TaskUs, Inc. Class A Common Stock 2026 Q2 Earnings Call

Trent, please go ahead. Hello, everyone, and thank you for joining us for today's TaskUs earnings call.

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 our 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. Before we start, I would like to remind you that the following discussions contain forward-looking statements within the meaning of the 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.

For details on the uncertainties and other factors that may cause our actual results to be materially different than those expressed in our forward-looking statements, see the risk factors section of our most recent annual report on Form 10-K, our quarterly reports on Form 10-Q, and other documents filed with or furnished to the SEC. These filings, which may be supplemented with subsequent periodic reports, are accessible on the SEC's website and our investor relations website. 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. The 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. 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.

Before we dive into the quarter, I want to take a moment to warmly welcome Rishabh Khemka, our new Chief Financial Officer, to his first TaskUs earnings call. Rishab brings an extraordinary track record of financial leadership, operational excellence, and disciplined growth across dynamic technology and service companies. He's hit the ground running and has already made an impact on our business in less than two months on the job. We're thrilled to have Rishab on board, and I know he looks forward to partnering with many of you on today's call. In the second quarter, we again delivered solid performance, generating $308.9 million in revenue, which outperformed the top end of our revenue guidance by $10.9 million, or 3.6%.

Our year-over-year revenue growth rate at 5% helped us generate $57.7 million in adjusted EBITDA or an adjusted EBITDA margin of 18.7%. This was 70 basis points ahead of our margin guidance, and on a dollar basis, it was 7.5% ahead of the adjusted EBITDA implied by the top end of our Q2 revenue guidance. Our business's ability to generate cash was on full display in Q2. We delivered $36.4 million in adjusted free cash flow, bringing our cash balance to $180.3 million. This brought our net leverage ratio down under 1.3 times, giving us a very strong balance sheet with ample liquidity to continue to invest in our AI and growth initiatives. Those investments are paying off. In Q2, we maintained our strong momentum by capitalizing on our biggest growth opportunities in AI Services and AI-enabled Digital Customer Experience.

Our Q2 performance underscores the resilience of our business in the AI era and reinforces our conviction in the strength of our client partnerships and the quality of TaskUs' team and solutions. We remain laser-focused on our long-term goal to increase revenue, EBITDA, and earnings per share over a multiyear horizon at rates that are among the best in the industry. Next, I'll provide some highlights from Q2, along with an update on our 2026 outlook. I'll hand it over to Rishab to walk through our financials in more detail. Again, Q2 revenue was $308.9 million, an increase of 5% on a year-over-year basis. As expected, revenue from our largest client declined by approximately 22% compared to Q2 of 2025.

This decline was more than offset by growth from other clients, resulting in revenue concentration from our top client of 20% in Q2 compared to 26% in Q2 of 2025. As we shared in Q1, revenue in the second half of 2026 will reflect additional headwinds from our largest client's automation and cost optimization efforts. However, our relationship with our largest client remains strong. Thanks to our high-quality delivery and proven agility in adapting to their evolving strategic priorities, TaskUs is positioned to benefit as this client consolidates vendors over the medium term. I'm very proud to report that outside our largest client, performance across the rest of our business was once again very strong. If we exclude our largest client, revenue in the rest of our business grew approximately 15% year-over-year in the quarter.

The primary engine behind this was our second through 20th largest client cohort, which grew approximately 30% on a year-over-year basis in Q2. Notably, these growth rates that exclude the impact of our largest client all accelerated when compared to Q1. Our sales and client service teams carried their momentum into the second quarter, delivering another solid performance. Q2 was once again defined by the expansion of our established partnerships with more than 50% of signings coming from existing clients. Following exceptionally strong onshore signings in our AI service offering in the first quarter, Q2 returned to a more normalized mix with heavier offshore delivery. Next, let's look at our service line performance for the quarter in more detail. Digital Customer Experience delivered $175.7 million in revenue, representing year-over-year growth of 6.4%.

DCX growth was primarily driven by clients in our mobility, logistics and travel, technology, healthcare, retail and e-commerce, and entertainment and gaming verticals. We expect DCX growth in the mid to high single digits for 2026, with growth rates likely to accelerate in the back half. It's important that we pause and highlight this. In the face of countless market headlines predicting that BPO customer care would all be automated, our customer care business is growing at an accelerating rate. Our success is based on our two-part approach. We're using AI to support the automation of simpler customer contacts while leveraging our talented teammates for premium human-led customer interactions. The accelerating growth of our DCX business in the AI era shows that our strategy is paying off. The future of customer care is combining AI technology with human talent to deliver better customer experiences.

Finally, I'll note that our investment in healthcare is also delivering results. During Q2, we're pleased to be named to Everest Group's Healthcare Customer Experience Management Intelligent Operations PEAK Matrix® Assessment for 2026. Turning to Trust & Safety, we generated $67.1 million in revenue, a decline of approximately 12.3% year-over-year. This was primarily driven by declining revenue from our clients in our social media vertical, partially offset by growth in our technology and financial service verticals. As we previously shared, as our largest social media clients invest in automating content moderation, we expect our Trust & Safety revenue to continue to decline year-over-year during the back half of 2026. We remain optimistic that these declines will stabilize in 2027 as we continue to support complex Trust & Safety workloads and benefit from vendor consolidation at our largest client. Moving on to AI Services.

This specialized service offering continues to be our fast-growing service line, with revenue increasing 26% year-over-year to $66.1 million. Here, our strong growth was primarily attributable to our ongoing ramp of clients in our mobility, logistics, and travel vertical, including clients in the autonomous vehicle, autonomous delivery, and robotics industries. This exceptional performance was partially offset by reductions in revenue in our social media vertical, driven by the end of certain AI automation projects at our largest client and other social media clients. From an AI Services signings perspective, we saw strength in our technology and social media verticals during Q2. Given our results, we continue to believe our investments in our AI service offerings focused on the world's leading foundational models, hyperscalers and autonomous vehicle, autonomous delivery, and robotics companies are paying dividends.