What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-06 compared with 2024-03-08 · 128 added, 144 removed, 322 unchanged (46% of the section changed)

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We are a provider of outsourced digital services and next-generation customer experience to the world’s most innovative companies, helping our clients represent, protect and grow their brands.

We serve our clients to support their end customers’ urgent needs, navigate an increasingly-complex compliance landscape, handle sensitive tasks, including online content moderation and enable artificial intelligence technology and automation.

As of December 31, 2023, we served nearly 200 clients spanning established and emerging industry segments, including e-commerce, FinTech, food delivery and ride sharing, gaming, Technology, HealthTech, social media and streaming media.

Our global, omni-channel delivery model is focused on providing our clients three key services – Digital Customer Experience (“Digital CX”), Trust and Safety and Artificial Intelligence (“AI”) Ser vices.

88% of our revenue for the year ended December 31, 2023 was delivered from non-voice, digital channels or omni-channel services which allow us to utilize resources efficiently, thereby driving higher profitability.

We serve our clients by supporting their end customers’ urgent needs, helping them navigate an increasingly complex compliance landscape, handling sensitive tasks, including online content moderation, and enabling artificial intelligence technology and automation.

As of December 31, 2024, we supported approximately 200 clients spanning established and emerging industry sectors, including social media, e-commerce, gaming, streaming media, food delivery and ride-sharing, technology, financial services, and healthcare.

Our global, omnichannel delivery model is focused on providing our clients three key services – Digital Customer Experience (“Digital CX”), Trust + Safety, and Artificial Intelligence (“AI”) Ser vices.

87% of our revenue for the year ended December 31, 2024 wa s delivered from non-voice, digital channels or omnichannel services which allow us to utilize resources efficiently, thereby driving higher profitability.

We have designed our platform to enable us to rapidly scale and benefit from our clients’ growth.

We believe our ability to deliver “ridiculously good” outsourcing will enable us to continue to grow our client base.

We believe our ability to deliver “ridiculously good” outsourcing will enable us to continue growing our client base.

We use our strong reputation and expertise serving the digital economy to attract new innovators and enterprise-class brands looking to transform.

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Business Highlights

During 2023, we continued to support our current clients, and win new clients, as they navigated prolonged macroeconomic challenges.

We expanded our client portfolio, winning 47 new clients in 2023, achieving a 35% new client win rate, and expanded work with our current clients, with 58 current clients signing new statements of work.

We continued our focus on cost optimization allowing us to maintain margins and cash generation.

We also launched and began implementing TaskGPT, a next generation customer support technology, into our workflows internally and to support our clients.

During 2024, we supported both new and existing clients as they navigated an uncertain global macroeconomic environment.

We expanded our client portfolio, winning 39 new clients in 2024 and achieving a 45% new client win rate, and increasing the scope of services provided to our current clients, with 63 current clients signing new statements of work.

While continuing investments in resources and technology to achieve our goal of returning to growth following a challenging year in 2023, we maintained our focus on cost optimization, profit margins and cash generation.

We also made new investments in technology and talent in support of our goal of leading the industry in the implementation of generative AI-enabled tools, to deliver the next generation of specialized and customer experience services.

2024 Developments

Return to Revenue Growth

During 2024, we have seen some of the challenges and market uncertainty we faced in 2023 begin to subside.

Through our continued focus on partnering with our clients and strategic investments we have made in sales and marketing, including our focus on landing enterprise clients and cross-selling our specialized services, we achieved revenue growth of 7.6% for the the year ended December 31, 2024 compared to a revenue decline of 3.8% for the year ended December 31, 2023.

This acceleration of revenue growth requires additional investments in operations, facilities, hiring and training.

Additionally, we have seen an increase in pricing pressure as our clients remain focused on cost reduction and competitors reduce their rates.

While we believe we are a premium provider of specialized services, we have and expect to continue to price our services competitively in order to achieve above market growth rates and take share from our competitors.

These factors may impact our margins and cash flow.

Recent Financial Highlights

For the year ended December 31, 2023, we recorded service revenue of $924.4 million, a 3.8% decrease from $960.5 million for the year ended December 31, 2022.

For the year ended December 31, 2023, we recorded net income of $45.7 million an increase from $40.4 million for the year ended December 31, 2022, due primarily to lower stock-based compensation expense, cost optimization and the benefit from foreign currency exchange rate changes and forward contracts, partially offset by rising interest rates and higher income taxes.

For the year ended December 31, 2024, we recorded service revenue of $995.0 million, a 7.6% increase from $924.4 million for the year ended December 31, 2023.

For the year ended December 31, 2024, we recorded net income of $45.9 million consistent with $45.7 million for the year ended December 31, 2023, due primarily to higher revenue growth and higher interest income, mostly offset by higher cost of services and certain litigation costs.

Adjusted Net Income for the year ended December 31, 2024 decreased 6.2% to $118.7 million from $126.5 million for the year ended December 31, 2023.

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Our operating results in any period are not necessarily indicative of the results that may be expected for any future period.

2023 Developments

Macroeconomic Trends

Macroeconomic factors, including global economic and geopolitical developments, increased inflation rates, interest rate changes, and foreign currency exchange rate changes, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify.

Due to market uncertainty and potential recession or other economic challenges, many of our customers have increased their focus on cost reduction resulting in certain customers electing to shift work from our onshore locations to our offshore delivery locations, partnering with service providers to find cost-efficient arrangements, or reducing vendor spend across the board.

These factors contributed to a deceleration in our revenue growth rate and an increase in our operating costs.

We expect some or all of these factors to continue to impact our operations in the near term;

however, we believe that the increased cost focus also creates meaningful opportunities with both new and existing clients.

Generative AI

Generative AI, including Large Language Models (“LLMs”), has developed significantly in recent years and has demonstrated further advancement in 2023.

We believe this technology has the potential to impact most industries, including business process outsourcing, further automating simple, repeatable tasks, and even streamlining some more sophisticated workflows.

Certain of our clients have begun experimenting with this technology.

As this technology develops, demand for certain service offerings could decrease, further reducing our clients' spend, which could have a negative impact on our revenue.

We also believe that this technology will provide us with new opportunities and workflows.

We have historically differentiated our value proposition with a frontline first culture, which aligns with and allows us to be an extension of our clients’ brands, as well as our focus on driving efficiency, seeking opportunities to eliminate simple, routine work so our teammates can deliver higher value services.

We have been using generative AI for nearly two years and believe the future of this technology is one of augmentation rather than automation, enabling our talented teammates to leverage these tools and continue to meaningfully improve client outcomes and operational efficiencies.

During the year ended December 31, 2023 , we launched TaskGPT, a next generation customer support technology, enabling rapid expansion and enhancements to our customer service capabilities by leveraging AI technology.

New technology also produces demand for novel services.

We have demonstrated an ability to quickly discover and launch services in new markets and believe we are well positioned to discover these needs and deliver them for our innovative clients.

We believe that there is an opportunity to integrate generative AI throughout our offerings, including:

• AI Services:

TaskUs provides annotation and evaluation support services to help train algorithms, improving the models’ performance and aligning them with human values.

We built a Prompt Engineering team that creates and refines prompts for AI systems.

• Trust and Safety:

We expect to see increased demand for Trust and Safety services in a world of infinite content creation and deepfake technology.

We also work with generative AI companies to ensure the safety and soundness of their AI (e.g., ensuring responses of LLMs do not violate company policies).

• Digital Customer Experience:

We believe that there may be a decrease in volumes of certain workflows;

however, there may also be revenue opportunities for systems integrators and service providers to build, integrate and deploy this technology.

We have launched a consultative model that helps leading enterprises innovate by building new capabilities powered by generative AI across a spectrum of tasks, from automating the routine to assisting in creative work.

TaskUs consults with companies to drive customer engagement, improve customer service and enhance operations through the use of technology.

Trends and Factors Affecting our Performance

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We won 39 new clients in 2024, and we achieved a 45% new client win rate for every dollar of new client opportunities we pursued.

As of December 31, 2023 , we served nearly 200 of the world’s leading technology companies.

As our clients grow in size and the complexity of their outsourcing needs increases, we believe we have an opportunity to increase the addressable spend available to TaskUs through enhanced penetration of current services as well as cross-selling new services.

We continue to see meaningful opportunities from recent industry consolidation as clients diversify their vendor networks.

We are focused on capturing a larger share of their demand for specialized services that support and protect their brands.

In 2024, 63 current clients signed new statements of work with us.

As of December 31, 2024, we supported approximately 200 of the world’s leading companies and generated revenue in excess of $1.0 million from 102 of these clients during 2024.

We also made progress on our strategic goal of cross-selling our suite of specialized services to our client base, increasing the number of clients using more than one service line by 16% year-over-year to 64 clients.

Expanded service offerings

We closely watch trends and work closely with current and potential clients to develop offerings that we believe align with our core competencies and present an attractive market opportunity.

We watch trends and work closely with current and potential clients to develop offerings that we believe align with our core competencies and present an attractive market opportunity.

This approach has earned us the opportunity to support some of the most innovative companies and has enabled significant expansion opportunities with large global enterprises.

We leveraged our knowledge working with Generative AI to quickly implement TaskGPT throughout our offerings, augmenting the support our talented teammates provide to meaningfully improve client outcomes and operational efficiencies.

We combine our expertise and service offerings to support the Generative AI ecosystem through three pillars (1) Build - supporting clients across industries with the creation and tuning of AI algorithms through our AI Services expertise 2) Protect - training AI models to align them with human values and protect marketplaces against adverse effects of generative AI outputs with our Trust and Safety services 3) Grow - deploying generative AI solutions in our DCX services to improve customer experiences and help our clients operate more efficiently to grow their business.

We continue to implement generative AI into our offerings, augmenting the support our talented teammates provide to meaningfully improve client outcomes and operational efficiencies, as well as supporting clients with the creation and tuning of AI algorithms and training AI models to align them with human values and protect marketplaces against adverse effects of generative AI outputs.

Within Digital Customer Experience, we are deploying generative AI solutions to improve customer experiences and help our clients operate more efficiently to grow their business, including through our expanded sales and customer acquisition services.

Within Trust + Safety, we have seen an increase in client demand for our Financial Crimes + Compliance services where we leverage a combination of data analytics, technology and human expertise to reduce regulatory compliance risk and detect and prevent activities that could involve money laundering, fraud, or other financial crimes.

Expanding geographically

We expanded our presence from 27 sites in 13 countries as of December 31, 2022 to 28 sites in 12 countries as of December 31, 2023.

During 2023, we significantly increased our Headcount outside of the U.S., the Philippines and India (the “Rest of World”) from approximately 4,100 employees as of December 31, 2022 to approximately 6,000 as of December 31, 2023, with particularly strong growth in Colombia and Mexico.

We expanded our presence to 28 sites in 12 countries as of December 31, 2024.

During 2024, we significantly increased our Headcount outside of the U.S., the Philippines and India (the “Rest of World”) from approximately 6,000 employees as of December 31, 2023 to approximately 8,700 as of December 31, 2024, with particularly strong growth in Colombia and Greece.

We plan to continue expanding our geographic footprint to drive growth with both existing and new clients, which may result in one-time costs that may impact profitability.

As we enter new geographies and make new capabilities available, clients may elect to move current work with TaskUs in one geography to another geography to optimize cost or to provide additional business continuity to their operations.

As we enter new geographies and make new capabilities available, clients may elect to move current work with TaskUs from one geography to another to optimize cost or provide additional business continuity to their operations.

This allows us to serve our clients better in the long term in most cases and deepens our relationship as we tend to grow and operate over multiple geographies with our larger clients over time as they grow.

As of December 31, 2024, we supported 83 clients from more than one geography, an increase of 32% year-over-year.

These changes in geographic mix may result in fluctuations in revenue and cost of service which are driven by the geography in which the work is being performed.

These fluctuations are in line with our business model, which aims to deliver service out of the optimal geography for our clients.

This allows us to serve our clients better in the long-term in most cases and deepens our relationship as we tend to grow and operate over multiple geographies contemporaneously with our larger clients over time as they grow.

These fluctuations align with our business model, which aims to deliver service out of the optimal geography for our clients.

These fluctuations might be especially noticeable in a particular service line or geography on a period over period basis.

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During the year ended December 31, 2024 , we continued to focus on cost management and financial flexibility.

We reviewed our cost structure in order to drive efficiencies across functions.

While we incurred certain costs associated with these changes, including severance in some cases, we believe these actions will have long-term benefits to the goal of enabling our future growth and profitability.

We generated net cash flow from operating activities of $143.7 million and Free Cash Flow of $112.7 million, respectively, both of which include the $18.3 million payment for earn-out consideration.

We reviewed our cost structure and invested in process and technology improvements in order to drive efficiencies across functions.

While we incurred certain costs associated with these activities, including severance in some cases, we believe these actions will have long-term benefits to the goal of enabling our future growth and profitability.

In 2024, our cost management activities enabled us to make investments in growth including resources in sales and marketing, global delivery locations, and the deployment of technologies.

Our technology investments include the implementation of TaskGPT, our suite of generative AI-enabled tools which allow our teammates to drive increased efficiency, quality, and customer satisfaction.

We also increased our investments in industry and service line expertise and operational excellence.

We believe this combination of technology, expertise, and our well-trained teammates is a critical part of what makes us the provider of choice for our clients.

We generated net cash flow from operating activities of $138.9 million and Free Cash Flow of $99.8 million, respectively, resulting in an increase of cash and cash equivalents of $66.4 million, while reducing our debt.

As of December 31, 2024 , we had cash and cash equivalents totaling $192.2 million and $190.0 million of borrowing availability under the 2022 Revolving Credit Facility, which we believe positions us well to continue investing in our future growth and profitability.

Hiring and retention of employees

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The voluntary attrition rate for employees who were employed by TaskUs for more than 180 days was 22.2% for the year ended December 31, 2024 .

Foreign currency fluctuations

We are subject to foreign currency exposure, primarily related to costs from the international locations in which we have operations.

In order to mitigate this exposure, we enter into foreign currency exchange rate forward contracts for the larger geographies in which we operate to reduce the volatility of forecasted cash flows denominated in foreign currencies.

Key Components of Our Results of Operations

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• Digital Customer Experience :

Principally consists of omni-channel customer care services primarily delivered through digital (non-voice) channels.

Other solutions include learning experience and customer care services for new product or market launches and customer acquisition solutions.

• Trust and Safety:

Principally consists of review and disposition of user and advertiser generated visual, text and audio content for purposes which include removal or labeling of policy violating, offensive or misleading content.

Also included in this area are our offerings for risk management, compliance, identity management and fraud.

Principally consists of omnichannel customer care services, primarily delivered through digital (non-voice) channels.

Also included in this offering are learning experience and sales and customer acquisition services.

• Trust + Safety :

Principally consists of monitoring, reviewing and managing user and advertiser-generated content on online platforms to ensure it complies with community guidelines, legal regulations and platform specific policies.

Also included in this offering are our services 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.

Principally consists large language model support and 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.

As these services are delivered, we bill our clients on either time-and-materials, cost-plus, unit-priced, fixed-price, or outcome oriented basis.

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Cost of services

Cost of services consists primarily of costs related to delivery of services, and consists primarily of personnel costs like salaries and wages, employee welfare, employee engagement, recruiting, professional development and stock-based compensation expense.

Additionally, cost of services includes expenses related to sites and technology costs that can be directly attributed to the delivery of services.

Cost of services consists primarily of costs related to delivery of services, and consists primarily of personnel costs like salaries and wages, stock-based compensation expense and employee welfare.

Additionally, cost of services includes expenses related to sites and technology, recruiting, professional development and employee engagement costs that can be directly attributed to the delivery of services.

Selling, general, and administrative

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Amortization of intangible assets relates primarily to our client relationship and trade name intangibles, which are amortized over their useful lives using the straight-line method, which reflects the pattern of benefit, and assumes no residual value.

Other Expense (Income), Net

Other expense (income), net primarily consists of gains and losses resulting from changes in the fair value of our foreign currency exchange rate forward contracts which are not designated as hedging instruments.

Other income also includes gains and losses resulting from the remeasurement of U.S.-denominated accounts to foreign currency and interest income.

Other income, net

Other income, net primarily consists of gains and losses resulting from the remeasurement of U.S.-denominated accounts to foreign currency, gains and losses resulting from changes in the fair value of our foreign currency exchange rate forward contracts which are not designated as hedging instruments, as well as interest income.

Financing expenses

Financing expenses primarily consist of interest expenses related to our term loan as well as commitment fees related to the undrawn revolving credit facility.

Provision for (Benefit From) Income Taxes

Provision for (benefit from) income taxes consists primarily of income taxes related to U.S.

Provision for income taxes

Provision for income taxes consists primarily of income taxes related to U.S.

federal and state income taxes and income taxes in foreign jurisdictions in which we conduct business.

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Amortization of intangible assets 19,935 20,346 (411) (2.0) %

Loss on disposal of assets 1,322 31 1,291 NM

Loss (gain) on disposal of assets (80) 1,322 (1,402) NM

Total operating expenses 902,561 829,327 73,234 8.8 %

Operating income 92,424 95,038 (2,614) (2.8) %

Other expense (income), net (1,711) 7,443 (9,154) NM

Other income, net (3,306) (1,711) (1,595) 93.2 %

Financing expenses 21,549 21,717 (168) (0.8) %

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$ 611,837 $ 605,943 $ 5,894 1.0 %

Trust and Safety

Trust + Safety

248,041 186,742 61,299 32.8 %

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$ 994,985 $ 924,365 $ 70,620 7.6 %

Digital Customer Experience was primarily driven by a decrease from existing clients in FinTech, Social Media, On Demand Travel + Transportation and HealthTech.

These decreases were partially offset by an increase from existing clients in Technology, as well as new clients in Retail + E-Commerce, HealthTech and On Demand Travel + Transportation.

Trust and Safety was primarily driven by an increase from existing clients in On Demand Travel + Transportation, Technology and Entertainment + Gaming, as well as new clients in FinTech.

These increases were partially offset by a decrease from existing clients in Social Media and FinTech.

AI Services was primarily driven by a decrease from existing clients in Social Media and On Demand Travel + Transportation, partially offset by an increase from existing clients in Entertainment + Gaming.

Digital Customer Experience was primarily driven by an increase from new clients, including Financial Services, Healthcare and Professional Services + Industry.

This increase was mostly offset by a decrease from existing clients, including On Demand Travel + Transportation and Entertainment + Gaming, partially offset by an increase in Financial Services.

Trust + Safety was primarily driven by an increase from existing clients, including Social Media and Financial Services.

AI Services was primarily driven by an increase from new clients, including Professional Services + Industry, Technology and Social Media.

This increase was partially offset by a decrease from existing clients, including On Demand Travel + Transportation, partially offset by Technology.

Service revenue by delivery geography

The majority of our service revenues are derived from contracts with clients who are either located in the United States, or with clients who are located outside of the United States but whereby the contract specifies payment in United States Dollars.

However, we deliver our services from multiple locations around the world.

We deliver our services from multiple locations around the world;

however, the majority of our service revenues are derived from contracts that require payment in United States dollars, regardless of whether the clients are located in the United States.

The following table presents the breakdown of our service revenue by geographical location, based on where the services are provided:

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$ 994,985 $ 924,365 $ 70,620 7.6 %

Trust and Safety contributed 5.0% of the total increase primarily driven by clients in Social Media, On Demand Travel + Transportation, FinTech and Technology.

Digital Customer Experience reduced 3.2% of the total increase primarily driven by clients in On Demand Travel + Transportation, FinTech, HealthTech and Retail + E-Commerce, partially offset by clients in Technology.

AI Services reduced 0.4% of the total increase primarily driven by clients in Social Media and On Demand Travel + Transportation, partially offset by clients in HealthTech, Retail + E-Commerce, Entertainment + Gaming and Technology.

Trust + Safety contributed 6.6% of the total increase primarily driven by clients in Social Media and Financial Services.

Digital Customer Experience contributed 4.0% of the total increase primarily driven by clients in Financial Services, Technology and Healthcare, partially offset by clients in Retail + E-Commerce.

AI Services reduced 0.5% of the total increase primarily driven by clients in Social Media.

United States:

The United States was impacted by certain of our clients electing to shift work from the United States to the Philippines and India as well as decreased spending from clients in FinTech, particularly crypto and equity trading clients.

Digital Customer Experience contributed 23.4% of the total decrease primarily driven by clients in FinTech, Social Media and Entertainment + Gaming, partially offset by clients in On Demand Travel + Transportation and Technology.

Trust and Safety contributed 13.1% of the total decrease primarily driven by clients in Social Media and FinTech.

AI Services contributed 4.6% of the total decrease primarily driven by clients in Social Media, On Demand Travel + Transportation and Retail + E-Commerce, partially offset by clients in HealthTech.

Trust and Safety contributed 15.2% of the total increase primarily driven by clients in On Demand Travel + Transportation and Social Media.

AI Services contributed 0.2% of the total increase primarily driven by clients in On Demand Travel + Transportation and Social Media, mostly offset by clients in HealthTech and Retail + E-Commerce.

Digital Customer Experience reduced 2.5% of the total increase primarily driven by clients in On Demand Travel + Transportation, partially offset by clients in Technology and Retail + E-Commerce.

Digital Customer Experience contributed 23.5% of the total decrease primarily driven by clients in On Demand Travel + Transportation, Entertainment + Gaming, Technology, Social Media, Healthcare and Retail + E-Commerce.

Trust + Safety reduced 2.7% of the total decrease primarily driven by clients in Social Media and On Demand Travel + Transportation.

AI Services was flat driven by a decrease in clients in On Demand Travel + Transportation, mostly offset by clients in Social Media.

Trust + Safety contributed 7.6% of the total increase primarily driven by clients in Social Media, On Demand Travel + Transportation and Retail + E-Commerce.

AI Services contributed 4.2% of the total increase primarily driven by clients in Professional Services + Industry and Social Media.

Digital Customer Experience reduced 4.9% of the total increase primarily driven by clients in On Demand Travel + Transportation, partially offset by clients in Retail + E-Commerce.

Rest of World:

Digital Customer Experience contributed 45.6% of the total increase primarily driven by clients in FinTech, On Demand Travel + Transportation, Entertainment + Gaming, Retail + E-Commerce and HealthTech, partially offset by clients in Social Media.

Trust and Safety and AI Services contributed 0.9% and 0.5%, respectively, of the total increase.

Growth in the Rest of World was driven by Latin America, as well as consistent growth across Asia and Europe.

Digital Customer Experience contributed 17.6% of the total increase primarily driven by clients in Financial Services, Professional Services + Industry, On Demand Travel + Transportation and Technology.

Trust + Safety contributed 9.9% of the total increase primarily driven by clients in Social Media and Financial Services.

AI Services contributed 0.6% of the total increase primarily driven by clients in Technology.

Growth in the Rest of World was driven by Colombia, Greece and Mexico.

Operating expenses

Cost of services

The decrease was primarily driven by lower personnel costs of $19.7 million, including the impact of certain clients electing to shift work from the United States to the Philippines and India, partially offset by the impact of wage inflation and higher employee welfare costs.

The remaining decrease was associated with a reduction of costs previously incurred while transitioning to a hybrid model and lower recruiting and professional development costs, mostly offset by site expansions and costs associated with certain teammates operating on-site.

The increase was primarily driven by higher personnel costs of $46.4 million associated with increased headcount.

The remaining increase included facilities and related costs associated with site expansion and recruiting costs to prepare for accelerating growth.

Selling, general, and administrative expense

The decrease was primarily driven by lower personnel costs of $26.0 million, due primarily to a reduction in stock-based compensation expense and the impact of optimization efforts as we drive efficiencies across functions, as well as earn-out consideration recognized as compensation expense.

The remaining decrease was associated with our optimization efforts, including lower insurance expense based on renegotiated rates, reductions in recruiting and professional development costs and professional fees and services, as well as bad debt expense.

These decreases were partially offset by higher software and travel costs.

The increase in depreciation is a result of capital expenditures for leasehold improvements associated with site expansions.

Amortization of intangible assets

The increase in amortization is due to our acquisition of heloo on April 15, 2022.

See Note 3, "Business Combination" in the Notes to Consolidated Financial Statements included in this Annual Report.

Loss on disposal of assets

The increase in loss on disposal of asset s is associated with optimizing our footprint, resulting in exiting certain sites in the United States and the Philippines.

Other expense (income), net

Changes are primarily driven by our exposure to foreign currency exchange risk resulting from our operations in foreign geographies, primarily the Philippines and India, offset by economic hedges using foreign currency exchange rate forward contracts .

The remaining increase is associated with higher interest income.

The increase was primarily driven by certain litigation costs of $15.4 million.

This increase was partially offset by lower personnel costs of $2.9 million, due primarily to a reduction in stock-based compensation expense of $9.9 million, as well as earn-out consideration of $7.9 million, partially offset by an increase in headcount and bonus, associated with higher revenue attainment.

Loss (gain) on disposal of assets

The change wa s associated with optimizing our footprint in 2023, resulting in exiting certain sites in the United States and the Philippines.

Other income, net

Increase is due primarily to higher interest income.

This increase was partially offset by changes driven by our exposure to foreign currency exchange risk resulting from our operations in foreign geographies, offset by economic hedges using foreign currency exchange rate forward contracts .

See Part II, Item 7A., "Quantitative and Qualitative Disclosures About Market Risk" in this Annual Report for additional information on how foreign currency impacts our financial results.

Financing expense

Changes in financing expense are primarily driven by increases in the rate of SOFR and LIBOR used to calculate the interest rate of our deb t, as well as additional borrowings in 2022.

See “—Liquidity and Capital Resources—Indebtedness—2019 Credit Agreement” and “—2022 Credit Agreement” for additional information.

Changes in financing expense are primarily driven by changes in the rate of SOFR used to calculate the interest rate of our deb t, as well as quarterly payments.

See “—Liquidity and Capital Resources—Indebtedness—2022 Credit Agreement” for additional information.

Provision for income taxes

Our effective tax rate for the years ended December 31, 2024 and 2023 was 38.2% and 39.1%, respectiv ely.

Costs related to the issuance of stock-based compensation, the acquisition of heloo and severance within the provision for income taxes calculation are adjusted for Non-GAAP purposes.

If those costs are removed, the provision for income taxes would have bee n $33.7 million and $30.6 million and the effective tax rate would have been 24.5% and 21.4% for the years ended December 31, 2023 and December 31, 2022, respectively.

Costs related to the issuance of stock-based compensation, the acquisition of heloo, litigation costs and severance within the provision for income taxes calculation are adjusted for Non-GAAP purposes.

If those costs are removed, the provision for income taxes would have been $35.0 million and $33.7 million and the effective tax rate would have been 26.4% and 24.5% for the years ended December 31, 2024 and December 31, 2023, respectively.

Revenue by Top Clients

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Top twenty clients

Our clients are part of the rapidly growing Digital Economy and they rely on our suite of digital solutions to drive their continued success.

For our existing clients, we benefit from our ability to grow as they grow and to cross sell new solutions, further deepening our entrenchment.

For the years ended December 31, 2024 and 2023, we generated 22% and 19%, respectively, of our service revenue from our largest client.

Many of our clients are part of the rapidly growing digital economy and they rely on our suite of digital solutions to drive their continued success.

For our existing clients, we benefit from our ability to cross sell new solutions and provide service in mult iple geographies , further deepening our entrenchment.

We continue to identify and target high growth industry verticals and clients.

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Non-GAAP Financial Measures

We use Adjusted Net Income, Adjusted Earnings Per Share (“EPS”), EBITDA, Adjusted EBITDA, Free Cash Flow and Conversion of Adjusted EBITDA, as key measures to assess the performance of our business.

We use Adjusted Net Income, Adjusted Earnings Per Share (“EPS”), EBITDA, Adjusted EBITDA, Free Cash Flow and Conversion of Adjusted EBITDA to Free Cash Flow, as key measures to assess the performance of our business.

Each of the measures are not recognized under accounting principles generally accepted in the United States of America ("GAAP") and do not purport to be an alternative to net income or cash flow as a measure of our performance.

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Adjusted Net Income is a non-GAAP profitability measure that represents net income or loss for the period before the impact of amortization of intangible assets and certain items that are considered to hinder comparison of the performance of our business on a period-over-period basis or with other businesses.

During the periods presented, we excluded from Adjusted Net Income amortization of intangible assets, transaction costs, earn-out consideration, the effect of foreign currency gains and losses, gains and losses on disposals of assets, non-recurring severance costs, stock-based compensation expense and associated employer payroll tax and the related effect on income taxes of certain pre-tax adjustments, which include costs that are required to be expensed in accordance with GAAP.

During the periods presented, we excluded from Adjusted Net Income amortization of intangible assets, transaction costs, earn-out consideration, the effect of foreign currency gains and losses, gains and losses on disposals of assets, non-recurring severance costs, certain non-recurring litigation costs, stock-based compensation expense and associated employer payroll tax and the related effect on income taxes of certain pre-tax adjustments, which include costs that are required to be expensed in accordance with GAAP.

Our management believes that the inclusion of supplementary adjustments to net income applied in presenting Adjusted Net Income are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future.

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1,302 431 871 202.1 %

Loss on disposal of assets 1,322 31 1,291 NM

Loss (gain) on disposal of assets (80) 1,322 (1,402) NM

Severance costs (4)

487 1,852 (1,365) (73.7) %

Litigation costs (5)

15,423 — 15,423 100.0 %

Stock-based compensation expense (6)

7 unchanged sentences

NM = not meaningful

(1) Represents professional service fees primarily related to the acquisition of heloo in 2022 and other non-recurring transactions.

(1) Represents professional service fees related to non-recurring transactions.

(2) Represents earn-out consideration recognized as compensation expense related to the acquisition of heloo.

(3) Realized and unrealized foreign currency losses include the effect of fair market value changes of forward contracts and remeasurement of U.S.

(3) Realized and unrealized foreign currency losses include the effect of fair market value changes of forward contracts not designated as hedging instruments and remeasurement of U.S.

dollar-denominated accounts to foreign currency.

(4) Represents severance payments as a result of certain cost optimization measures we undertook during the period to restructure support roles.

(5) Represents only those litigation costs that are considered non-recurring and outside of the ordinary course of business.

(6) Represents stock-based compensation expense, as well as associated payroll tax.

(6) Represents tax impacts of adjustments to net income which resulted in a tax benefit during the period, including stock-based compensation expense and earn-out consideration.

(7) Represents tax impacts of adjustments to net income which resulted in a tax benefit during the period, including stock-based compensation, the acquisition of heloo, litigation costs and severance.

After these adjustments, we applied a non-GAAP effective tax rate of 26.4% and 24.5% for the year ended December 31, 2024 and 2023, respectively, to non-GAAP income before income taxes.

(8) Net Income Margin represents net income divided by service revenue and Adjusted Net Income Margin represents Adjusted Net Income divided by service revenue.

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Adjusted EBITDA is a non-GAAP profitability measure that represents EBITDA before certain items that are considered to hinder comparison of the performance of our business on a period-over-period basis or with other businesses.

During the periods presented, we excluded from Adjusted EBITDA transaction costs, earn-out consideration, the effect of foreign currency gains and losses, gains and losses on disposals of assets, non-recurring severance costs, stock-based compensation expense and associated employer payroll tax and interest income, which include costs that are required to be expensed in accordance with GAAP.

During the periods presented, we excluded from Adjusted EBITDA transaction costs, earn-out consideration, the effect of foreign currency gains and losses, gains and losses on disposals of assets, non-recurring severance costs, certain non-recurring litigation costs, stock-based compensation expense and associated employer payroll tax and interest income, which include costs that are required to be expensed in accordance with GAAP.

Our management believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future.

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1,302 431 871 202.1 %

Loss on disposals of assets 1,322 31 1,291 NM

Loss (gain) on disposal of assets (80) 1,322 (1,402) NM

Severance costs (4)

487 1,852 (1,365) (73.7) %

Litigation costs (5)

15,423 — 15,423 100.0 %

Stock-based compensation expense (6)

7 unchanged sentences

NM = not meaningful

(1) Represents professional service fees related to the acquisition of heloo in 2022 and other non-recurring transactions.

(1) Represents professional service fees related to non-recurring transactions.

(2) Represents earn-out consideration recognized as compensation expense related to the acquisition of heloo.

(3) Realized and unrealized foreign currency losses include the effect of fair market value changes of forward contracts and remeasurement of U.S.

(3) Realized and unrealized foreign currency losses include the effect of fair market value changes of forward contracts not designated as hedging instruments and remeasurement of U.S.

dollar-denominated accounts to foreign currency.

(4) Represents severance payments as a result of certain cost optimization measures we undertook during the period to restructure support roles.

(5) Represents only those litigation costs that are considered non-recurring and outside of the ordinary course of business.

(6) Represents stock-based compensation expense, as well as associated payroll tax.

(6) Represents interest income earned on short-term savings and time-deposit funds beginning in 2023.

(7) Represents interest earned on short-term savings, time-deposit and money market funds.

(8) Net Income Margin represents net income divided by service revenue and Adjusted EBITDA Margin represents Adjusted EBITDA divided by service revenue.

8 unchanged sentences

Free Cash Flow $ 99,784 $ 112,675

Conversion of Adjusted EBITDA (1)

Conversion of Adjusted EBITDA to Free Cash Flow (1)

47.5 % 51.0 %

(1) Conversion of Adjusted EBITDA represents Free Cash Flow divided by Adjusted EBITDA

(1) Conversion of Adjusted EBITDA to Free Cash Flow represents Free Cash Flow divided by Adjusted EBITDA.

Liquidity and Capital Resources

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federal income tax purposes) may result in taxable cancellation of indebtedness income to us, which amounts may be material, and in related adverse tax consequences to us .

In September 2022, our Board of Directors approved a share repurchase program of up to $100.0 million of shares of our Class A common stock.

In May 2023, the Company announced that our Board of Directors authorized a $100.0 million increase to the share repurchase program, increasing the total authorization to $200.0 million, with the total amount remaining available after the increase being exclusive of any commissions, fees or excise taxes.

On December 6, 2024, the Company announced a one-year extension of its share repurchase authorization, extending the previously authorized $200.0 million authorization through December 31, 2025.

The share repurchase program was initially announced in September 2022 for up to $100.0 million of shares of our Class A common stock and capacity was increased to a total authorization of $200.0 million of shares of our Class A common stock (exclusive of any commissions, fees or excise taxes) in May 2023.

Pursuant to our share repurchase program, we may repurchase shares of our Class A common stock from time to time through open market purchases, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act.

Open market purchases are expected to be structured to occur within the pricing volume requirements of Rule 10b-18.

The timing and total amount of stock repurchases will depend upon, business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, restrictions under the terms of our loan agreements and other relevant considerations.

The repurchase program may be modified, suspended or discontinued at any time at the Company’s discretion and does not obligate the Company to acquire any amount of Class A common stock.

During the year ended December 31, 2024, we repurchased 1,527,354 shares of our Class A common stock under the share repurchase program for $17.6 million , which we funded principally with available cash.

2 unchanged sentences

2022 Credit Agreement

On September 25, 2019, we entered into a credit agreement (the “2019 Credit Agreement”) that included a $210.0 million term loan (the “2019 Term Loan Facility”) and a $40.0 million revolving credit facility (the “2019 Revolving Credit Facility” and, together with the 2019 Term Loan Facility, the “2019 Credit Facilities”) .

On April 30, 2021, we entered into Amendment No.

1 to the 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, we entered into the 2022 Credit Agreement (as defined below) and the total outstanding debt under the 2019 Credit Facilities of $267.2 million was fully repaid.

2022 Credit Agreement

On September 7, 2022, we entered into a credit agreement (the “2022 Credit Agreement”) with both new and existing lenders which amended and restated the 2019 Credit Agreement.

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 proceeds of the 2022 Term Loan Facility were used to repay all borrowings under the 2019 Credit Agreement, to pay related fees and expenses and for general corporate purposes.

The Revolving Credit Facility includes a letter of credit sub-facility of up to $15.0 million, and the 2022 Credit Facilities include an uncommitted incremental facility, which, subject to certain conditions, would provide for additional term loan facilities, an increase in commitments under the Term Loan Facility and/or an increase in commitments under the Revolving Credit Facility, in an aggregate amount of up to $268.8 million (which may increase based on LTM Consolidated EBITDA (as defined in the 2022 Credit Agreement)) plus additional amounts based on achievement of a certain consolidated total net leverage ratio.

4 unchanged sentences

As of December 31, 2024, we had no balance outstanding and $190.0 million of borrowing availability 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.

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.

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These changes were partially offset by changes in operating assets and liabilities of $2.1 million.

Net cash provided by oper ating activities for the year ended December 31, 2022 reflects the net income of $40.4 million, as well as the add back for non-cash charges totaling $112.8 million, primarily driven by $69.0 million in stock-based compensation expense, $37.9 million of depreciation and $19.9 million of amortization of intangible assets, partially offset by deferred taxes of $11.8 million.

Net cash provided by oper ating activities for the year ended December 31, 2023 reflects net income of $45.7 million, as well as the add back for non-cash charges totaling $110.0 million, primarily driven by $52.8 million in stock-based compensation expense, $40.4 million of depreciation and $20.3 million of amortization of intangible assets, partially offset by deferred taxes of $8.0 million.

These changes were partially offset by changes in operating assets and liabilities of $12.1 million.

1 unchanged sentence

Net cash used in investing activities for the year ended December 31, 2024 was $39.1 million compared to net cash used in investing activities of $32.0 million for the year ended December 31, 2023.

Purchase of property and equipm ent decreased primarily due to certain employees returning to the office driving higher utilization of equipment.

Net cash used in investing activities for the year ended December 31, 2022 included the acquisition of heloo, net of cash received.

The increase was primarily due to higher site build-out costs and purchases of technology and computers for replacements and to support revenue growth , partially offset by the investment in loan receivable in 2023 .

Financing Activities

Net cash used in financing activities for the year ended December 31, 2024 was $25.2 million compared to net cash used in financing activities of $119.1 million for the year ended December 31, 2023.

Net cash used in financing activities for the year ended December 31, 2023 consisted primarily of payments to acquire shares under our share repurchase program.

Net cash used in financing activities for the year ended December 31, 2022 consisted of payments on long-term debt, including the repayment of all outstanding borrowings under the 2019 Credit Facilities, payments to acquire shares under our share repurchase program, payments for taxes related to net share settlement of equity awards and payments for debt financing fees, mostly offset by proceeds from the 2022 Credit Facilities, borrowings from our 2019 Revolving Credit Facility and proceeds from employee stock plans.

The decrease was due primarily to lower payments to acquire shares under our share repurchase agreement.

Contractual Obligations

14 unchanged sentences

Historically, we have not experienced significant losses on these types of indemnification obligations.

JOBS Act Accounting Election

We qualify as an emerging growth company pursuant to the provisions of the JOBS Act.

The JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies.

We have elected to use the extended transition period until we are no longer an emerging growth company or until we choose to affirmatively and irrevocably opt out of the extended transition period.

As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.

Critical Accounting Estimates

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For additional information regarding recent accounting pronouncements adopted and under evaluation, refer to Note 2, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements.

JOBS Act Accounting Election

We qualify as an emerging growth company pursuant to the provisions of the JOBS Act.

The JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies.

We have elected to use the extended transition period until we are no longer an emerging growth company or until we choose to affirmatively and irrevocably opt out of the extended transition period.

As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis