our goodwill impairment tests for the years ended December 31, 2022 and 2021 did not indicate any impairments of goodwill. 79 Table of Contents Intangible assets consisted of the following as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 (in thousands) Weighted-Average Years Remaining Intangibles, Gross Accumulated Amortization Intangibles, Net Intangibles, Gross Accumulated Amortization Intangibles, Net Customer relationships 10.7 $ 251,539 $ ( 68,987 ) $ 182,552 $ 240,800 $ ( 52,175 ) $ 188,625 Trade name 10.7 42,222 ( 11,986 ) 30,236 41,900 ( 9,077 ) 32,823 Other intangibles 0.5 410 ( 205 ) 205 — — — Total 10.7 $ 294,171 $ ( 81,178 ) $ 212,993 $ 282,700 $ ( 61,252 ) $ 221,448 Future amortization expense for intangible assets subject to amortization was: (in thousands) 2023 $ 20,286 2024 19,968 2025 19,921 2026 19,921 2027 19,921 Thereafter 112,976 Total $ 212,993 8. Long-Term Debt The balances of current and non-current portions of debt consist of the following as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 (in thousands) Current Noncurrent Total Current Noncurrent Total Term Loan $ 3,712 $ 265,613 $ 269,325 $ 11,813 $ 188,212 $ 200,025 Revolver — — — 39,878 — 39,878 Less: Debt financing fees ( 378 ) ( 1,388 ) ( 1,766 ) ( 556 ) ( 972 ) ( 1,528 ) Total $ 3,334 $ 264,225 $ 267,559 $ 51,135 $ 187,240 $ 238,375 2019 Credit Agreement On September 25, 2019, the Company entered into a credit agreement (the “2019 Credit Agreement”) that included a $ 210.0 million term loan (the “2019 Term Loan Facility”) and a $ 40.0 million revolving credit facility (the “2019 Revolving Credit Facility” and, together with the 2019 Term Loan Facility, the “2019 Credit Facilities”) . On April 30, 2021, the Company entered into Amendment No. 1 to its 2019 Credit Agreement with the existing lenders providing for $ 50.0 million incremental revolving credit commitments on the same terms as our existing revolving credit facility. On September 7, 2022, the Company entered into the 2022 Credit Agreement (as defined below) and the total outstanding debt under the 2019 Credit Facilities of $ 267.2 million was fully repaid. 2022 Credit Agreement On September 7, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) with both new and existing lenders which amended and restated the 2019 Credit Agreement. The 2022 Credit Agreement includes a $ 270.0 million term loan (the "2022 Term Loan Facility") and a $ 190.0 million revolving credit facility (the "2022 Revolving Credit Facility" and, together with the 2022 Term Loan Facility, the “2022 Credit Facilities”). The proceeds of the 2022 Term Loan Facility were used to repay all borrowings under the 2019 Credit Facilities, to pay related fees and expenses and for general corporate purposes (the “Refinancing”). The Refinancing was accounted for as a debt modification for existing lenders and new debt for new lenders, resulting in debt issuance costs, including amounts allocated from the 2019 Credit Facilities, of $ 1.9 million associated with the 2022 Term Loan Facility and $ 1.1 million associated with the undrawn 2022 Revolving Credit Facility. Third party fees of $ 0.3 million associated with the debt modification were recorded in financing expenses on the consolidated statements of operations for the year ended December 31, 2022. The 2022 Term Loan Facility matures on September 7, 2027, and commencing with the fiscal quarter ending December 31, 2022, requires quarterly principal payments of 0.25 % of the original principal amount through September 30, 2023, 0.625 % of the original principal amount through September 30, 2024, 1.25 % of the original principal amount through September 30, 80 Table of Contents 2025, 1.875 % of the original principal amount through September 30, 2026 and 2.50 % of the original principal amount thereafter, with the remaining principal due in a lump sum at the maturity date. Voluntary principal prepayments are permitted. The 2022 Revolving Credit Facility provides the Company with access to a $ 15.0 million letter of credit facility and a $ 15.0 million swing line facility, each of which, to the extent used, reduces borrowing availability under the 2022 Revolving Credit Facility. The 2022 Revolving Credit Facility terminates on September 7, 2027. As of December 31, 2022, we had $ 190.0 million of borrowing available under the 2022 Revolving Credit Facility. Borrowings under the 2022 Credit Agreement, with the exception of swing line borrowings, bear interest, at our option, either at (i) an adjusted Term Secured Overnight Financing Rate (“SOFR rate”) plus a margin of 2.25 % per annum, subject to a SOFR rate floor of 0.00 % or (ii) an alternative base rate plus a margin of 1.25 % per annum, subject to an alternative base rate floor of 1.00 %, Any borrowings under the swing line will be subject to the base rate. The 2022 Revolving Credit Facility also requires a commitment fee of 0.40 % per annum of undrawn commitments to be paid quarterly in arrears. We have elected to pay interest on borrowings under the 2022 Term Loan Facility based on the SOFR rate. The interest rate in effect for the 2022 Term Loan Facility as of December 31, 2022 was 6.667 % per annum. The 2022 Credit Agreement contains a financial covenant requiring compliance with a maximum total net leverage ratio and certain other covenants, including, among other things, covenants restricting additional borrowings, investments (including acquisitions) and distributions. We were in compliance with all debt covenants as of December 31, 2022. Substantially all assets of our direct wholly owned subsidiary TU MidCo, Inc., its wholly owned subsidiary TU BidCo, Inc. and its material wholly owned domestic subsidiaries are pledged as collateral under the 2022 Credit Agreement, subject to certain customary exceptions. Principal maturities of the outstanding debt as of December 31, 2022 are as follows: (in thousands) 2023 $ 3,712 2024 8,438 2025 15,188 2026 21,937 2027 220,050 Total $ 269,325 9. Leases Operating lease costs recorded to cost of services was $ 15.2 million for the year ended December 31, 2022. Operating lease costs recorded to selling, general, and administrative expense were immaterial. Rental expense for the years ended December 31, 2021, and 2020 was $ 12.9 million, and $ 11.1 million, respectively. During the year ended December 31, 2020, the Company terminated its lease at its former Santa Monica Headquarters and San Antonio, which were due to expire in 2022 and 2023. As a result of such terminations, the Company recorded lease termination cost of $ 1.8 million in 2020. The following table presents the weighted average remaining lease term and weighted average discount rate for the Company's operating leases as of December 31, 2022: December 31, 2022 Weighted average remaining lease term 4.1 years Weighted average discount rate 5.3 % The following table presents supplemental cash flow information related to the Company's operating leases: (in thousands) Year Ended December 31, 2022 Cash paid for amounts included in the measurement of operating lease liabilities 14,551 ROU assets obtained in exchange for operating lease liabilities 13,146 The future lease payments on the Company’s operating lease liabilities as of December 31, 2022 were as follows: 81 Table of Contents (in thousands) 2023 $ 13,528 2024 12,166 2025 11,271 2026 6,641 2027 2,952 Thereafter 3,002 Total lease payments 49,560 Less: interest ( 5,566 ) Total lease liabilities $ 43,994 Future minimum rental commitments under non-cancelable operating leases as of December 31, 2021 were as follows: (in thousands) 2022 $ 14,036 2023 12,270 2024 9,032 2025 8,899 2026 4,034 Thereafter 4,654 Total $ 52,925 10. Commitments and Contingencies Legal Proceedings We are subject to various legal proceedings, claims, and litigation arising in the ordinary course of business. Although the outcomes of such matters cannot be predicted with certainty, we believe that resolution of all such pending matters will not, either individually or in the aggregate, have a material adverse effect on the Company’s business, operating results, cash flows, or financial condition. On February 23, 2022, a purported class action lawsuit captioned Lozada v. TaskUs, Inc. et al., No. 22-cv-1479-JPC, was filed in the United States District Court for the Southern District of New York against the Company, our Chief Executive Officer, our President, and our Chief Financial Officer. The complaint alleges that the registration statement filed in connection with the Company’s IPO and the Company’s second and third quarter 2021 earnings calls contained materially false and misleading information in violation of the federal securities laws. On October 20, 2022, the Court entered an order appointing Humberto Lozada as lead plaintiff in the lawsuit. On December 16, 2022, lead plaintiff filed an amended complaint, alleging additional misstatements in certain of the Company’s 2021 earnings releases filed on Form 8-K and at an investor conference, and asserting additional securities claims, including against members of TaskUs’s board of directors as well as BDP FC Aggregator L.P. The complaint seeks unspecified damages and an award of costs and expenses, including reasonable attorneys’ fees, as well as equitable relief. We believe that the lawsuit is without merit and intend to defend the lawsuit vigorously. Our motion to dismiss was filed on February 17, 2023. We cannot predict at this point the length of time that this action will be ongoing or the liability, if any, which may arise therefrom. The Company has received three lawsuits that present in large degree the same legal or factual issues, with allegations that are similar in nature. We believe that these three lawsuits are without merit and intend to defend each vigorously. We cannot predict at this point the length of time that these actions will be ongoing or the liability, if any, which may arise therefrom. As these actions are still in preliminary phases, any potential loss or impact on financial position or results of operations cannot yet be estimated: On April 1, 2022, a purported class action lawsuit captioned Gregory Forsberg, Christopher Gunter, Samuel Kissinger, and Scott Sipprell vs. TaskUs, Inc. and Shopify, Inc., Shopify Holdings (USA), Inc., Shopify (USA) Inc., No. 1:22-cv-00436-UNA, was filed in the United States District Court for the District of Delaware. The complaint alleges the named defendants failed to exercise reasonable care in securing and safeguarding consumer information in connection with a 2020 data breach impacting Ledger SAS cryptocurrency hardware wallets, resulting in the unauthorized public release of approximately 272,000 pieces of detailed personally identifiable information, including Plaintiffs’ and class members’ full names, email addresses, postal addresses, and telephone numbers. The four named plaintiffs allege aggregate losses of approximately $ 140,000 , and 82 Table of Contents allege that the damages exceed $ 5 million for purposes of class action jurisdiction. On December 22, 2022, the Court stayed the case for a 60 day period and vacated the January 11, 2023 hearing on TaskUs' and Shopify's pending motions to dismiss. On September 16, 2022, a purported class action lawsuit captioned My Choice Software, LLC vs. Shopify, Inc. Shopify (USA) Incl., TaskUs, Inc., Does 1-100, No. CGC-22-601842, was filed in the Superior Court of the State of California, County of San Francisco. The complaint alleges the named defendants secretly installed tracking cookies on consumers' devices to track individual consumer activity and gather private information and that the defendant Shopify allowed two of its support staff to steal customer data from more than 100 merchants. The complaint seeks unspecified damages and an award of costs and expenses, including reasonable attorneys’ fees, as well as equitable relief. This complaint has not been served on TaskUs, Inc. On September 16, 2022, a lawsuit captioned My Choice Software, LLC vs. TaskUs, Inc., Tassilo Heinrich, Shopify, Inc., Shopify Holdings (USA) Inc., Shopify (USA) Inc, Does 1-50, No. 22-cv-1710 was filed in the US District Court, Central District of California. The complaint alleges the defendants profited off of the plaintiff's information. The complaint seeks unspecified damages and an award of costs and expenses, including reasonable attorneys’ fees, as well as equitable and injunctive relief. On February 13, 2023, TaskUs, Inc. filed a Motion to Dismiss, which is currently pending. Indemnification In addition, in the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify clients, vendors and other business partners with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, cybersecurity breach, services to be provided by us or from intellectual property infringement claims made by third parties. Historically, we have not experienced significant losses on these types of indemnification obligations. 11. Stock-Based Compensation Stock Plans Phantom Stock Plan On June 19, 2015, TaskUs Holdings’ board of directors officially adopted a company-wide phantom stock plan and related phantom share agreements. The plan and agreements establish key terms and conditions of the grants, including amount of shares reserved for the grant, amount granted to an employee, vesting, and forfeiture terms. The phantom stock awards were to be settled in cash upon an IPO or in a similar form as the method of purchase used by a future acquirer upon an occurrence of a change in control (each as defined in such plan). In connection with the Blackstone Acquisition, the phantom stock awards associated with the plan were settled partially in cash and partially in rollover shares in accordance with the terms of the plan. The contractual lives and the vesting conditions for the rollover phantom stock varied depending on the employment status of the holder at the acquisition date. All other terms were substantially the same as the plan and the agreements as discussed above and were to be settled in cash upon an IPO or in a similar form as the method of purchase used by a future acquirer upon an occurrence of a change in control. Prior to the IPO, management determined that these triggering events were not probable, and as such no liability or expense was recorded for the year ended December 31, 2020 related to the rollover shares. There were 6,514,360 outstanding phantom shares as of December 31, 2020. There were 1,399,470 phantom shares forfeited during the year ended December 31, 2021 . As of December 31, 2021, there were no phantom shares outstanding. 2019 Stock Incentive Plan On April 16, 2019, the Company established an equity incentive plan pursuant to which the Company has granted option awards to selected executives and other key employees (the “2019 Plan”) . The option awards contain service, market and performance conditions. Stock options under this plan contingently vest over a period of two years in the event of a change in control and over a period of three years in the event of an IPO (each as defined in such plan), with the vesting period beginning on the date of the performance event so long as the holder remains employed. The amount of options eligible for vesting is contingent upon Blackstone’s return on invested capital in the Company. These options have contractual lives of 10 years . As amended, the Company reserved 7,597,730 common shares for issuance under the 2019 Plan. Following the IPO and establishment of the 2021 Plan, defined below, it is not expected that any additional awards will be issued under the 2019 Plan. 2021 Omnibus Incentive Plan In connection with the IPO, the Company adopted the 2021 Omnibus Incentive Plan (the “2021 Plan” and, together with the 2019 Plan, the “Incentive Plans”), which provides for the issuance of non-qualified stock options, incentive stock options, stock appreciation rights (“SARs”), restricted shares of Class A common stock, restricted stock units (“RSUs”), or other equity-based or cash-based awards. The stock options are subject to service-based vesting conditions and generally vest quarterly or 83 Table of Contents annually ove r three to four years and expire 10 years from the date of the grant. The RSUs are typically subject to service-based vesting conditions and generally vest in quarterly or annual installments over two to four years . The Company initially granted 6,614,122 awards to its founders and reserved an additional 12,160,929 shares of Class A common stock for issuance under the 2021 Plan, subject to automatic annual evergreen increases. As of December 31, 2022, the total number of shares available for future grants under the 2021 Plan was 9,132,323 . Employee Stock Purchase Plan The Company adopted the TaskUs, Inc. 2022 Employee Stock Purchase Plan (the “ESPP”) on June 14, 2022. Under the ESPP, eligible employees may purchase a limited number of shares of our Class A common stock at the lesser of 85 % of the market value on the enrollment date or 85 % of the market value on the purchase date. As of December 31, 2022, n o shares were issued through the ESPP. As of December 31, 2022, the total number of shares available for issuance under the ESPP was 5,000,000 . Stock Options The following table summarizes the stock option activity for the year ended December 31, 2022: Number of options Weighted-average exercise price Weighted-average remaining contractual term (years) Aggregate intrinsic value (in thousands) Outstanding at January 1, 2022 9,685,321 $ 10.53 8.4 $ 421,789 Granted 448,928 $ 29.30 Exercised ( 798,803 ) $ 4.35 Forfeited, cancelled or expired ( 1,611,735 ) $ 7.07 Outstanding at December 31, 2022 7,723,711 $ 12.98 7.6 $ 57,880 Vested and exercisable at December 31, 2022 1,147,627 $ 17.51 7.8 $ 5,265 Vested and exercisable at December 31, 2022 and expected to vest thereafter 7,723,711 $ 12.98 7.6 $ 57,880 The weighted-average grant-date fair value of options granted during the years ended December 31, 2022, 2021 and 2020 was $ 10.73 , $ 9.69 and $ 1.65 , respectively. The total pre-tax intrinsic value of the options exercised during the year ended December 31, 2022 was $ 10.9 million. No stock options were exercised during the years ended December 31, 2021 and 2020. Awards granted to employees contain service, performance and market conditions that affect vesting. We use the Black-Scholes model to determine the fair value of stock options with either solely service conditions or with a combination of service and performance conditions. Prior to the IPO, we valued our options using a combination of Monte Carlo simulation and Black-Scholes model. A Monte Carlo simulation was first used to determine the number of options eligible for vesting, then a Black-Scholes model was used to estimate the value for the vested options given the simulated scenario. The grant date fair value of the stock options was estimated using the Black-Scholes option pricing method with the following assumptions: Year ended December 31, 2022 2021 2020 Dividend yield (%) 0 % 0 % 0 % Expected volatility (%) 32 - 35 % 32 - 35 % 35 % Risk-free interest rate (%) 1.6 - 4.2 % 0.8 - 1.4 % 0.3 - 1.8 % Expected term (years) 5.5 - 7.0 5.1 - 7.0 5.3 - 9.0 The assumptions used in the Black-Scholes model, other than the fair value of our common stock, are estimated as follows: • Expected dividend yield: Zero percent, as we do not anticipate paying dividends on our common stock. • Expected volatility: Based on the historical stock price volatility of comparable publicly-traded companies in our peer group and the implied volatility of our assets and current leverage. • Risk-free interest rate: Based on the U.S. Treasury yield curve in effect at the time of grant. • Expected term: Estimated based on the simplified method as we do not have adequate historical data. 84 Table of Contents RSUs The following table summarized the RSU activity for the year ended December 31, 2022: Number of RSUs Weighted-average grant date fair value Outstanding at January 1, 2022 4,179,475 $ 29.01 Granted 1,091,376 $ 25.97 Released ( 1,020,937 ) $ 28.16 Cancelled ( 354,690 ) $ 33.22 Unvested and Outstanding at December 31, 2022 3,895,224 $ 28.00 The weighted-average grant date fair value of RSUs granted during the year ended December 31, 2021 was $ 28.66 . No RSUs were granted during the year ended December 31, 2020. The total pre-tax intrinsic value of the RSUs released during the years ended December 31, 2022 and 2021 was $ 20.3 million and $ 12.4 million. No RSUs were released during the year ended December 31, 2020. Performance Stock Units (“PSUs”) The Company had 3,373,417 PSUs with a weighted-average grant date fair value of $ 4.02 outstanding as of December 31, 2022 and 2021. The majority of the PSUs vest contingently in annual installments over four years subject to continued service and the achievement of certain enterprise value compound annual growth rate ("CAGR") targets. The remaining PSUs vest contingently in four years subject to continued service and the achievement of certain market capitalization CAGR targets. The grant date fair value of the PSUs granted during the year ended December 31, 2021 were estimated using the Monte Carlo simulation method with the following assumptions: Dividend yield (%) 0 % Expected volatility (%) 40 % Risk-free interest rate (%) 0.1 - 0.6 % Stock-Based Compensation Expense The following table summarizes the components of stock-based compensation expense recognized in the Company’s consolidated statements of operations for the periods presented: Year ended December 31, (in thousands) 2022 2021 2020 Cost of services $ 3,557 $ 1,318 $ — Selling, general, and administrative expense 65,422 172,367 — Total $ 68,979 $ 173,685 $ — For the year ended December 31, 2020, no change in control, IPO or liquidity event actually occurred or was imminent. Therefore, none of the phantom shares or options were vested or exercisable, and no expense was recorded for the year ended December 31, 2020 given the performance condition was not probable. For the year ended December 31, 2021, the change in control condition of our phantom shares became probable upon the IPO. As a result, the Company recognized expense in the amount of the expected cash settlement of the phantom shares totaling $ 127.5 million in selling, general and administrative expense on the consolidated statements of operations for the year ended December 31, 2021. Additionally, the Company concluded that the public offering represented a qualifying liquidity event that would cause the performance condition of the options under the 2019 Plan to be probable of occurring, and began recognizing compensation expense in relation to those options, including approximately $ 2.2 million of compensation expense related to nonvested stock options based on the service already provided by the employee at that time. For the year ended December 31, 2022, there was $ 11.6 million, $ 57.7 million and $ 5.3 million of unrecognized compensation expense related to the Company’s unvested stock options, RSUs and PSUs, respectively, that is expected to be recognized over a weighted-average period of 1.3 years, 1.6 years and 1.7 years. The tax benefits recognized in the consolidated statements of operations for stock-based compensation expense were $ 3.2 million and $ 4.3 million for the years ended December 31, 2022 and 2021, respectively, and were no t material during the year ended December 31, 2020 . 85 Table of Contents 12. Income Taxes The components of income (loss) before income taxes consists of the following, for the periods indicated: Year ended December 31, (in thousands) 2022 2021 2020 United States $ 7,942 $ ( 111,296 ) $ 22,617 Foreign 56,591 50,333 21,802 Income (loss) before income taxes $ 64,533 $ ( 60,963 ) $ 44,419 The provision for (benefit from) income taxes consists of the following, for the periods indicated: Year ended December 31, (in thousands) 2022 2021 2020 Current: Federal $ 16,418 $ 999 $ 10,974 State 3,215 2,146 3,411 Foreign 16,233 6,067 2,522 Total current tax expense 35,866 9,212 16,907 Deferred: Federal ( 6,490 ) ( 9,844 ) ( 5,692 ) State ( 881 ) ( 796 ) ( 875 ) Foreign ( 4,384 ) ( 837 ) ( 454 ) Total deferred tax expense (benefit) ( 11,755 ) ( 11,477 ) ( 7,021 ) Total provision for (benefit from) income taxes $ 24,111 $ ( 2,265 ) $ 9,886 The following table presents the tax effects of temporary differences that gives rise to significant portions of deferred tax assets and deferred tax liabilities as of the dates indicated: (in thousands) December 31, 2022 December 31, 2021 Deferred Tax Assets Accruals $ 3,728 $ 3,108 Allowances and reserves 1,374 907 Deferred rent — 108 Intercompany payable 1,654 1,894 Foreign Tax Credit — 1,143 State taxes 963 751 Stock-based compensation expense 8,004 4,407 Deferred revenue 772 943 Fixed assets 671 — Unrealized foreign exchange gain/loss 1,130 — Section 163(j) interest limitation — 1,364 Operating lease liabilities 1,292 — Other 2,054 400 Total deferred tax assets $ 21,642 $ 15,025 Deferred Tax Liabilities Intangibles ( 48,750 ) ( 51,602 ) Operating lease right-of-use assets ( 1,241 ) — Fixed assets — ( 443 ) Unrealized foreign exchange gain/loss — ( 1,774 ) Total deferred tax liabilities $ ( 49,991 ) $ ( 53,819 ) Net deferred tax liabilities $ ( 28,349 ) $ ( 38,794 ) 86 Table of Contents The Company assessed the available positive and negative evidence to estimate whether it was more likely than not that some portion, or all, of the deferred tax assets would be realized. Evidence of sources of taxable income and the pattern and timing of the reversal of the temporary differences were sufficient to support a conclusion that a valuation allowance was not needed. The Company thereby determined it was more likely than not the deferred tax assets would be realized. The following is a reconciliation stated as a percentage of pretax income of the U.S. federal statutory income tax rate (21%) to the Company’s effective tax rate: Year ended December 31, 2022 2021 2020 Federal tax rate 21 % 21 % 21 % State taxes, net of federal benefit 3 ( 2 ) 2 Other permanent differences — ( 6 ) 6 Nondeductible officers’ compensation 9 ( 15 ) — GILTI Inclusion 10 ( 10 ) 6 FDII ( 1 ) — ( 4 ) RTP 2 ( 1 ) — Nondeductible transaction costs — ( 2 ) — Stock-based compensation expense 3 ( 3 ) — Foreign jurisdiction income tax holiday ( 3 ) 6 ( 11 ) Foreign tax credit ( 11 ) 5 ( 3 ) Foreign tax rate differential 1 9 3 Tax credits — 2 — FIN48 — — 4 BEAT 2 — — Earn-out consideration 3 — — Other adjustments ( 2 ) — ( 2 ) Effective tax rate 37 % 4 % 22 % The Company operates under tax holidays in the Philippines, which were effective through December 31, 2022, and may be extended for certain sites, if certain additional requirements are satisfied. The tax holidays are conditional upon the Company meeting certain employment and investment thresholds. The impact of these tax holidays decreased foreig n taxes by $ 6.1 million, $ 6.7 million and $ 4.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. The benefit of the tax holidays on net income per share (diluted) was $ 0.06 , $ 0.07 and $ 0.05 for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, unremitted earnings of the subsidiaries outside of the U.S. are approximately $ 195.8 million, which the Company has not made a provision for U.S. or additional foreign withholding taxes and state taxes. The Company’s practice and intention are to indefinitely reinvest these earnings outside the U.S. Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation. During 2021, the Philippines passed the CREATE Act which, among other changes, reduced the Philippines statutory tax rate from 30% to 25%. As a result of the law change, the Company recognized an expense of $ 2.4 million as a result of reducing the value of deferred tax assets. On March 27, 2020, the United States CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permitted NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021 and the deferral of employer taxes. The Company chose to avail itself of these CARES Act provisions for NOL carryover and carrybacks and the deferral of employer taxes. The Company has carried back net operating losses originating in the period from October 1, 2018, through December 31, 2018, to claim a refund for taxes paid in fiscal 2015, 2016, 2017, and the period from January 1, 2018, through September 30, 2018, resulting in a refund of approximately $ 5.2 million. As a result of NOL carryback, as of December 31, 2021, the Company reduced the 2017 transition tax liability to $ 1.0 million. Under the CARES Act, the Company received a net cash benefit of $ 5.3 million from the deferral of social security taxes otherwise due from April 10, 2020 through the year ended December 31, 2020. One-half of the deferred amount was paid by December 31, 2021, and the second half was paid by December 31, 2022. 87 Table of Contents A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows: Year ended December 31, (in thousands) 2022 2021 Uncertain tax benefit balance as of beginning of period $ 1,720 $ 1,919 Gross increases/(decreases) - tax positions for current period — 364 Gross increases/(decreases) - tax position in prior periods ( 364 ) ( 563 ) Uncertain tax benefit balance as of end of period $ 1,356 $ 1,720 As of December 31, 2022, the Company had approximately $ 1.4 million of unrecognized tax benefits that if recognized would affect the effective income tax rate. The Company estimates no material changes to its uncertain tax positions within the next 12 months. The Company recognizes interest and penalties related to uncertain tax positions as components of provision for (benefit from) income taxes. As of December 31, 2022, the Company accrued interest and penalties of $ 0.2 million and $ 0.1 million, respectively. The Company files income tax returns in US federal and state jurisdictions, as well as in the Philippines, Canada, India, Greece, Mexico, Taiwan, the United Kingdom, Ireland, Colombia, Japan and Malaysia. In 2022, the Company established business operations in Poland, Romania, Croatia and Serbia for which the Company will be subject to tax. As of December 31, 2022, the tax years 2019 to 2022 are subject to examination by tax authorities. 13. Shareholders’ Equity Dividend Distribution On April 9, 2021, prior to the IPO, the board of directors declared a cash dividend in the aggregate amount of $ 50.0 million to holders of its common stock. The cash dividend was paid on April 16, 2021. Amendment and Restatement of Certificate of Incorporation On June 10, 2021, the Company amended and restated its certificate of incorporation to effect a ten -for-one forward stock split of its outstanding common stock and authorized three classes of ownership interests: (i) 250,000,000 shares of preferred stock, par value $ 0.01 per share, (ii) 2,500,000,000 shares of Class A common stock, par value $ 0.01 per share, and (iii) 250,000,000 shares of Class B common stock, par value $ 0.01 per share. After giving effect to the ten -for-one stock split, all outstanding shares of common stock were reclassified into an equal number of shares of Class B common stock (the “Class B Reclassification”) and the selling shareholders participated equally in the Class B Reclassification. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting, transfer and conversion rights. Voting Rights— Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible into one share of Class A common stock at any time or automatically upon certain conditions but no later than June 10, 2028 ( seven years following the filing and effectiveness of the amended and restated certificate of incorporation). Dividend Rights— Subject to any preferential rights of any then outstanding preferred stock, all shares of our common stock are entitled to share equally, on a per share basis, in any dividends our board of directors may declare from legally available sources; provided, however, that in the event a dividend is paid in the form of shares of Class A common stock or Class B common stock, then holders of Class A common stock shall be entitled to receive shares of Class A common stock and holders of Class B common stock shall be entitled to receive shares of Class B common stock. We have no current plans to pay dividends on our common stock. Any decision to declare and pay dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. Because we are a holding company and have no direct operations, we will only be able to pay dividends from funds we receive from our subsidiaries. In addition, our ability to pay dividends is limited by covenants in our existing indebtedness and may be limited by the agreements governing any indebtedness we or our subsidiaries may incur in the future. Liquidation Rights— Upon our liquidation, dissolution or winding up, whether voluntary or involuntary, after payment of the debts and other liabilities of the Company and subject to the rights, if any, of the holders of any outstanding series of preferred stock or any class or series of stock having a preference over or the right to participate with the common stock, the holders of all outstanding shares of Class A common stock and Class B common stock shall be entitled to receive the remaining 88 Table of Contents assets of the Company available for distribution to its shareholders ratably in proportion to the number of shares held by each such shareholder. Initial Public Offering On June 15, 2021, the Company closed its IPO of 5,553,154 shares of Class A common stock (the “primary” offering) and selling shareholders sold 9,626,846 outstanding shares (the “secondary” offering), including shares sold by the selling shareholders pursuant to the underwriters’ full exercise of their option to purchase additional shares, at a public offering price of $ 23.00 per share. The Company received net proceeds of $ 120.7 million after deducting underwriting discounts and commissions, but before deducting offering expenses. The Company used the proceeds from the primary offering, together with cash on hand, to satisfy payments of approximately $ 127.5 million in respect of vested phantom shares. The Company did no t receive any proceeds from the secondary offering. Secondary Offering On October 25, 2021, certain of the Company's shareholders completed a secondary offering of 12,077,480 shares of the Company's Class A common stock at a public offering price of $ 63.50 per share. All of the shares of Class A common stock were offered by existing shareholders. The Company did not sell any common stock in the offering and did not receive any proceeds from the offering. 14. Earnings Per Share The Company has Class A common stock and Class B common stock outstanding. Because the only difference between the two classes of common stock are related to voting, transfer and conversion rights, the Company has not presented earnings per share under the two-class method, as earnings per share are the same for both Class A common stock and Class B common stock. The accompanying financial statements and related notes to the financial statements give retroactive effect to the stock split for all periods presented. See Note 13 , “ Shareholders’ Equity ” for additional information. The following table summarized the computation of basic and diluted earnings per share for the years ended December 31, 2022, 2021 and 2020: Year ended December 31, (in thousands, except share and per share data) 2022 2021 2020 Numerator: Net income (loss) available to common shareholders $ 40,422 $ ( 58,698 ) $ 34,533 Denominator: Weighted-average common shares outstanding - basic 97,815,679 94,832,137 91,737,020 Effect of dilutive securities 4,787,500 — — Weighted-average common shares outstanding - diluted 102,603,179 94,832,137 91,737,020 Net income (loss) per common share: Basic $ 0.41 $ ( 0.62 ) $ 0.38 Diluted $ 0.39 $ ( 0.62 ) $ 0.38 Since the Company was in a net loss position for the year ended December 31, 2021 , diluted EPS is equal to basic EPS as the inclusion of potential common stock equivalents would have been anti-dilutive. The Company excluded 2,840,004 and 105,177 potential common stock equivalents from the computation of diluted EPS for the years ended December 31, 2022 and 2021 , respectively, because the effect would have been anti-dilutive. In addition, the Company excluded 7,476,384 potential common stock equivalents from the computation of diluted EPS for the year ended December 31, 2021, since it was in a net loss position; however, these awards would have been dilutive if the Company was in a net income position. As of December 31, 2022 and 2020 , there were 4,917,920 and 8,459,100 , potential common stock equivalents outstanding, respectively, with performance and market conditions which were not met at each date, that were excluded from the calculation of diluted EPS. 15. Related Party On October 1, 2018, Bidco acquired 100 % of the outstanding shares of TaskUs Holdings, Inc. (formerly known as TaskUs, Inc.) at a purchase price of $ 429.4 million (the “Transaction”). As a part of the Transaction, the Company entered into a Stock Purchase Agreement, which provides that the sellers of TaskUs, Holdings, Inc. are entitled to receive cash payments for certain tax benefits, if any, realized as a result of the Blackstone Acquisition that are received by the Company for a specified period after the closing date. The Company recognized expense of $ 3.6 million for the expected payment to the sellers during 89 Table of Contents the year ended December 31, 2020, which was included within accounts payable and accrued liabilities in the consolidated balance sheets as of December 31, 2020. The Company made payment to the sellers during the year ended December 31, 2021. Underwriting of Offerings Blackstone Securities Partners L.P., an affiliate of Blackstone, served as underwriter of 1,380,000 of the 15,180,000 million shares of Class A common stock sold in the IPO, with underwriting discounts and commissions of $ 1.265 per share paid by the Company and selling shareholders, with respect to the shares sold by them. Blackstone Securities Partners L.P. served as underwriter of 1,021,942 of the 12,077,480 shares of Class A common stock sold in the secondary offering, with underwriting discounts and commissions of $ 2.06375 per share paid by the selling shareholders. 90 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.