TaskUs (TASK)

Digital outsourcing company TaskUs (NASDAQ:TASK) reported Q4 CY2024 results exceeding the market’s revenue expectations, with sales up 17.1% year on year to $274.2 million. The company expects next quarter’s revenue to be around $271 million, close to analysts’ estimates. Its non-GAAP profit of $0.31 per share was 11.3% below analysts’ consensus estimates.

Company Overview

Founded in 2008 as a virtual assistant service before evolving into a global digital solutions provider, TaskUs (NASDAQ:TASK) provides outsourced digital services and customer experience solutions to innovative companies, helping them manage content moderation, customer support, and AI operations.

The sector stands to benefit from ongoing digital transformation, increasing corporate demand for cost efficiencies, and the growing complexity of regulatory and cybersecurity landscapes. For those that invest wisely, AI and automation capabilities could emerge as competitive advantages, enhancing process efficiencies for the companies themselves as well as their clients. On the flip side, AI could be a headwind as well as the technology could lower the barrier to entry in the space and give rise to more self-service solutions. Additional challenges in the years ahead could include wage inflation for highly skilled consultants and potential regulatory scrutiny on outsourcing practices—especially in industries like finance and healthcare where who has access to certain data matters greatly.

TaskUs competes with other business process outsourcing companies including Teleperformance (OTCMKTS:TLPFY), TELUS International (NYSE:TIXT), and Concentrix (NASDAQ:CNXC), as well as specialized content moderation providers like Accenture (NYSE:ACN) and Cognizant (NASDAQ:CTSH).

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $995 million in revenue over the past 12 months, TaskUs is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, TaskUs grew its sales at an incredible 22.6% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. TaskUs’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 1.8% over the last two years was well below its five-year trend.

This quarter, TaskUs reported year-on-year revenue growth of 17.1%, and its $274.2 million of revenue exceeded Wall Street’s estimates by 2%. Company management is currently guiding for a 19.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 11.6% over the next 12 months, an improvement versus the last two years. This projection is admirable and indicates its newer products and services will spur better top-line performance.

Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt, and taxes.

TaskUs has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average adjusted operating margin of 18.8%.

Analyzing the trend in its profitability, TaskUs’s adjusted operating margin decreased by 1 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, TaskUs generated an adjusted operating profit margin of 16.1%, down 4.3 percentage points year on year. This contraction shows it was recently less efficient because its expenses grew faster than its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

TaskUs’s EPS grew at an astounding 16.2% compounded annual growth rate over the last five years. However, this performance was lower than its 22.6% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of TaskUs’s earnings can give us a better understanding of its performance. As we mentioned earlier, TaskUs’s adjusted operating margin declined by 1 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, TaskUs reported EPS at $0.31, down from $0.35 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects TaskUs’s full-year EPS of $1.29 to grow 8.3%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

TaskUs has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.2% over the last five years, slightly better than the broader business services sector.

Taking a step back, we can see that TaskUs’s margin expanded by 3.8 percentage points during that time. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

TaskUs’s free cash flow clocked in at $20.38 million in Q4, equivalent to a 7.4% margin. The company’s cash profitability regressed as it was 6.1 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

TaskUs historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.4%, somewhat low compared to the best business services companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, TaskUs’s ROIC has increased significantly over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

TaskUs reported $192.2 million of cash and $305.2 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $209.9 million of EBITDA over the last 12 months, we view TaskUs’s 0.5× net-debt-to-EBITDA ratio as safe. We also see its $21.55 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see TaskUs beat analysts’ revenue expectations this quarter. We were also glad its full-year revenue guidance exceeded Wall Street’s estimates. On the other hand, its EPS missed significantly. Overall, this was a weaker quarter. The stock traded up 4.4% to $13.78 immediately following the results.

Updated: June 14, 2025 at 11:24 PM EDT

Before deciding whether to buy TaskUs or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

TaskUs isn’t a terrible business, but it isn’t one of our picks. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its relatively low ROIC suggests management has struggled to find compelling investment opportunities. And while the company’s rising returns show management's prior bets are at least better than before, the downside is its weak EPS growth over the last three years shows it’s failed to produce meaningful profits for shareholders.

TaskUs’s P/E ratio based on the next 12 months is 12x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $17.75 on the company (compared to the current share price of $16.72).