Good afternoon, and welcome to the TaskUs Fourth Quarter and Full Year 2025 Earnings Call. My name is Victor, and I'll be your conference facilitator today. [Operator Instructions] I would now like to introduce Trent Thrash, Senior Vice President of Corporate Development & Investor Relations. Trent, you may begin.

Hello, everyone, and thank you for joining us for today's earnings call. Joining me are Bryce Maddock, our Co-Founder and Chief Executive Officer; and Balaji Sekar, our Chief Financial Officer. Full details of our results and additional management commentary are available in our earnings release, which can be found on the Investor Relations section of the website at ir.taskus.com. We have also posted supplemental information on our website, including an investor presentation and an Excel-based financial metrics file. Please note, this call is being simultaneously webcast on the Investor Relations section of our website. Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meaning of federal securities laws, including, but not limited to, statements regarding our future financial results and management's expectations and plans for the business. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here. You should not place undue reliance on any forward-looking statements. Factors that could cause actual results to differ from these forward-looking statements can be found in our Annual Report on Form 10-K, which was filed with the SEC in March of last year. This filing, which may be supplemented with subsequent periodic reports, is accessible on the SEC website and our Investor Relations website. We expect our next 10-K to be filed with the SEC in early March. Any forward-looking statements made on today's conference call, including responses to questions, are based on current expectations as of today, and TaskUs assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. These discussions throughout today's call contain non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our earnings press release, which is available in the IR section of our website. Now I will turn the call over to Bryce Maddock, our Co-Founder and Chief Executive Officer. Bryce?

Thank you, Trent. Good afternoon, everyone, and thank you for joining us. As many of you may have seen, today, we announced that our long-time CFO, Balaji Sekar, is leaving TaskUs at the end of the quarter to pursue another opportunity with a private company outside the industry. So before discussing our 2025 results, I want to sincerely thank Balaji for his service to TaskUs. During Balaji's nearly 10 years at TaskUs, we grew from being a start-up of a few thousand, based exclusively in the Philippines to a global corporation with over 65,000 teammates spread across 13 different countries. Along the way, Balaji was critical to developing our partnership with Blackstone and ultimately leading our successful IPO in 2021. Balaji has been a reliable, trusted adviser to our entire C-suite and our Board of Directors. He's also been an incredible partner to me in the business and someone I'm very proud to call a friend. Balaji will be missed, but we are fortunate to have a deep bench of leadership while we execute on a search for a new CFO. I'm grateful for Balaji's willingness to support a seamless transition by continuing to serve as an adviser to me, our next CFO and Trent Thrash, who will serve as Interim TaskUs CFO. Today, we also announced that we have secured commitments to amend our existing credit agreement to address our upcoming 2027 term loan maturity. As part of this comprehensive refinancing, we will increase our term loan to $500 million and obtain access to a $100 million revolving line of credit. In connection with the refinancing commitments, we also declared a $3.65 per share special dividend payable to all shareholders in March of 2026. Depending on the share count on the record date, we currently estimate the total dividend…

Thank you, Bryce. It has been a privilege to serve as the CFO during such a transformative period for the company. I'm incredibly proud of the finance team we have built and the financial rigor we have put in place. While I'm looking forward to my next chapter, I remain a significant shareholder and have total confidence in TaskUs' long-term strategy. I'm working closely with the company over the coming months to ensure a smooth handoff. I will now focus on our full year and Q4 2025 results before moving to 2026 guidance. In the fourth quarter, we earned total revenues of $313 million, once again beating our guidance range of $302.4 million to $304.4 million. Revenue increased by 14.1% compared to the previous year, exceeding our expectation of 10.6% growth at the midpoint of our guidance. Our quarterly performance reflected strong year-over-year growth across all 3 of our service lines and higher-than-expected volumes from both new and existing clients across a broad range of verticals. Full year 2025 revenue increased year-over-year by 19% to $1.184 billion, well above the top end of our guidance range of $1.175 billion. We ended the year with approximately 50% of our 200 clients delivering revenues in excess of $1 million. More importantly, we successfully executed on our strategy of increasing share among our largest clients. Here, we grew our $5 million-plus cohort to 41 clients, up from 38 last year and expanded our $10 million-plus client cohort to 21 compared to 17 in 2024. This performance underscores the importance of diversifying our revenues among many large clients and our ability to capture a greater share in these critical relationships. We continue to have a strong relationship with our largest client, which represents 26% of our total revenues in Q4 compared to 27% in…

Thank you, Balaji. Before we take questions, I want to take a moment to highlight another incredible TaskUs teammate story. At TaskUs, our ridiculous culture isn't confined to our sites. It lives and breathes in the passions of our teammates. Miles Nicole Gianan is a quality supervisor at our Lizzy's Watchtower site in Manila, Philippines. He's also the President of TUCLAS, the TaskUs Climbers Association. TUCLAS started with a simple belief, human well-being is deeply connected to the health of the natural world. What began as a group of teammates going for hikes quickly turned into a deeper responsibility to protect the trails and the communities they visited. These hikes evolved into powerful volunteer initiatives, cleanup drives expanded into donation cycles, tree planting and community outreach. In November, TUCLAS summitted Mount Pulag and in early 2026, completed a twin hike featuring trail cleanups and environmental workshops focused on sustainability. This organic movement is a shining example of TUgether We Serve, TaskUs' global campaign where our teammates contribute tens of thousands of hours to volunteer activities in the communities we support. On a personal level, I've been inspired by TUCLAS and recently completed an incredibly rewarding trail cleanup mission of my own. With my 3 young kids in tow, it was a memory that I will never forget. With that, I'll ask the operator to open the line for our question-and-answer session. Operator?

[Operator Instructions] Our first question will come from the line of Jonathan Lee from Guggenheim Partners.

Balaji, it's been a pleasure working with you over the years, wishing you the best and Trent, congratulations on the expanded role here. First, I want to talk through sort of the '26 outlook here. What's contemplated there across the low end and the high end? And how much go get is needed? And can you talk through the expected service line acceleration versus deceleration in the near to medium term?

Yes, Jonathan, thank you so much for the question. So as always, we try to put forth an outlook that we feel like we can deliver and exceed. And so as we look at the range here, one of the biggest factors is just getting a sense of where the largest client will go in 2026. As you know, we've been through periods of rapid expansion, as last year, we grew by 41% with our largest client. We've also been through periods where revenue has contracted there, which happened in 2023. And so we've been having conversations with them walking through plans to automate portions of their volume. Clearly, if those plans take effect in a more aggressive fashion that would drive us towards the low end. And if it takes longer, that would drive us towards the high end. The other component here is we're seeing increase in demand for AI Services, both from foundational model developers as well as in our autonomous vehicle and robotics segment. And so those growth rates have been very aggressive. As I mentioned on the call, we saw or we're forecasting that revenue from our AV and foundational model clients will more than double in 2026. And certainly, if we see an acceleration in those growth rates, we would be at or above the high end of the guidance range. From a service line perspective, we anticipate continued growth in AI Services and in our DCX line of business. The line of business that is probably at most -- under most pressure in 2026 due to automation is the Trust & Safety volumes that we have at our largest client. So all that to say that it's the beginning of the year, and we have a track record of setting fairly conservative guidance, and our intention is to go out and really drive towards the high end of what we provided today.

Bryce, just as a follow-up, can you help us understand the types of investments you're looking to make through the year and how you're thinking about layering in those costs over the course of the year?

Yes. So we're already underway to expand the team that's focused on our AI transformation. We built out a strong AI consulting organization that is actively deploying pilots and production versions of agentic AI instances to our clients in the customer service space. I gave an example on the call of a really successful implementation with a client in a regulated industry. So that's a large investment for us. We're also continuing to expand our investment in our internal technical team. We believe that we can drive material improvements in our support spending. Very encouraged by the increase in efficiency that we've seen in talent acquisition, where the AI agent that we launched in Q4 has increased our recruiters' ability to hire teammates by 50%. In 2026, we're looking to see similar gains across all of our support organizations from business intelligence, workforce management, quality, our internal help desks. And so we think that will help significantly with margin protection. And then lastly, we're really leaning into AI Services and the demand that we're seeing there from foundational model developers and the autonomous vehicle and robotics segments. And so we're making heavy investments in bringing in talent to lead the go-to-market and consultative functions in those areas.

Our next question will come from the line of Antonio Jaramillo from Morgan Stanley.

I wanted to first start on pricing. Where are you guys finding opportunities to push through pricing versus where are you guys getting some more pushback? And then this might have been, like, disclosed during the call, but how are you factoring pricing into your margin guidance?

Yes, Antonio, thanks for the call. The pricing environment is definitely dynamic at the moment. Given the slow rate of growth in the overall industry, there is more competitiveness in pricing really over the last, I'd say, 18 months than we've seen historically. With that being said, we feel like we're in a premium position, particularly in the services that we're offering in AI Services and some of the premium customer support services that we're offering. Our ability to go and continue to take share based on the quality of our operational delivery is part of what drove that growth story in 2025. Again, we know that there was a huge amount of growth driven from our largest client. But even in Q4, we saw the growth rate from all clients outside of our largest client accelerate again to 12.7% year-over-year. And so I think that's just a testament to the strong operational execution that's giving us an ability to continue to command a premium price. One thing that is weighing on the margins is a continued geo mix shift. So a lot of the work that we're going to be doing in the AI Services space is going to be done onshore. And so as a result of that growth, we tend to have lower margins in our onshore environments versus our offshore environments. And so as we contemplate 2026 revenue, we're seeing an uptick in revenue as a percentage or a percentage of overall revenue in our onshore environments versus our offshore environments like the Philippines and India, where gross margins tend to be higher. And so that's a factor that's weighing on margins, along with just our commitment to continue to invest more aggressively in our AI transformation.

Yes. That's helpful. And then as a follow-up, like good to see that you're going to see like your top 20 clients grow rev at 15%. Where are they trying to like lean into services across your portfolio?

Yes. So again, that stat is that if we exclude our largest client, we expect our top 20 clients, so the clients 2 through 20 to grow revenue 15% year-over-year in 2026, which is consistent with what we saw from that cohort in Q4 of 2025. Really, this is a combination of taking share from competition. We're seeing pretty aggressive vendor consolidation across our biggest customers. Again, here, our strong operational execution is a big part of that story. We're also seeing some exponential growth rates in clients in emerging industries. Here, our relationships with the foundational model developers and the leaders in the autonomous vehicle spaces are driving significant revenue growth. If we look at just clients in those 2 spaces, revenue will more than double in 2026 when compared to 2025. So that's some of the underlying dynamics in that top 20 cohort.

Our next question will come from the line of David Koning from Baird.

Good job. And I guess, my first question, if we think of the big undertaking of kind of shifting some of the work to different types, when we look out a couple of years, few years maybe, how much of the revenue base at that time will be similar to what it is today? And I guess I'm asking the question, because is what you're adding going to be incremental to what you do today and you'll continue to do a lot of the same things? Or is a lot of it going to replace given your expectation that some of the revenue today will go away? I'm just kind of thinking through the mix of business, how it changes and how that churns.

Dave, thanks for the question. So historically, our industry and our business has seen consistent trends of automation and reinvention. And if I think back to when we started TaskUs, the first few clients we had were doing things like transcribing voice mail messages or transcribing receipts, things that have been automated for well over a decade now. And we've been able to grow the business by discovering emergent forms of demand and then going into those forms of demand and developing a real expertise. And so, I'd say that what we're seeing today with all of the excitement around AI is very similar to what we've seen in the past, but just at an accelerated pace. So we're fully aware that the current trend will lead to automation of simple customer service volumes. We're very lucky that most of the customer service work that we're embarking upon doing, we're doing at the moment is, our premium volumes where our clients have been certainly, in some cases, resistant to automating in other cases, actually interested in increasing their investment in these types as they automate simple work types. But I'd say if we look forward a few years to what our customer experience business will look like, it really is going to be that technology plus talent solution-based business. We're going to see our business evolve away from charging for hours to actually charging for outcomes where TaskUs owns the end-to-end experience, whether it's solved by an AI agent or a human expert. If I think about areas where we've got real tailwinds, our AI Services business, which has been the fastest-growing service line for TaskUs for more than 5 quarters and will continue to be our fastest-growing service line as we go into 2026 is a real success story. Because whether it's our foundational model developers, our social media clients or emerging new forms of demand in autonomous vehicles and robotics, we're just seeing huge amounts of demand for data collection, data annotation, evals and other forms of work that are needed to make those endeavors function. And so I think we're going to see that business continue to scale and become a bigger and bigger portion of what we do. I'd say the Trust & Safety business will continue to endure, but this is a business which I think will probably have the lowest growth rate in 2026, given the impact that automation is likely to have on some of those core content moderation volumes. So as we think about where the business will be in 3-plus years' time, I think we'll continue to see DCX transform into being a combination of technology and talent and the AI Services business continue to grow exponentially.

Yes. All makes sense. And my follow-up, just thinking about interest expense, it seems like there's 2 cash outflows, one being the $333 million dividend. But then it looked in the press release that there was $160 million non-recurring litigation payment that might be made as well. And just putting that in context with the new debt, just is interest expense going to be like $40 million or so going forward? Or how do we think of that?

So, Dave, thanks for the question. So in terms of the interest expense, like we called out today, it's going to be SOFR plus 2.75% from an interest cost perspective. And in terms of the -- just a reconciliation in terms of what we're going to be getting is like we will have about $100 million of revolver and about $500 million of new term loan that we're going to be getting. And then about $333 million will be paid out as a dividend. And then just in terms of amortization, what is going to happen is that, we do have a payment holiday starting -- and we'll start paying about Q3 of 2026, then about 5% annually for the first 3 years and then about 7.5% in year 4 and 10% in year 5. And then in terms of interest cost, you're right. That's about approximately what that would be at SOFR plus 2.75%.

Our next question will come from the line of Puneet Jain from JPMorgan.

So this year's guidance implies like flat to modest positive growth by this year-end. And I know you talked about like headwinds at large client, which will impact growth rates. Is there a way to think about like how much of the existing book of business has exposure to AI-related automation similar to what you expect for the large client? And how much of would have happened by the year-end?

Yes. Thank you, Puneet. So obviously, we're not providing quarterly breakdowns of what the rest of the year is going to look like, but our intention is to continue to drive year-over-year revenue growth for every quarter of the year, and the team is obviously working very hard to do that. There -- we understand the concern around AI-related exposure in our business. And clearly, there's been quite a lot of concern about this in really all service businesses off late. What we would say is we continue to see clients lean into automating simple, repeatable work types, and we certainly have been part of that solution in our Agentic AI consulting practice, where we're able to automate a significant portion of inbound calls, e-mails, chats that are fairly simple. But many of these clients are also reinvesting a portion of that savings in improving their customer experience through human interactions for premium customers or in critical care situations. And so we're benefiting from growth across many of our clients. In fact, in -- amongst most of our largest customer experience clients revenue has grown in 2025, and we expect it to grow again in 2026. And so while there is automation taking place, in general, we continue to benefit from growth in industries that I think people felt were kind of squarely at the bull's eye of AI-related automation. In the medium term, we want to be part of the solution. And so growing our agentic AI consulting practice, expanding our AI Services business is going to be part of reinventing TaskUs into the future service provider that we will become. And ultimately, we see ourselves as evolving from being mostly an hourly-based service into an outcome-based solution where people can come and purchase a combination of technology and talent to deliver for their clients.

Got it. And there has been like a lot of news flow around AI, agentic AI over the last few weeks. Are you seeing like your clients respond to all that news flow with a new sense of urgency? Like is there any change in client behavior as all this news around Anthropic and stuff? Like has that changed your clients' behavior in terms of the speed at which they are moving and trying to embrace some of those AI solutions at all?

It certainly has increased excitement. And amongst our clients, we're working actively to leverage that excitement into pilots and production versions of the AI agents that we are selling to customers in partnership with Decagon and with Regal. And also continue to expand our AI Services business, where we're seeing AI winners, foundational model developers, robotics companies, autonomous vehicle companies continue to spend more and more on data collection, data annotation and evals that are necessary to build out their models. As far as the recent news and some of the agents that have been published in the last month or so, I'd say that most of our clients are still in a discovery phase. It's one thing to deploy AI agents as a consumer. It's a very different thing to think about deploying end-to-end autonomous agents into an enterprise environment. So there are security concerns and legal concerns that clients have that I think will make that type of adoption a bit slower. But certainly, it's on the road map for most of our clients. It's something that we expect to see over the medium term.

I agree. Bryce, I just wanted to follow up on one of the questions that Dave had on the cash flows. So David, just to clarify, the $160 million is net cash from operating activities that we're expecting for 2026, and that excludes any litigation payment that may happen. So that's the $160 million is actually the cash -- operating cash that we are planning for 2026, just to clarify.

Our next question will come from the line of Maggie Nolan from William Blair.

The AI Services, obviously, that's really robust growth, and it sounded like it was a substantial portion of the bookings as well. How sustainable do you view this level of growth? And how big do you think this segment could become in the next couple of years?

Bryce maybe -- you maybe on mute.

Can you guys hear me?

Yes.

Okay. Sorry, did not of my answer come through?

No, Bryce. I did not hear any...

Okay. Great. Sorry about that. Well, it was a brilliant answer, Maggie. I'll do my best to recreate it. So what I was saying about AI Services was, this is certainly the segment that we're the most excited about. When we think about the growth rate that it drove in 2025 and what we expect it to drive in 2026, we're seeing demand from foundational model developers, autonomous vehicle companies and robotics companies, all of which have healthy amounts of funding to spend on continuing to refine and improve their models through the type of work that we're doing, both in data collection, data annotation and in evals. The one call out I would make is that AI Services tends to be more project-based in nature. And there is -- there are some work that we are doing for clients in the social media space that could make revenue growth rates inside the service line choppy at times. With all that being said, we expect AI Services to be our fastest-growing service line in 2026 overall, and it continues to be what we're most excited about in terms of driving growth in the business over the medium term.

Okay. Great. And then on the top clients, I mean, obviously, there's a concentration there in your revenue and they're able to probably move, I would assume, faster than maybe other clients in terms of things like, in the past it's been offshoring, now it's automation, those types of things. Can you maybe help us understand how you're assessing the potential for similar things to happen across your client portfolio versus the specific relationship and concentration that you have with that top client?

Yes. So first, in terms of the relationship with the top client, it remains very strong. We're one of their core vendors, and we anticipate that over the medium term, we will see vendor consolidation that will benefit TaskUs. As I said earlier, we go through periods of expansion and contraction with our largest client. Last year, revenue grew by 41%. We saw a contraction in 2023 of about 17%. And so as we head into 2026 and they are successfully investing in automating Trust & Safety volumes, we expect revenues to contract somewhat in this year. But as we look out to 2027 and beyond, we believe that we can get back to growth in that relationship. As far as the other clients go, it is true that our largest client is very technically advanced and deploying models aggressively. But the same is true for many, if not most of our clients. We focused historically on high-growth technology businesses, and so these businesses are on the forefront of automation. And despite that, if we look at clients # 2 through 20, we're seeing a forecast for 2026 of about 15% revenue growth. And that's due to vendor consolidation. It's due to us working with these clients through our agentic AI consulting practice to embed solutions that combine technology and talent and just overall strong execution. So I wouldn't say that what's happening at our largest client is a forecast for what's to come in other clients. If anything, I actually think over the medium term, we are in a position to get back to growth with our largest customer and sustain the growth that we're seeing with other large clients.

And with that, this will conclude today's conference call. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.