TaskUs, Inc. (NASDAQ:TASK) Q1 2024 Earnings Call Transcript

TaskUs, Inc. (NASDAQ:TASK) Q1 2024 Earnings Call Transcript May 9, 2024

TaskUs, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon and welcome to the TaskUs’ First Quarter 2024 Investor Call. My name is Daniel and I will be your conference facilitator today. At this time, all participants have been placed on mute to avoid background noise. After the speakers’ remarks, there will be a question-and-answer period. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to introduce Trent Thrash, Senior Vice President of Corporate Development and Investor Relations. Trent, you may begin.

Trent Thrash: Good afternoon and thank you for joining us for the TaskUs first quarter 2024 earnings call. Joining me on today’s call are Bryce Maddock, our Co-Founder and Chief Executive Officer and Balaji Zucker, 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 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. Please note that 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 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. Factors that could cause actual results to differ from these forward-looking statements can be found on our Annual Report on Form 10-K, which was filed with the SEC on March 8th of 2024. This filing, which may be supplemented with subsequent periodic reports we filed with the SEC, is available 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 following discussion contains 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?

Bryce Maddock: Thank you, Trent. Good afternoon, everyone and thank you for joining us. In the first quarter, we outperformed the top end of both our revenue and adjusted EBITDA guidance. We generated $227.5 million in revenue, approximately $3 million above the top end of our guidance of $224.5 million. We delivered $50.6 million of adjusted EBITDA for an adjusted EBITDA margin of 22.2%, also above our guidance of 22%. I’m very happy to announce that we now expect to return to year-over-year revenue growth in the second quarter and we expect our growth rate to accelerate in each subsequent quarter this year. We updated our annual revenue guidance and now expect to grow annual revenue year-over-year at any point in the guidance range.

I’m also very pleased with our team’s financial discipline, which is focused on balancing cash flow generation with our investments in sales, marketing and technology, including our Generative AI initiatives. As a result, we generated strong free cash flow in the first quarter of 2024, putting us on track to deliver on our full-year free cash flow guidance of $120 million to $130 million. Next, I’ll spend time going through some of the highlights of our Q1 performance. Balaji will then walk through our Q1 financials, our Q2 outlook and our increased full-year 2024 guidance. Q1 revenue was $227.5 million, a decline of 3.3% on a year-over-year basis, but $4 million ahead of the midpoint of our guidance. The 2.9% sequential quarterly decline was reflective of an anticipated decline in seasonal revenue discussed during our Q4 2023 call, which was partially offset by better-than-expected performance by our top 20 clients during the quarter.

In terms of delivery geographies, revenue from U.S. delivery declined 45% in Q1 year-over-year. As a result, U.S. revenue is now approximately 11% of total revenue, continuing to migrate towards our long-term view that approximately 10% of revenue will be delivered from the U.S. Revenue for all other geographies grew by approximately 7%, demonstrating the strength of our offshore business. Q1 again saw a rapid growth in Latin America with revenue from the region growing by more than 50% year-over-year. We ended the quarter with approximately 490,600 global teammates, an increase of approximately 1,400 teammates from the end of 2023. On the heels of a strong sales performance in Q4, our sales and client services teams have continued to deliver in the face of an unpredictable macroenvironment.

In Q1, sales were again, largely driven by bookings from existing clients, which accounted for approximately 72% of total new signings. We’re encouraged by the size, quality and depth of pipeline opportunities across our service lines from both new and existing clients. During Q1, we also continued to make progress on our strategic goal of cross-selling our suite of specialized services to our client base. The number of clients using more than one of our specialized services increased by more than 20% year-over-year. We also continued expanding our presence in new markets, including adding notable use cases for enterprise clients in the banking and financial services industry, as well as with fast-growing technology clients in the professional services, travel and transportation and social media verticals.

Shifting focus to our service lines. In Q1 of 2024, digital customer experience revenue declined 8.7%, compared with Q1 of 2023. Here, we saw expansions with existing clients and new client revenue, but both of those were more than offset by a decline in revenues from the cost optimization initiatives we discussed on prior calls. In terms of DCX signings in Q1, we saw strength in bookings in our on-demand travel and transportation and non-crypto FinTech verticals. Additionally, we were pleased to see the Q4 momentum in sales and customer acquisition services carry over into Q1 with wins in multiple client verticals, including a large contract signing with a new client that provides technology-enabled legal solutions. We signed a new DCX contract leveraging the capabilities of our teammates from the heloo acquisition to support another European-based financial services client.

heloo also signed contracts to support a pan-European job search application and a provider of digital parking services in Q1. Lastly, as a result of our strong relationship with a leading food delivery client, we signed multiple new DCX contracts to support their vendors and customers from our Colombia operations. Turning to trust and safety, which includes our risk and response solutions, revenue growth in this specialized service offering again, accelerated, increasing by 36% compared with Q1 of 2023 and 5.8% quarter-over-quarter. Q1’s rate of growth exceeded Q4’s solid 24%. This broad-based growth was largely driven by seven clients with increases in excess of $1 million, including the continued strong growth of our largest client from a large on-demand travel and transportation client, and from certain clients in the FinTech market.

During Q1, our risk and response teams, which deliver financial, compliance, risk and fraud detection services, once again, delivered revenue growth that was accretive to the overall growth of the trust and safety service line. In Q1, we were honored to be recognized as a leader in the Everest Group’s trust and Safety Services PEAK Matrix for the second consecutive year, as well as their Financial Crime and Compliance Operations Services PEAK Matrix for the first time. When combined with our Q1 recognition as a leader in their data annotation and labeling solutions for AI PEAK Matrix, TaskUs is now the only company to achieve a leader recognition in all three specialized service offering categories. From a sales perspective, demand for all of our trust and safety services continues to grow.

Similar to recent quarters, we saw strong growth in the number of clients using our trust and safety service line. Notably, we signed a meaningful expansion of our relationship with our largest client in Q1, increasing the scope of both our content moderation, and risk and response services. We also added additional work providing pre-sanctioned streaming services to a provider of card issuing and payment solutions. As a new client in 2023, this revenue expansion is a testament to the quality performance our teammates consistently deliver on behalf of our clients. Moving on to AI Services, revenues declined approximately $8.9 million or 23.6%, compared to Q1 of 2023. AIS revenue continued to be impacted by declines at our largest overall client and our largest autonomous vehicle client.

We continue to see strong sales momentum for our AI service work, including at our largest client, where we signed multiple new AI projects this quarter. Additionally, we signed a contract to support our largest autonomous vehicle client’s expansion of their operations in Texas. As discussed in our Q4 call, we still anticipate AI service revenue from these two clients and AI services in general to stabilize over the course of 2024 as difficult comparisons lapse and recent signings continue to ramp. Before moving on to our updated 2024 outlook, I want to provide a brief update on our generative AI initiatives. We believe these technologies have the potential to be incredibly powerful when properly trained, maintained and integrated into our clients’ operations.

TaskUs is well positioned to help clients leverage genAI and other automation technologies across their customer experience. Some of this work will automate services we currently deliver, while other aspects of it will increase demand for our specialized services. To date, we have not experienced any material impact on our revenues from clients directly leveraging genAI to automate processes we currently support. Meanwhile, the development and maintenance of these technologies have increased demand for our specialized services. Today, we deliver services across all three of our service lines for genAI industry leaders. We’re playing often supporting our clients’ automation efforts, while capturing a larger and larger share of the demand for the specialized services that support and protect their use of GenAI.

We’re pleased with the results we’ve seen since making our taskGPT-based knowledge co-pilot, AssistAI freely available to all TaskUs clients. After being trained on our clients’ knowledge bases by our GenAI engineering team, these early use cases have demonstrated measurable improvements in our teammates’ efficiency and quality. In summary, GenAI is going to have a transformative impact on our business in the years to come. We believe it creates significant opportunities for us and that these opportunities will more than make up for the impact of successful automation efforts. While the details are ever-evolving, our core value proposition of delivering a well-trained combination of technology, talent and global delivery capabilities remains the same.

Before handing it over to Balaji to provide more details about our Q1 results, I want to touch briefly on our 2024 outlook. In light of our year-to-date achievements, positive sales momentum and our cautiously-optimistic outlook for the remainder of 2024, we’re increasing the low end of our full-year revenue guidance from $900 million to $925 million and maintained the top end of our outlook at $950 million. This represents a $25 million increase to the lower end of our guidance and a $12.5 million increase in our midpoint, up from $925 million to $937.5 million. Our updated guidance implies a return to annual revenue growth at any point in the range. To support our return to growth, we’re accelerating our investments in sales and marketing, technology and the capacity and infrastructure needed to deliver on this increased demand.

Despite these investments, we’re maintaining our adjusted EBITDA margin guidance of 22% to 23% and free cash flow guidance of $120 million to $130 million for the full year. We remain focused on executing against our strategic initiatives and investing for growth, while remaining diligent about our cost structure in order to maximize cash flow and drive value for shareholders. With that, I’ll hand it over to Balaji to go through the Q1 financials and our 2024 outlook in more detail.

Balaji Sekar: Thank you, Bryce and good afternoon, everyone. I’m going to discuss our financial results for the first quarter of 2024. Please note that some of these items are non-GAAP measures and the relevant reconciliations are attached to the press release we issued earlier today. In the first quarter, we earned total revenues of $227.5 million, once again, beating our guidance range of $222.5 million to $224.5 million. Revenues decreased by 3.3% compared to the previous year. We outperformed our guidance as a result of new client ramps and existing client volumes, both of which came in stronger than we expected. In the first quarter, our DCX service offering generated $143.5 million for a year-over-year decline of 8.7%.

As Bryce covered earlier, the decline was primarily from certain client cost optimization initiatives, including the Q1 2023 project rundowns from our largest client and the U.S. client, who lost a large contract, both of which we previously discussed in Q1 of 2023. This was partially offset by expansions with existing clients and new clients signing ramps. Our trust and safety business, which includes our risk and response solutions, grew by 36.1%, compared to Q1 of 2023, resulting in $55.3 million of revenue. As we pointed out earlier, we are excited about the fairly broad-based progress in the service line, which included Q1 growth from new and existing clients across our on-demand travel and transportation, social media and FinTech verticals.

Our AI Services business declined by 23.6% year-over-year for revenues of $28.7 million due to contractions at our largest client and our largest autonomous vehicle client. We expect revenues from this service line to stabilize over the course of 2024, as we lap the difficult comparisons resulting from client-driven cost optimization programs in 2023 and as recent signings continue to ramp. Our client base has continued to diversify in Q1. Our revenue concentration with our largest client was approximately 19%, down from 20% in Q1 2023. Despite the prior year’s optimization efforts, we saw revenue from our top clients stabilize beginning Q2 of 2023 and we expect to grow revenues with this client this year. Our top 10 and top 20 clients accounted for 56% and 67% respectively, down from 58% and 71% in Q1 of last year.

We continue to see strength from our clients outside of our top 20, which grew 7% year-over-year. In the first quarter, we generated 58% of our revenues in the Philippines, 11% in the United States, 13% in India and 18% from the rest of the world. We saw particularly strong year-over-year growth in excess of 50% in Latin America. For the full-year 2024, we now expect to see year-over-year revenue growth in all of our delivering geographies with the exception of United States. Our cost of service as a percentage of revenue was 59.5% in the first quarter compared to 58.5% in Q1 of the prior year. The increase was due to typical wage and benefits cost inflation, as well as the net impact of the weaker dollar compared with Q1 of 2023 in Latin America, partially offset by the gains from operational cost efficiency and geographic mix shift.

In the first quarter, our SG&A expenses were $52.9 million or 23.3% of revenue. This compares to SG&A in Q1 of 2023 of $64.3 million or a 27.3% of revenue. Earn-out consideration and stock compensation expenses reduced $6.6 million and $3 million respectively, compared to the previous year. In the first quarter of 2024, we earned adjusted EBITDA of $50.6 million or 22.2% margin, compared to $55 million and 23.4% in the previous year. Adjusted net income for the quarter was $27.3 million and adjusted earnings per share was $0.30. By comparison, in the year-ago period, we earned adjusted net income of $32.5 million and adjusted EPS of $0.32. The reductions in adjusted EBITDA and adjusted net income were primarily driven by the impact of lower revenue, wage and benefits compensation, net Forex impact and investments in strategic growth areas, which were partially offset by our G&A cost optimization initiatives.

Now, moving on to the balance sheet, cash and cash equivalents were $165.4 million as of March 31st, 2024, compared with December 31st, 2023 balance of $125.8 million. In the quarter, we bought back approximately 300,000 shares at an average price of $11.91. And as of quarter end, we had approximately $53.9 million of authorization left on our plan. Our net leverage ratio continues to be healthy and was 0.4 times as of the quarter end. Cash generated from operations was $51.2 million for the first quarter of 2024 as compared to $43.7 million in Q1 of 2023. Our capital expenditure decreased in the first quarter of 2024 to $3.6 million compared to $5.2 million in Q1 of 2023. As Bryce mentioned, the strength of our anticipated client ramps will drive an increase in investments during the remainder of 2024.

As a result, we now expect CapEx to be approximately $39 million for the year. Free cash flow was $47.6 million or 94.1% of adjusted EBITDA for the quarter. Our strong cash flow performance in Q1 was primarily the result of working capital decrease associated with the drop in revenue from Q4 to Q1, and a strong collections activity and low capital expenditures. For the remainder of 2024, we expect lower free cash flow conversion due to increased capital expenditures and the buildup of working capital associated with our return to revenue growth. In terms of our financial outlook for the remainder of the year, we now anticipate full-year 2024 total revenues to be in the range of $925 million to $950 million. Consistent with Q1, we expect to earn full-year 2024 adjusted EBITDA margin of between 22% and 23%.

Including the additional investments supporting our improved outlook, we are maintaining our free cash flow guidance between $120 million and $130 million at any point in our guidance range. This implies a conversion rate of over 50% from adjusted EBITDA, a great demonstration of our financial discipline. For the second quarter, we expect revenues to be in the range of $230 million to $232 million. And we expect our adjusted EBITDA margin to be between 22% and 22.5% for the quarter. The adjusted EBITDA margin guidance for the second quarter and full year is based on current Forex rates. So, any change to currency rates would impact our margins. As a reminder, the majority of our revenue is built and collected in U.S. dollars. So, we do not see the impact of U.S. dollar fluctuations in our revenues.

Also, please note that our free cash flow guidance excludes the impact of certain litigation costs, which are non-recurring and outside the ordinary course of business. In Q1, we have and we will continue to add back these costs to our adjusted EBITDA. While new material this quarter, we anticipate these expenses will increase as we progress further into 2024. I will now hand it back to Bryce.

Bryce Maddock: Thank you, Balaji. Before we open for questions, I’d like to share another TaskUs teammate story. John Raleigh de Guzman [ph] has been navigating life with cerebral palsy since birth. Cerebral palsy affects movement and muscle tone, and makes everyday mobility very challenging for Raleigh, who relies on crutches to get around. As a Tier 2 dispute teammate supporting a FinTech campaign, Raleigh is responsible for providing timely resolutions to escalated customer complaints. Leveraging his comprehensive understanding of the dispute process and strong customer service skills, he recommends solutions and solves customer problems with each interaction. Raleigh says that his work at TaskUs is more than just a job. It’s a source of purpose and fulfillment.

He is an active member of the TaskUs community in Bulacan, Philippines, where his site is located. On a recent visit to the site, his colleague shared with me how impressive he is. He never makes excuses, shows up to work early and always delivers for our customers. Raleigh embodies our core value inspire others by believing in yourself. His story is just one example of the positive impact TaskUs on people and communities all around the world. With that, I’ll ask the operator to open our line for our question-and-answer session. Operator?

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Jonathan Lee with Guggenheim Partners. Your line is now open.

Jonathan Lee: Brilliant. thanks for taking our questions and good to see the earlier inflection expectations here. Bryce, what’s contemplated in your outlook from a macroeconomic perspective and across your solutions here?

Bryce Maddock: I think, we’re taking an appropriately cautious stance when we look at the macroeconomic conditions across the rest of the year. Some of you would have undoubtedly seen that a number of our clients have had slower-than-expected growth rates announced in their own earnings calls. That’s not a surprise to us. The vast majority of our largest clients continue to grow revenue and contact volumes year-over-year and that’s reflected in the updated guidance. So, we’re cautiously optimistic. but we’re aware that there is a risk in the macroeconomic environment and that’s been factored in.

Jonathan Lee: Got it. appreciate the color there. And just a follow-up, can you talk about any sort of evolution you’ve seen in the demand environment through the quarter start of the year and how your customer conversations have trended since the start of this quarter?

Bryce Maddock: Yes. It’s accelerated. The demand environment last year was challenging with delayed decision-making and a real focus on cost reduction. What we’ve seen thus far this year is both acceleration in new client sales and expansions amongst our broad base of existing clients. If we focus just on our largest clients, our largest client is back to growth year-over-year this year. But in fact, if you look at our top five clients, we expect four of our top five clients will increase revenue in 2024 when compared to 2023 and some of those are back in double-digit growth rates. So, we’re seeing just a quite a broad-based increase in demand for our services from both new and existing clients.

Jonathan Lee: Thanks for that color.

Bryce Maddock: Thanks, Jonathan.

Operator: Thank you. One moment for our next question. our next question comes from Maggie Nolan with William Blair. Your line is now open.

Maggie Nolan: Thank you. Maybe, to dig into that a little bit further, is it trust and safety that’s driving the better outlook for Q2 and beyond? Is it a particular client perhaps better traction with your top client that you spoke of? And then what level of visibility and confidence do you have into this trend continuing into the second quarter and the second half of the year that allowed you to raise the bottom end of guidance?

Bryce Maddock: Yes. So obviously, trust and safety is really the shining star amongst our service lines at the moment. We’ve seen an increase in demand for content moderation services amongst our social and dating clients. We’ve seen an increase in demand for our risk and response services amongst both FinTech and enterprise financial service clients. And we’re also seeing a lot of new demand from generative AI clients to help secure their models. So, there’s a fair amount of that growth for the rest of the year will come from trust and safety. We’re also expecting the declines in digital customer experience at AI Services to moderate. In particular on AI Services, we’ve got some very challenging comps when we look at 2023 just given the onshore-to-offshore shifts that we saw at our largest AI Services clients.

But the number of projects that we’re working on in AI Services continues to increase both year-over-year and sequentially. And the demand for this looks like it will help to slowly decline to get us back to growth by the end of the year. As far as visibility goes, we’ve proven that an ability to very accurately forecast and in all cases beat the revenue guidance we provide on a quarterly basis. That’s just given the strong client conversations and contractual commitments that we have from our clients. And when we look at the back half of the year, we’ve had conversations with many of our largest clients. We are actively selling new locations and new services. and so, that gives us confidence that we’ll be able to deliver on this guidance.

Maggie Nolan: Okay. Thank you. And then you talked a couple of times in the script about incremental investments, I’m assuming to prepare for this incremental revenue that’s coming, and that would likely primarily be headcount additions. Help me understand what this means for margins. Does that mean that margins are a little bit more compressed in Q2 and you start to see some leverage in the back half of the year? Or does that mean that margins look better more like in 2025 as you get some of those investments in here in the near term?

Bryce Maddock: Yes. I’ll have Balaji add color here. but let me just provide 30,000 foot perspective. At the start of this year, we made a decision that we were going to play offense. We were going to go out and hire sales and marketing leaders, and continue to invest in our generative AI initiatives by expanding our technology team. And those investments are beginning to pay off with our return to growth and our expectation of accelerating growth rates over the course of the rest of the year. When we consider sort of just that level of investment, there’s naturally going to be some downward pressure on our margins. But we expect to maintain best-in-class margins and we would expect that the margins would expand as we get back to a state of growth into 2025. Balaji, do you want to add color on that?

Balaji Sekar: Yes. And thanks, Bryce. And so, Maggie, from a like just to reiterate what Bryce said is from an investment perspective, we’re continuing to invest in strategic growth areas within sales, marketing and technology. And like you mentioned, to support the revision in the revenue guidance that we’re providing right now, we are going to be investing in facilities, and we’ll also be incurring certain ramp costs to deliver those revenues. So, both of those are baked into the forecast that we are providing today. So, from an adjusted EBITDA perspective, the full year would be somewhere between 22% to 23%. So, that’s unchanged from what we gave last time. And for Q2, we would be somewhere between 22% to 22.5%. So, what is going to happen from a cannibalization in the back half of the year, I would expect Q3 to be the highest quarter from an EBITDA perspective, EBITDA percentage.

And then Q4 now will incur some additional seasonal costs that we typically incur every year. So, that’s how the cannibalization is going to be looking from a margin perspective.

Maggie Nolan: Very helpful. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from Ryan Potter with Citi. Your line is now open.

Ryan Potter: Hey. thanks for taking my question and good results here. I want to start on GenAI. How has client adoption of offerings like TaskGPT and AssistAI look so far? And instances where clients are leveraging these tools, have they been able to see tangible benefits? And have you also seen some tangible benefits or share shifts yet from these tools?

Bryce Maddock: Yes. Thanks for the question, Ryan. So, we’re continuing to have success deploying GenAI into our customers through the TaskGPT platform and our AssistAI offering, which we’re offering to all of our TaskUs clients free of charge. That offering has seen a steady increase in demand. I would say that more generally, we have seen a number of clients deploy Generative AI themselves in various ways. Some of these initiatives have driven modest efficiency increases. but I would classify most of the work that we’ve seen from our clients as in the experimental stage at this phase. And so, we have not yet seen any material impact to revenue as a result of clients deploying generative AI and automating volumes. But we have seen an uptick in demand for our genAI-related services, whether that’s trust and safety or AI services to support those models.

So, we fully expect that we will see an increase in efficiency gains, both from TaskGPT and our AssistAI platform, as well as from our clients’ own initiatives. But we continue to expect that those will be exceeded by the gains that we get from selling genAI services to our customers.

Ryan Potter: Got it. That makes sense. And then on headcount, it was nice and a surprise, honestly, to see the sequential headcount growth following the seasonal headcount drop than they usually see from 4Q to 1Q. So, were you able to staff some of the seasonal account kind of better than expected? And then just in terms of the headcount growth, where are you adding the most headcount currently across your geos and service lines? And should we expect the sequential headcount growth to continue through the rest of the year?

Bryce Maddock: Yes. Given the more robust demand that we saw in Q1, we were able to retain many of our seasonal staff and move them on to new programs successfully. The overall talent environment remains competitive, but not as competitive as it was in 2021 and 2022. We saw increases in headcount in a number of different geographies. We’ve seen very robust growth in Latin America, and both Colombia and Mexico. We’ve got strong growth in the Philippines and in Europe. And so, we would expect in those regions a continuation of this kind of headcount growth and perhaps even an acceleration in places like Europe and the Philippines into the back half of the year.

Ryan Potter: Great. Thanks, again.

Bryce Maddock: Yes. Thanks, Ryan.

Operator: Thank you. [Operator Instructions] Our next question comes from Cassie Chan with Bank of America. Your line is now open.

Cassie Chan: Hey, guys. Thanks for taking my question. First, I just wanted to ask, obviously, you guys just piggybacking off of the LatAm growth of the greater than 50%. How big is that geo relative to some of the others sitting in rest of world? And I’ll just stop there for my third question.

Bryce Maddock: Yes. So, the region is relatively recent for us. We only entered Colombia in the last couple of years and we entered Mexico in the last five years, I believe. But we’re talking about a region that’s on its way to triple-digit millions in revenue and growing at 40% to 50% year-over-year growth rates. So, obviously, we expect the percentage growth rates to moderate somewhat as those numbers get bigger, but it will become one of the biggest regions for us over the course of the next 12 months.

Cassie Chan: Got it. And are you still expecting revenues from some of those few top clients to be flat to slightly up in ’24 that’s contemplated in your updated guide? And on the back of that, like any changes in the pricing environment that you guys have seen as of late? Thank you.

Bryce Maddock: Yes. As far as the biggest clients go, I think on our last call, we talked about the top three clients, which declined at a double-digit percentage year-over-year in 2023, we’d be back to single-digit percentage growth. That is still the case, although the growth amongst those clients is now higher than we had last quarter. And as I mentioned, our top five clients — of our top five clients, four of them are going to be growing revenue in 2024, and two of those will be by double-digit percentages. So, we’re back to some robust growth rates amongst those clients.

Operator: Thank you. One moment for our next question. Our next question comes from Robert Bamberger with Baird. Your line is now open.

Robert Bamberger: Yes. Thanks for taking my question. So, just given the recent solid crypto volumes at FinTech’s, did that contribute anything to Q1? And then I guess what amount do you expect for all of 2024? I think you had talked about it being somewhere around 4% to 5% of total revenue. Should that tick up a little bit?

Bryce Maddock: Yes. We’ve seen the crypto markets really grow rapidly. but that hasn’t been as directly reflected in the volumes that we’ve seen from our crypto customers. I think what we said was that last year revenues from crypto and equity trading clients were 4%. They were also 4% in Q1, and we’re forecasting full-year 2024 crypto and equity related revenues to be 5% of total revenues. As a reminder, at their peak for a full year, we had 12% of our revenues coming from crypto and equity trading clients. And Balaji can correct me on any of those numbers if those are wrong. But obviously, that was a very different time. I think what we saw was — what we’ve seen is that the clients, who moved work from onshore to offshore have kept all of that work offshore and they’ve taken a much more conservative approach to scaling up in the face of the recent bull market.

Robert Bamberger: Yes. That all makes sense. Thanks. And then in terms of just the shift to offshore, has that slowed down at all recently? Or does that 10% of U.S. revenue still make sense longer term from that 11% now? Or do you think it could be lower or higher from the 10% you talked about previously?

Bryce Maddock: Yes. We’ve seen a gradual reduction in onshore to offshore shifts. I think, the majority of the work that we’ve got in the U.S. now is going to stay. Historically, we’ve said that we don’t expect U.S. revenues to drop below 10% of overall revenues and we still feel that way. Obviously, we’re down to 11% in Q1. but we expect to be somewhere between 10% and 11% for the full year.

Robert Bamberger: Perfect. Thanks, guys.

Operator: Thank you. One moment for our next question. Our next question comes from Matthew Roswell with RBC Capital Markets. Your line is now open.