TaskUs, Inc. (NASDAQ:TASK) Q4 2022 Earnings Call Transcript

TaskUs, Inc. (NASDAQ:TASK) Q4 2022 Earnings Call Transcript February 27, 2023

Operator: Good morning. Welcome to the TaskUs Investor Call. My name is Paul and I’ll be your conference facilitator today. At this time, all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. As a reminder, this call is being recorded. I would now like to introduce Alan Katz, Vice President of Investor Relations. Alan, you may begin.

Alan Katz: Good afternoon and thank you for joining us for the TaskUs fourth quarter and full year 2022 earnings call. Joining me on the call today are Bryce Maddock, Co-Founder and Chief Executive Officer of TaskUs; 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 our website at ir.taskus.com. Please note that this call will be simultaneously webcast on the Investor Relations section of the company’s corporate 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 those forward-looking statements can be found in our annual report on Form 10-K, which was filed with the SEC on March 9, 2022. This filing is accessible on the SEC’s website and on our website at ir.taskus.com, and may be supplemented with subsequent periodic reports we file with the SEC. We expect our 2022 10-K to be filed with the SEC in the coming week. 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 development or otherwise, except as required by law.

The following discussion contains non-GAAP financial measures. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metrics, 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, Co-Founder and Chief Executive Officer of TaskUs. Bryce?

Bryce Maddock: Thank you, Alan. Good afternoon everyone and thank you for joining us. We had a strong end to 2022 with both revenue and adjusted EBITDA coming in above our guidance ranges. I am so proud of our global team that worked tirelessly throughout this year to advance our strategic goals. We completed our first acquisition of heloo, which expanded our European delivery footprint and finished the year ahead of plan. We expanded our operations into new geographies such as Malaysia and Japan and launched new service offerings such as the financial crimes work led by our risk and response team and training and development solutions led by our learning experience organization. We also officially launched our TaskVerse platform delivering scaled AI annotation and e-commerce data projects to both existing and new TaskUs clients.

We signed contracts with three of the largest global tech companies in the world and added and expanded our business with large enterprise clients. Lastly, we continue to maintain what we believe is the strongest corporate culture in the industry and have brought 42% of our teammates back to the office as of the end of the year. Overall, sales activity remains strong throughout the year as we continue to strengthen and diversify our revenue base. We ended 2022 with 86 clients billing $1 million or more on an annual basis and 21 clients billing $10 million or more annually, up from 72 and 16 the year prior. We also made significant progress on our efficiency and cost efforts. As a result, we increased our adjusted EBITDA margins in Q4 and ended the year well above both our most recent guidance range and our initial outlook that we provided at the start of the year.

These are just a few of the incredible accomplishments of our team in a very challenging environment. In 2022, our clients shifted their focus from growth to efficiency amidst increasing economic uncertainty. This is increased demand for our efficient offshore delivery and automation solutions from both new and existing clients. As we discussed on the last call, over the next few quarters we expect to continue to see a volatile macro environment as well as a challenging set of comps from the first half of 2022. However, I remain confident in our ability to drive profitable organic revenue growth in 2023 and exit the year in an even stronger position. I’m going to move on to a quick recap of the fourth quarter and full year results then I’ll discuss the impact that we expect from the current macro environment and what that means for our 2023 outlook.

And lastly, I’ll discuss our strategy to improve profitability and drive growth in the back half of this year into 2024 and beyond. Let’s start with financials, Q4 with another strong quarter of both top line and bottom line growth. Revenue grew by 6.8% year-on-year to $242.2 million above the top end of our guidance range of $233 million. Adjusted EBITDA grew by 3.2% year-on-year to $57.9 million for an adjusted EBITDA margin of 23.9% also above our guidance of 23.2%. For the full year 2022, we achieved $960.5 million in revenue and $223.2 million in adjusted EBITDA for an adjusted EBITDA margin of 23.2%, again above the top end of our guidance ranges. We ended the year with top line growth of over 26% while maintaining margins that we believe to be among the highest in the industry.

Moving on to signings and growth with our current clients. In Q4, revenue from our top 20 clients increased 1% year-over-year. This growth rate continued to be materially impacted by the transition of work offshore at our largest client and the declines in volume at our largest crypto and equity trading clients. If we exclude the impact from those three clients, our largest 17 clients grew over 27% year-over-year and revenue from clients outside the top 20 grew at approximately 25% year-on-year. We expect to see our clients outside of our top 20 grow at a faster rate than our largest clients in 2023 as we improve the diversity and resilience of our client base. Looking at our service offerings, digital customer experience revenue grew by 7.3% compared with Q4 of 2021 as a result of expansion with existing clients and new client signings.

We’re seeing strong signing activity from existing clients in the HealthTech, HiTech, travel and on demand transportation spaces as well as with non-crypto FinTech clients. This service offering returned to sequential quarterly revenue growth this quarter as the lower volumes from clients in the crypto and equity trading spaces were more than offset by clients looking to leverage our global footprint to drive efficiency. As I discussed last quarter, our large clients have continued to turn to us to absorb volumes after announcing internal staff reductions. In terms of our crypto and equity trading clients, as expected, they represented 4% of our Q4 revenue or $10.5 million. While we continue to be the preferred partner of the largest players in this space, we expect revenues from these clients to continue to decline throughout 2023.

Moving on to some of the signings for the quarter. In Q4, we signed a digital CX contract with a leading provider of global money transfers and multicurrency management. We will be supporting email, chat, text and calls for this client’s multinational operations and are driving a digital transformation process enabling cost savings and efficiency gains. We’ll be servicing their end users in Europe, North America and Latin America. In Q4, we also started a DCX engagement with a healthcare data and analytics provider. This company turned to TaskUs to provide data validation for health plan participation and appointment information. Poor data poses a significant risk to the healthcare industry’s ability to close gaps in care and drive better patient outcomes.

By solving this problem, we are protecting patients and providers, while improving our clients’ operating efficiency. We also expanded our DCX relationship with a telehealth provider in the quarter supporting a large expansion of their business. Both of these clients are being served out of our U.S. operations. We’ve seen strong demand for our U.S. delivery among healthcare customers due to the regulatory requirements and the highly sensitive nature of their work. This type of work is a great example of U.S.-based services that we believe will remain onshore regardless of the economic environment. We see the U.S. as a key geography for delivering highly specialized services, particularly to healthcare clients. Moving on to trust and safety, which we previously called content security.

Revenues in this service offering declined 5.1% compared with Q4 of 2021, driven by the impact of our largest client moving work to our locations in the Philippines and India. If we excluded the impact from our largest client, this quarter’s trust and safety revenues would have grown by 8% compared with Q4 of 2021. At our largest client we continue to see volume increases and take share from our competitors in Q4. The number of teammates supporting this client increased by 29% from the start of 2022 to the end of the year. With scaled offshore operations in both the Philippines and India, we’re well positioned to continue to grow volumes at our largest client in 2023. As I discussed on the Q3 call, we continue to transition roles from the U.S. to offshore geographies.

This transition will now be complete at the end of Q1, at which time effectively, all of our U.S.-based revenue with this client will have shifted offshore. Looking at our other client signings in the trust and safety offering, we expanded our relationship with one of the country’s largest dating apps to provide both content moderation support, as well as DCX services. This client has grown from a small pilot in 2021 and today we support them across ten business lines, leveraging both in-office teammates and TaskVerse based gig workers. Our expertise in automation and process engineering has led to have multiple expansion opportunities, which we believe will continue in the current environment. We also expanded our trust and safety work with a social engagement platform that maintains online communities for large digital publishers.

This platform enables publishers to bring conversations back from social networks to the publisher’s own site. As such, it is vital to ensure that all of the user generated content follows the publisher’s moderation policies. We’ve helped this client to craft their product and policies to protect these diverse virtual communities. Recognizing our expertise, this quarter, our client transitioned content moderation for one of the world’s largest publications to TaskUs. They have turned to us for our expertise on trust and safety research, proactive and reactive classification, flagging of transformation trends and policy enforcement AI services revenues grew 20.1% in Q4 compared with Q4 of 2021, driven primarily by expansions with existing clients in the autonomous vehicle, social media and travel and transportation spaces.

Last quarter, I highlighted an exciting new engagement with the leading provider of generative AI technology. Their user base has grown exponentially since our last call and we’ve supported this growth and expanded the scope of services that we provide to them. They continue to leverage our AI services to train and develop their algorithm. In Q4, we began to provide content moderation services to ensure their technology responds to user questions in accordance with policy guidelines. We’re doing the complex, sensitive, in-center work that requires the clinician-led wellness support that TaskUs pioneered for this industry. This serves as another great example of TaskUs discovering new industries and developing the specialized services those industries need to scale.

We also expanded the scope of our crowdsourced data collection and data annotation business using the TaskVerse, our global gig worker platform, which we brought to market at the start of 2022. We now have approximately 115,000 taskers signed up for gig work in approximately 80 countries, covering over 90 languages. In its first year the TaskVerse supported some of the largest technology companies in the world. For one of our e-commerce clients our tasker community performed more than 1.2 million annotations over the period of just a few weeks. For one of our big tech clients we collected and annotated tens of thousands of videos from TaskVerse supporting the development of our client’s most advanced and inclusive machine learning-based products.

While this is a small service offering from a revenues perspective, we expect growth of revenues from the TaskVerse to significantly outpace every other part of our business for the next few years. Looking at our overall signings activities, our engagement this quarter were again driven largely by growth from existing clients, which accounted for over 75% of the total new business signings in Q4. We ended the year with an annual net revenue retention rate of 114%, and our current pipeline is the largest it has ever been, including opportunities for expansion with existing clients, new client engagements, and large transformational deals. Turning to revenue growth within our industry verticals. We’re seeing particular strength from clients in their retail and e-commerce space, the HiTech space, which we will begin to call just technology and with on-demand travel and transportation clients.

Each of these verticals grew by approximately 40% this quarter compared with Q4 of 2021. We also saw approximately 30% growth from clients in the entertainment and gaming space this quarter. In Q4, we delivered excellent results for three of the world’s largest technology firms that we began working with earlier in the year. We now have plans to expand all three relationships in 2023. We see the potential for even more significant growth across these clients, but viewed this as upside to the 2023 outlook that we’re providing today. I’ll spend a few minutes discussing our teammates and the environment for talent before I move on to our outlook for 2023. In Q4, we added 800 net new teammates to TaskUs bringing our global headcount to 49,500. We continue to see year-over-year increases in the size of our teammate populations in every country except Ireland and United States.

In the back half of 2022, we saw a significant improvement in employee retention and in Q4; we had the best employee retention numbers of the entire year. Overall, 2022 employee attrition was higher than in 2020 and 2021, but lower than in 2019, which is the last full year where we had all of our teammates in the office. TaskUs teammates rated us 4.6 stars on Glassdoor as of the end of the quarter. Now, let’s move on to our outlook for 2023. In our press release issued this afternoon, we indicated revenue of $965 million at the mid-point of our guidance range, and adjusted EBITDA margin of 23% and free cash flow generation of at least $100 million, excluding the earn out payment associated with the heloo acquisition that we completed in the second quarter of 2022.

Like our clients, we are laser focused on improving the efficiency of our business. This year, our goal is to improve both our adjusted EBITDA and free cash flow year-over-year regardless of what happens in the macroeconomic environment. Balaji will provide more details on what will drive these results later in the call. Let me spend a few minutes on our guidance and how the current macroeconomic environment plays into our outlook. We worked closely with each of our clients as part of their 2023 budgeting processes. On the Q3 call, I noted two trends across our client base that emerged from these conversations. First, clients are looking to reduce costs by leveraging our global delivery model, shifting expensive in-house resources to our efficient offshore teams.

We continue to see this as a large driver of signings in the past quarter. We’re doing more complex work and taking on more sensitive and critical processes. At the same time, a number of our clients continue to reduce the size of our team supporting them from the U.S. decisive impact in Q1 of 2022, 33% of our revenues came from U.S. delivery. By Q4 of 2022, this number had dropped to 21% of total revenues. The mid-point of the guidance provided today contemplates a scenario in which the number drops to just 15% of total revenues for the back half of this year. The U.S. is a key geography for us and will always play a vital role in our global delivery model. A majority of the work that remains in the U.S. must stay in the U.S. for regulatory reasons, process compliance, or because of strong client preferences.

We continue to win exciting new clients for our U.S. operations like the two healthcare clients that I mentioned earlier who rely on our U.S. teams for sensitive and regulated processes, but it’s clear that the growth engine of our business in the years to come will be our efficient offshore operations in the Philippines and India, nearshore operations in Colombia and Mexico, and our digital automation capabilities. Given these trends and the uncertain macroeconomic environment, we’ve decided to take a cautious approach by setting a wider guidance range for 2023. As we near a floor on our U.S. revenue declines and accelerate the growth of our global delivery locations, we expect to return to growth in the back half of this year. We are focused on three initiatives to accelerate revenue growth over the course of 2023.

First, we see meaningful opportunity to expand with the large global technology and traditional enterprise clients that we signed in 2022. Given our stellar performance in 2022, these clients focus on cost and our ability to deliver efficiencies, we’re confident we’re going to see meaningful growth here. Second, we’ve seen a significant increase in demand for our specialized services from industries where we have a distinct competitive advantage. We have exciting opportunities in the HealthTech, and autonomous transportation spaces. I’m personally very excited about the services we’re providing to the generative AI industry. Here again, we are well ahead of the competition, supporting the leader in the space and developing a set of specialized services that hundreds of startups in this space will need to develop and maintain their own models.

Lastly, we’re expanding our go-to-market efforts globally, in particular in Europe and Asia. As we grew in Europe in 2022, our heloo acquisition helped to cement our reputation there as a top service provider. In 2022, we supported approximately 40 clients that are based in Europe, tripling our European client base in just a single year. From our sites in Malaysia, Taiwan, and Japan were now providing services for the Asia operations of several of our largest global clients positioning us well to compete for business in the region. Global go-to-market expansion represents a vast opportunity area for us. By executing on these three initiatives, I believe that we will grow profitably in 2023 while increasing our adjusted EBITDA and free cash flow.

With that, I’ll hand it over to Balaji to go through the Q4 financials in a bit more detail and provide our outlook for Q1 and the year ahead.

Photo by path digital on Unsplash

Balaji Sekar: Thank you, Bryce, and good afternoon, everyone. I’m going to focus my remarks primarily on our fourth quarter, but we’ll reference a few key full year metrics. 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 fourth quarter, we earned total revenues of $242.2 million, an increase of 6.8% over the prior year, leading to total revenues for the year of $960.5 million, and growth of 26.3% higher than the top end of our guidance range. The strong revenue performance in the fourth quarter compared with guidance was primarily driven by two factors. First, the timing of offshoring for our largest client, which shifted from Q4 to Q1 resulting in higher revenues from this client in the quarter.

Second, we also saw stronger seasonality with our consumer exposed clients than we had expected as of the last earnings call and some of the volume risks that we expected did not materialize. This was particularly true for clients in the e-commerce, food delivery and on demand transportation spaces. Our offshore delivery model presence an attractive way to drive efficiency into their businesses. Hence, as these clients had shifted their focus to cost this past holiday season, we were able to grow volumes with them. Moving on to our service offerings. We saw year-over-year growth in two of our three specialized service offerings. In the fourth quarter, our digital customer experience offering generated $159 million for a year-over-year growth rate of 7.3%.

Our trust and safety business declined 5.1% compared to Q4 of 2021, resulting in $42.3 million of revenues, driven by the offshoring of volumes from our largest client. And our AI services business grew 20.1% year-over-year for revenues of $40.9 million. In Q4, we continued to see the diversification of our revenue base. Our revenue concentration with our largest client was 22% consistent with Q3 and down from 25% in Q4 of 2021, while our second largest client comprised less than 10% of our revenue consistent with Q3 and down from 11% in 2021. We showed sequential and year-over-year revenue growth with this client in both Q3 and Q4 of 2022. In Q4 of 2022, our top 10 and top 20 clients accounted for 58% and 71% of our revenue respectively compared to 60% and 75% in the prior year as of trend of revenue diversification continues.

In the fourth quarter, we generated 54% of our revenues in the Philippines, 21% of our revenues in the United States, 12% of our revenues from India and 13% of our revenues from the rest of the world, mainly driven by our operations in Europe and Asia. You’ll note that we began reporting India as a standalone geography. Given our tremendous growth there over the past several years and the potential for India in the future to be as large as the Philippines, we felt that this increased disclosure was important. In terms of our cost of service as a percentage of revenue, it was 57.5% in the fourth quarter compared to 56.2% in the prior year. The year-over-year increase was driven by wage inflation, expenses associated with our return to the office and the transition cost associated with shifting work offshore.

This was primarily offset by the strong U.S. dollar and the geographic mix of revenue. In the fourth quarter, our SG&A expenses were $64.5 million or 26.6% of revenue. This compares with SG&A in Q4 2021 of $65.7 million or 29% of revenue. We continue to invest in sales, automation and the TaskVerse platform while taking significant actions to drive efficiency into the corporate functions. Stock compensation expenses in the quarter were $13.3 million relating to equity grants compared to $20.4 million in Q4 2021. Stock composition expense reductions in Q4 2022, they’re primarily offset by $4.8 million associated with the earn out consideration accrual from our acquisition of heloo. We earned adjusted EBITDA of $57.9 million and the 23.9% margin in Q4 compared to $56.2 million at 24.8% margin in the fourth quarter last year.

Our revenue growth, the strong U.S. dollar and our geographic mix of revenue was partially offset by increased cost due to return to office, wage inflation and expenses associated with transitioning worth offshore. For the full year, we achieved $223.2 million in adjusted EBITDA and an adjusted EBITDA margin of 23.2% above our guidance range. As our clients have shifted their focus to driving efficiencies into their businesses, so have we. In 2022, we kicked off a multi-year effort to improve the efficiency of our global operating model, leveraging automation and shared services resulting in millions of dollars of saving last year. In 2023, we will continue these efforts further optimizing our global operations and support an administrative functions through the use of technology and process design.

This multi-year program will lead to approximately $20 million of in year savings in 2023. This efficiency effort combined with the growth of our higher margin offshore business would allow us to continue to invest in strategic growth areas. It’ll also help offset wage inflation and other cost items and drive improvement in our adjusted EBITDA margins in the back half of 2023 and beyond. Adjusted net income for the quarter was $33.3 million and adjusted earnings per share was $0.33, impacted by increased financing expenses and higher taxes in the quarter. By comparison, in the prior year period, we earned adjusted net income of $37.1 million and adjusted EPS of $0.34. For the full year, adjusted net income was $142.8 million and adjusted earnings per share was $1.39 compared with $129.4 million in adjusted net income and $1.26 of adjusted earnings per share in 2021.

Now moving on to our cash flow and balance sheet. Free cash flow was $24.9 million in Q4 and $103.3 million for the full year 2022 above our guidance of $100 million. This represents a conversion rate of 46.3% of adjusted EBITDA for the full year in line with our medium-term target of being between 40% to 50%. Cash and cash equivalence were $134 million as of December 31, 2022 compared with the September 30th balance of $132.5 million. Our DSO in the quarter remained flat at 66 days compared with Q3. Our capital expenditure decreased in the fourth quarter to $7.7 million or 3% of revenues compared to $20.8 million or 9% of revenue in Q4 of 2021. For the full year CapEx was $43.8 million or 5% of revenue compared with $59 million in 2021 or 8% of revenue.

This decrease was driven largely by better utilization of technology assets as employees return back to the office. We expect that over time our build out CapEx could trend lower as we leverage a more balanced work from home model, improving free cash flow conversion. In terms of use of cash, we maintained our discipline capital allocation program, and this year we allocated $100 million towards our buyback program. In the quarter, we bought 900,000 shares for $17.3 million. For the year we had repurchased 1.6 million shares for $31 million. We will continue to allocate capital to our buyback program opportunistically. We continue to deliver the balance sheet and end the year at 0.6 times net debt-to-adjusted EBITDA leverage ratio. Our priority remains investing for growth.

Given the strength of our balance sheet, we have ample capacity to take action on any M&A opportunity that meet our investment criteria and to continue to return capital in the form of repurchases. At this point, I will outline our financial outlook for the full year and first quarter of 2023. We anticipate full year 2023 total revenue to be in the range of $940 million to $990 million. We expect to earn a full year 2022 adjusted EBITDA margin of approximately 23%, and we are confident we will achieve over $100 million in free cash flow in 2023, excluding the earn-out payment associated with the heloo acquisition. This adjusted EBITDA margin guidance for the full year is based on current ForEx rate, 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 from U.S. dollar fluctuation on our revenues. Our profitability will also be impacted by the typical wage inflation that we see on an annual basis, partially offset by higher gross margins achieved in our offshore geographies and the reduced G&A spending our team achieved in the back half of 2022. Looking at the more immediate term, our outlook for Q1 is unchanged from our expectations. As of the time of the Q3 call. We will see the reductions from our Q4 seasonal volumes, and we will realize the impact of the transition of work offshore for our largest client. As a result, we anticipate revenues to be in the range of $231 million to $233 million, and we expect to earn an adjusted EBITDA margin of approximately 21%.

The adjusted EBITDA margin for Q1 will be impacted by lower revenues while we execute on our next phase of cost saving initiatives. We expect these two begin flowing through in Q2 and more significantly impact our reported margins in the back half of the year as we start growing again. I will now hand it back to Bryce, before we take your questions. Thank you.

Bryce Maddock: Thank you, Balaji. Before we open for questions, I want to share another TaskUs teammate’s story. Earlier this month I visited our team in Tijuana, Mexico. Our frontline first mantra means we invest in providing inspiring facilities and world-class benefits to attract and retain the best talent in the industry. In Mexico, we offer our teammates scholarships to take college courses part-time to advance their careers. Additionally, our teammates told me that we are the only BPO provider in the region to offer fully paid comprehensive health insurance. This program proved to be a critical investment for Marcos, our Procurement Officer at the Oasis location. Marcos joined TaskUs from a manufacturing company, partially because we provided such good healthcare coverage.

Marcos is a passionate motorcyclist, and earlier this year he hit a major fall while riding. TaskUs insurance paid for Marcos to go to a private hospital where he had emergency surgery and covered his salary during his recovery. In our conversation, Marcos remark that joining TaskUs might just have saved his life, and he ended the conversation by saying, I got my soul back when I joined TaskUs. Listening to Marcos was a powerful reminder for me of the positive impact that TaskUs has on the lives of our teammates across the globe. 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: Thank you. Thank you. Our first question is for Maggie Nolan with William Blair. Please proceed with your question.

Maggie Nolan: Hi, thank you. You had given some color on the pipeline, including some mention of large transformational deals. How quickly are you able to close deals of this nature and would there be a resulting margin impact from these types of deals?

Bryce Maddock: Yes. Thanks Maggie for the question. So I’ve talked before about shifting the way we bill our clients from hours to outcomes. We’ve done this in a number of cases in the past, but we’re now seeing increased interest and larger deal size. The transformational deals in the pipeline today are in the tens and millions of dollars a year in revenue and this shift is being driven by the increased focus on cost across our client base and the revolution that we’re seeing in the generative AI space. So again, these transformational deals tend to have larger deal sizes and longer contract terms. They give us control over the levers that we need to drive margins, whether that’s automation process or geographic delivery. And finally we do expect that these deals will take somewhat longer to close than traditional deals. All that being said I’m very excited about the prospect of these types of engagement to drive growth and margin expansion over time.

Maggie Nolan: Okay. That’s great to hear. And then, so it sounds like maybe they materialize a little bit later in the year in terms of the revenue and then Balaji, you had mentioned some seasonality that drove revenue in the fourth quarter of 2022. What sort of expectations should we have for seasonality in 2023?

Balaji Sekar: Yes, so Maggie, in terms of season…

Bryce Maddock: I can jump…

Balaji Sekar: Yes. Go ahead.

Bryce Maddock: No, go ahead, Balaji.

Balaji Sekar: Yes. So Maggie, in terms of seasonality what typically happens is that with especially with some of the consumer businesses, we do see seasonality pick up in Q4 and then we see that impacting in Q1. And then for the rest of the year, we typically don’t see seasonality. We’ll typically see a pickup again in Q4 of 2023 as we start gaining more seasonal work. But again, for the overall business seasonality is not a big impact. It’s a pretty small impact from a overall revenue perspective for the year.

Maggie Nolan: Okay, thank you.

Operator: Thank you. Our next question is from Kathy Cheng with Bank of America. Please proceed with your question.

Kathy Cheng: Hey guys, thanks for taking my question. So first I just wanted to ask, what are some of the assumptions that are baked into your 2023 outlook? So how much are you expecting for growth in your top client, you mentioned that in 4Q and 3Q you grew your second largest client as well year-over-year and quarter-over-quarter? Are you expecting that trend to continue into 2023? And I think you gave a little bit of color on crypto as well, but I just wanted to make sure that I got that right. In terms of you’re expecting declines in crypto throughout 2023, is that as a percentage of your total or is that in dollar terms of that like $10.5 million you gave? Thank you.

Bryce Maddock: Yes. Thanks Kathy. So our current outlook for Q1 is consistent with the outlook that we provided on the Q3 call. In terms of Q2 and the back half of 2023, restricting a cautious tone just due to macroeconomic uncertainty and specifically we’re watching two things. The first is the speed of decision making, while our pipeline is larger than ever, we do anticipate some delayed decision making. And as I just said, those large transformational deals we do expect those to take longer to close. The second is the economic environment continues to cause our clients to pursue cost savings, and this has increased the potential for further reductions in offshore shifts that impact our U.S. business. We do believe we’re approaching a floor here, but at the midpoint of our guidance range, we contemplate a scenario in which U.S. revenues fault to just 15% of overall revenues in the back half of 2023 down from about a third of revenues in the first half of 2022.