TaskUs, Inc. Q2 FY2022 Earnings Call

Greetings. Welcome to the TaskUs Inc. Q2 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Alan Katz, Vice President of Investor Relations. You may begin.

Good afternoon, and thank you for joining the TaskUs second quarter 2022 earnings call. Joining me on the call today 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 this website, including an investor presentation and an Excel-based metric file. Please note that this call is being simultaneously webcast on the IR 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 that 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. 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 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 it over to Bryce Maddock, Co-Founder and Chief Executive Officer of TaskUs.

Thank you, Alan. Good afternoon, everyone. And thank you for joining us. We delivered another strong quarter in Q2 with revenue and adjusted EBITDA coming in above the top end of our guidance ranges. Q2 revenue grew by 36.9% year-on-year to $246.5 million above the top end of our guidance range of $243.5 million. Adjusted EBITDA grew 26.2% year-on-year to $55.7 million for an adjusted EBITDA margin of 22.6%, just above our guidance of 22.5%. I’m also proud to report that this quarter Everest Group named TaskUs the fastest growing business process service provider in the world. While we delivered strong results, we are seeing the impact of our clients shifting their focus from growth to cost optimization. In the search for immediate savings, some of our clients have cut vendor spend. Since our last call, this trend has accelerated, particularly among our clients in the cryptocurrency and equity trading spaces. Given these trends, we have lowered guidance for the remainder of the year. I want to be clear that in the face of these significant challenges, we are still positioned to deliver industry-leading profitable growth. This is because our teams continue to execute strongly on our five growth levers. Our clients' focus on cost presents a major opportunity as they are increasingly turning to us to help optimize their spend by leveraging our offshore teams. I will review how we performed in Q2 and then return to our updated outlook for the remainder of the year and our strategy to continue to grow faster than the industry. In Q2, we executed well across our first two growth levers, expanding with our current high growth clients and adding new clients across verticals as we delivered signings from both new and existing clients. Starting with our growth with current clients in Q2, our top 20 clients increased their spend year-over-year by almost 30%. While revenue from clients outside of the top 20 grew by more than 60%, our largest client group only grew by 12% compared to Q2 of 2021. As expected, this growth rate is lower than prior quarters, driven by the impact of their transition offshore beginning to flow through this quarter. We have made great progress in reducing client revenue concentration and improving the diversity and resilience of our client base. Looking at our service offerings, digital customer experience revenue grew 47.4% compared with Q2 of 2021 as a result of expansion with existing clients and new client signings. Demand for DCX services has been particularly strong in gaming, travel and transportation, and among challenger banks and remittance apps in the FinTech space. We signed a digital customer experience expansion with a personal wellness brand to expand from one geography to three. We expect to add an additional 400 teammates to Latin America and the Philippines to support this client. We expanded our European language support work in Greece for one of the world’s largest e-commerce marketplaces. We are now delivering services from three different countries for this client, providing multilingual customer support, tech support, and sales through various channels. In a quest for cost savings, our clients have begun to shift work they were previously doing in-house to our offshore teams. One of our clients, a large gaming company, where we provide player support in multiple languages, has shifted a large portion of their European language DCX work to our team in Greece, and some of their Tier 3 support work to our teams in the Philippines. Finally, we signed another digital transformation contract with a large travel client. This client actively sought us out given our experience in the travel and transportation space. We have launched a center of excellence for them in Texas, where we will provide them with a few hundred travel advisors in the coming months. Moving forward, we believe we will see demand for onshore operations from enterprise clients. Moving on to content security, revenues in this service offering grew by 7.8% compared with Q2 of 2021, driven by volume growth with existing clients and new client signings. We saw particularly strong signings growth this past quarter for content security work out of Malaysia, where we signed an expansion with one of the world’s largest audio streaming platforms. We also signed a risk and response deal in Malaysia for a new client in the peer-to-peer payment space. We have been providing this client with know your customer and fraud investigation support. Two of our challenger bank clients also asked us to take on complex processes previously done by their in-house teams. Here, our risk and response organization will be delivering any money laundering and know your customer services while significantly reducing our client spend on new services. Finally, we began working with one of the world’s most popular gaming communication platforms. Given early success, we have already expanded the scope of trust and safety support that we will be providing this platform. We see an enormous growth opportunity ahead at this client. At our largest client, we completed the transition of hundreds of roles offshore at the end of May. Given the timing of this transition and the offsetting ramp of additional roles, we expect Q3 to be the lowest revenue quarter for our content security service offering this year. We expect to return content security to growth in 2023. Our relationship with our largest client remains very strong. We are in the process of scaling over a thousand new roles in our offshore delivery environments for them. Given the reduction to our onshore teams, this client’s revenues in the back half of the year will be down slightly when compared to the first half. But we now expect to earn more from this client in 2022 than we did in 2021. We also expect to continue modest annual revenue growth with this client in 2023. AI service revenues grew 39.4% in Q2 compared with 2021. This growth was driven primarily by expansions with existing clients in the social media, travel, and autonomous vehicle spaces, offset by the transition of work with our largest client. We signed several exciting projects for the TaskVerse, our gig-worker platform, which included multiple projects with two big tech firms, one of which is a first-time TaskUs client. We also signed a TaskVerse agreement with another one of our top-10 clients in the e-commerce space. TaskVerse.com is seeing strong initial demand for our data labeling and AI support services. In response, we are investing in sales and marketing to fuel its growth. Overall, our signings were again driven largely by growth from existing clients, which accounted for approximately 75% of our total new business signings in Q2. Looking at revenue growth within our industry verticals, we are seeing particular strength from our HealthTech, entertainment and gaming, and non-crypto FinTech clients. All of which grew revenue over 50% year-on-year in Q2. As economies around the world have reopened and business travel has resumed, we are also seeing a pickup in demand for our on-demand travel and transportation business. Revenue in this vertical grew by over 40% year-on-year. This includes astounding growth at our largest ride-sharing client where we more than tripled our revenue compared to Q2 of 2021 as we took significant share from our competitors. As I mentioned earlier, several enterprise travel companies have now turned to us to support their digital transformations. We are also seeing exciting opportunities in the autonomous vehicle space, where we have seen traction for both our AI services and learning experience solutions. The HiTech vertical also continues to be a major area of focus. Last quarter, I discussed opportunities we were pursuing with some of the biggest tech companies. I’m proud to report that we have since signed deals with three big tech firms. Here we are focused on delivering the operational excellence TaskUs is known for to earn the opportunity to expand. While we don’t expect significant revenues from these clients this year, they have the potential to contribute meaningful growth over the next few years. Moving on to our third growth lever, we also showed continued progress, expanding our specialized services. As I mentioned, we closed multiple AI services deals on the TaskVerse, and several risk and response engagements this quarter. We also expanded our engagement with our largest learning experience services client, and we are now servicing this client from three locations, providing training services to their global teams. As clients are shifting their focus to cost, we are beginning to see opportunities to bring other service offerings to the market. Our learning experience solution is a great example of our clients' willingness to look at certain in-house functions or processes that may not have been a candidate for outsourcing in the past. We are seeing good progress with our fourth growth lever, adding additional geographies, with Malaysia and Europe performing particularly well this quarter. Since launching in Malaysia at the start of the year, we have signed four clients, including geographic expansions with three of our existing global client relationships. We have also had strong sales performance out of Greece, where headcount grew by more than 50% from Q1 to Q2 of this year. Finally, our acquisition of heloo has opened up Central and Eastern Europe as a delivery hub for our clients. This gives us a lower cost footprint for European language support work. This brings me to our fifth growth driver, M&A; we closed our first acquisition in April. Over the past three months, we have made great progress in integrating the heloo team into TaskUs. heloo is performing ahead of plan, and we are starting to see opportunities for our sales teams to sell alongside one another. Given the current market dynamics, we are very excited about using M&A to consolidate our market over the medium term. However, we have not yet seen private market valuations aligned with the current public market reality. We remain disciplined and focused on accretive acquisitions, and we have the balance sheet and operating capacity to move quickly and take advantage of these opportunities. Turning to our teammates and the environment for talent. At the end of Q2, total headcount was 45,300, down by about 500 teammates compared with the end of last quarter. This was driven by our clients' focus on cost reduction by reducing team sizes, primarily in our U.S. operations and among our cryptocurrency clients. We also moved to eliminate certain corporate roles in response to our updated revenue guidance. The environment for talent continues to be competitive. We have seen attrition increase this quarter compared to both last year and Q1. The primary driver of this increase in attrition has been returning teammates to the office. We now have approximately 40% of our teammates working safely from TaskUs offices around the globe, up from 20% last quarter. Whether working from home or in our offices, we continue to deliver classes on time and meet our clients’ needs. We are working aggressively to reduce attrition, and I’m happy to say that our initial investments appear to be paying off as attrition in July was lower than in Q2. Our Glassdoor rating also remains among the highest in the space at 4.5 stars at the end of the quarter. Now let’s move on to our outlook for the remainder of the year. While we have performed well in the first half of the year, the current macro environment is impacting many of our clients. As a result, we revise our outlook for 2022 and now expect to grow at 23.6% at the midpoint of our guidance. This change in outlook was primarily driven by two factors. First, our clients in the cryptocurrency and equity trading spaces have reduced volume faster and deeper than we expected as of our first quarter call. To put this in context, cryptocurrency and equity trading clients as a group accounted for over 15% of our revenues in Q1. We now expect that there will be approximately 5% of our revenues in the fourth quarter. While some of this impact was baked into our outlook provided on the Q1 call, we have since seen incremental volume reductions. Second, we are seeing other high growth tech clients look for immediate savings in response to market uncertainty. Here, our clients have focused on our U.S.-based resources. Some of these clients are leveraging our offshore model and others are reducing vendor spend across the board. While the increased focus on cost creates meaningful opportunities with both new and existing clients over the coming quarters, it also puts immediate pressure on revenues. In response to these updates, we have not only taken steps to reduce our corporate spend but have also frozen hiring for most non-revenue generating roles. We will continue to invest in our technology and go-to-market teams as these investments will drive our growth in 2023 and beyond. In terms of margins, we now expect that our adjusted EBITDA margin for the full year will be approximately 22.3% or $210 million at the midpoint of our guidance range. We also expect to generate approximately a hundred million dollars of free cash flow this year. TaskUs is a highly cash-generating business and our disciplined approach to capital allocation will continue to support our growth. As we look to 2023 and beyond, we remain confident in our ability to grow faster than the rest of the industry. TaskUs has been the fastest growing business process service company since we were founded in 2008 because we are the preferred provider of high-growth tech disruptors. While it is a volatile time for tech firms, our view is that these companies will continue to outgrow the market over the long run. More immediately, we have a strong pipeline of opportunities to help these clients reduce their operating expenditures by shifting functions that they are currently doing in-house to our offshore delivery locations. Finally, we are expanding our addressable market by working with enterprise clients on their digital transformations and closing deals with big tech. This quarter, we have signed pilots with three big tech firms. These are companies that spend billions of dollars a year on outsource services. As we have done in the past, we expect to earn the opportunity to scale with these clients through the strength of our execution. With that, I will hand it over to Balaji to go through our Q2 financial results and provide more details on our guidance.

Thanks Bryce, and good afternoon, everyone. I’m going to discuss the financial results for the second quarter of 2022. 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 second quarter, we earned total revenues of $246.5 million, an increase of 36.9% over the prior year. We saw growth in each of our three specialized service offerings. In the second quarter, our digital customer experience offering generated $167.4 million for a year-over-year growth rate of 47.4%. Our content security business grew 7.8% versus Q2 of 2021, resulting in $46.3 million of revenue. And our AI services business grew 39.4% year-over-year for revenues of $32.7 million. In Q2, we saw continued diversification of our revenue, as growth from our top-line was executed by the ongoing expansion of the rest of our client base. As a result, our revenue concentration with our largest client was approximately 22%, down from 24% in Q1 and 27% in Q2 of 2021. Our second largest client was 9% of our revenue, down from approximately 10% in Q1 and 12% in Q2 of 2021. Our Top 10 and Top 20 clients accounted for 58% and 73%, down from 61% and 75% in Q1 of this year, and down from 63% and 77% as of Q2 of 2021. In the second quarter, we generated 51% of our revenues in the Philippines, 30% of our revenues in the United States, and 19% of our revenue from the rest of the world, mainly driven by our operations in India, Europe and Latin America. As Bryce discussed, we have seen a pickup in signings for services to be delivered out of our Malaysia and Greek locations. We expect to see our revenue concentration generally shift towards our offshore geographies for the remainder of the year. As a reminder, our margin is driven in large part by our geographic mix. Our cost of service as a percentage of revenues is lower in offshore locations, which positions us well for margin expansion over time. Our cost of service as a percentage of revenue was 58.2% in the second quarter, compared to 57.7% in Q2 of the prior year. The increase was primarily driven by ongoing expenses associated with our return to the office and costs associated with the transition of work from onshore to offshore locations. While we have seen wage inflation across geographies this year, the majority of this impact was offset by the currency benefit of the strong U.S. dollar and price increases from cost of living adjustments provision in our contracts. In the second quarter, our SG&A expenses were $68.9 million, or 28% of revenue. This compares to SG&A in Q2 2021 of $177.8 million, or 98.8% of revenue, which included a one-time phantom share grant and non-recurring teammate bonuses associated with the IPO of $133.7 million. Stock compensation expenses in the quarter were $18.1 million relating to equity grants, compared with $5.7 million in Q2 of 2021. Given the timing of the IPO in Q2 of last year, we only experienced the impact of a partial quarter of stock compensation and public company expenses during that quarter. In the second quarter of 2022, we earned adjusted EBITDA of $55.7 million and a margin of 22.6%, compared to $44.1 million and a margin of 24.5% earned in the second quarter of 2021. The reduction in our adjusted EBITDA margin was primarily driven by ongoing costs associated with our return to the office and the full quarter of public company expenses. We expect adjusted EBITDA to be impacted by the slower revenue growth for the balance of this year. We will also continue to invest to drive growth, which will partially be offset by our G&A cost optimization initiative and our higher margins offshore due to the mix change. Adjusted net income for the quarter was $38.7 million and adjusted earnings per share was $0.38. By comparison, in the year-ago period, we earned adjusted net income of $31.4 million and adjusted EPS of $0.32. Now moving on to the balance sheet. Cash and cash equivalents were $104.7 million as of June 30, 2022, compared with the March 31, 2022 balance of $77.1 million. Cash generated from operations was $36.1 million for the second quarter of 2022, as compared to cash generation of $5.8 million in Q2 of 2021. Our DSO was 66 days in the current quarter. Our capital expenditure decreased in the second quarter of 2022 to $11.6 million compared to $13.3 million in Q2 of 2021. The decrease was primarily driven by teammate related equipment purchases in Q2 of 2021, which were lower this year. Free cash flow was $24.5 million or 44% of adjusted EBITDA. As Bryce discussed, we have always been a business that prioritizes free cash flow and we continue to see this as an area of focus going forward. In terms of our financial outlook for the remainder of the year, we have updated our guidance as follows. We now anticipate full-year 2022 total revenues to be in the range of $930 million to $950 million, representing a year-over-year growth rate of 23.6% at the midpoint. In addition, we expect to earn a full-year 2022 adjusted EBITDA margin of approximately 22.3%. Lastly, we have added free cash flow, which we define as cash flow from operations less CapEx, as an annual guidance metric this quarter. We expect for full-year 2022 free cash flow to be approximately $100 million. For the third quarter of 2022, we anticipate revenues to be in the range of $224 million to $226 million representing a year-over-year growth rate of approximately 12% at the midpoint. We expect to earn a Q3 2022 adjusted EBITDA margin of approximately 22%. Our outlook implies that we will exit 2022 flat to low-single-digit top-line growth. While we are not providing guidance for 2023 on this call, we recognize that we will face challenging revenue comps in the first half of next year. We are confident that our growth rate will increase throughout the course of 2023, driven by the opportunities that Bryce outlined. I will now hand it back to Bryce before we take your questions.

Thank you Balaji. Before we get to Q&A, I want to share another TaskUs teammate story. This time for Jimenez, one of our teammates in Colombia. Jimenez moved to Colombia from Venezuela in 2020, as a result of the economic situation in her home country. This woman who trained as an engineer in Venezuela suddenly found herself unemployed in a new city. She began looking for opportunities in the BPO industry, hoping that she could apply her leadership skills to a new role. But she heard time and time again that while her background was impressive, her English was not yet strong enough for a customer service position. After some research, she set her sights on landing a role at TaskUs because of our culture and unique benefits. She applied to TaskUs in January, and our recruitment team instantly saw her potential. We invited her to join our Art of Fluency program, an English language training program that we developed to rapidly improve English proficiency for customer support. Within a few months, she was hired as a teammate. Jimenez has grown quickly at TaskUs. She supports one of our challenger bank clients and is delivering top quartile customer satisfaction scores. In less than a year, Jimenez has gone from being an unemployed refugee with limited English proficiency to a top-performing teammate supporting a global FinTech firm. It is these stories that inspire us. Our investment in our people continues to deliver for our teammates and our clients. And the Art of Fluency program is an amazing example of this. With that, I will ask the operator to open the line for our question and answer session.

Thank you. And at this time, we will be conducting a question-and-answer session. Our first question comes from the line of Dave Koning with Baird. Please proceed with your question.

Yes, hey guys. Nice job on the second quarter and thanks for all the guidance on the back half. Maybe they kind of kick it off just, if we look at the back half and kind of compare it to even last year. If you would exclude crypto and maybe anything else, maybe talk through a little more on whether it is crypto and one or two other things maybe would the back half actually be quite good growth. And then the second from that is Q4 really the base now when - you know, we kind of numbers from Q4 to just kind of grow more normalized sequentially going forward. I will leave it there let you kind of talk through some of those?

Yes, I will jump in here, Dave. Thanks so much for the question. So obviously, since our last call, we have seen our clients shift their focus to cost reduction. Some of them have done this by moving some of the work we are doing onshore to our offshore teams, and others have done this by simply reducing vendor spend looking for immediate savings. Across our entire client base, this has been most acute among our cryptocurrency and equity trading clients. So I want to make a few points about what we are seeing happen in the cryptocurrency and equity trading space. TaskUs has a low double-digit number of clients whose products feature a cryptocurrency or equity trading feature. These could be businesses that are entirely dedicated to trading equities or crypto, or they could be a broader financial platform that offers cryptocurrency or equity trading as part of their offering. These clients made up over 15% of our revenues in Q1, and we now expect that they will be about 5% of our revenues in Q4. With that said, we have not lost a single client in this space. We remain the preferred provider of high-growth tech companies, including those in the cryptocurrency and equity trading spaces. Despite these challenges, we remain confident in our growth trajectory, as we continue to have very, very strong relationships with all of our clients and in particular, our largest clients. So we previously discussed that at our largest client, we have been shifting a large portion of the work we are doing there from higher revenue onshore locations to lower revenue offshore locations, which is a transition that we completed in Q2, but we have seen very strong over volume growth with this client. We are adding over a thousand additional roles for them in the back half of this year. Given this headcount growth and our current pipeline of opportunities, we would expect to grow revenues with our largest client year-on-year in both 2022 and 2023 and hopefully, beyond that as well. We have also seen continued growth at our largest on-demand transportation and food delivery clients. On the call, I mentioned that our revenues with our largest on-demand transportation client have more than tripled year-over-year in Q2. We are taking significant share from our competitors and are now supporting this client from four different countries. Finally, we just signed pilots with three big tech companies that we believe have the potential to contribute meaningfully to our growth in 2023 and beyond. So strategically, we remain focused on supporting technology companies, and this is a space that is clearly experiencing some volatility today, but we believe it is going to outgrow the market over the long-term. For now, we have shifted our focus from selling onshore teams to selling offshore teams, to increasingly selling our automation solutions to help these clients reduce their costs. We have also expanded our addressable market by pursuing digital transformation deals with enterprise clients and signing the big tech deals that I just mentioned. So while we have encountered some significant challenges in the first half of the year, we do feel like our base has been reset, and we are very optimistic about our ability to continue to grow faster than the industry.

Got you. Thanks for all that color. And maybe just a quick follow-up. When we look at 2023, and I know you haven’t given any sort of formal guidance, but is it fair to say the first half has a pretty tough comp and we could expect you to grow slower than normal, just cause of that. And then the 22% margin in the back half? Is that a good place to kind of think about next year, there any puts and takes that would change that?

Yes, thanks Dave. So from an EBITDA for 2023 perspective, like Bryce mentioned, we will see our growth rates improve in the back half of 2023. I would expect to begin to see margin expansion as we would also start seeing the positive impact of offshoring getting into 2023. And like I said earlier, we will continue to monitor G&A spend while continuing to invest in growth. Hence, we expect that adjusted EBITDA margin to be about 2022 margins getting into 2023.

Hey, thanks for taking my question. I want to ask about the three last tech companies, the new contracts you signed there. Can you talk about the type of work you do for some of those clients and also the potential opportunity? Can any one of those potentially be your 10% client over time? And should we expect that work to be relatively more stable than the work you do for small medium sized clients given possibly the volume there at those accounts?

Puneet, thanks so much for the question. So we are very excited to have closed these deals. These are clients that we have pursued for many years, and this opens up a huge area of addressable spend and outsourcing budgets that run into the billions of dollars. The best way to think about the potential here is to look back at our relationship with our largest client. With our largest client, we initially signed a very small deal. In fact, in our first year, I think we did about a million dollars in revenue, but we worked really hard and we proved our value, and we started to win RFP after RFP. So we grew in the second year to $50 million in revenue and have continued working together. And to date, we have over $200 million from that client. So we are optimistic about the potential with all three of these clients. It is going to take a lot of hard work. We want to continue to diversify our revenue base. And when we think about smaller clients versus larger clients, we always want to keep a healthy mix of both, but the revenue growth that we are trying to drive into 2023, 2024, and beyond will be greatly helped by upside at these big tech clients.

No, I appreciate the color. And then another question on the guidance cut for this year. So it looks like you have assumed significant reductions at the crypto and equity trading clients, but what drives confidence that the other accounts have been de-risked enough in that guidance and should not be a source of incremental surprise given the macro environment is still uncertain?

Yes. So we are taking a very cautious approach to our outlook for the remainder of 2022 given the macro environment. We have a very robust forecasting process that goes client-by-client and looks at the conversations we are having with those clients and committed volumes. We have listened intently to the earnings calls of all of our public clients, and we are hearing quite a lot of optimism. Amongst our largest clients, clients in the social media, ride-sharing, and food delivery space, we continue to have very strong relationships and very strong growth trajectories. And so that is where we drive our confidence for the guidance that we are providing today.

Thank you. Maybe to ask that question in a slightly different way, can you expand a little bit on the nature of work that you are doing for the equity trading and crypto clients that was particularly sensitive to those client budget cuts? And then if that work is pervasive in any of your other segments, as we think about how a weaker macro could affect other segments from here?

Yes, in the FinTech space, across FinTech clients, we provide two primary areas of service. We provide digital customer experience services. So that is supporting their customers answering their questions, solving account issues. We also provide a significant amount of risk and response services; this could be anti-money laundering, know your customer, fraud investigations work. Both of those service lines were impacted by overall trading reductions. So trading volumes came down, contacts and investigation demand came down, and given the broader pressure in the space, there has also been an increased focus on operating expenditures in order to get to profitability. When we look across the rest of our verticals, we offer a range of specialized services that we have discussed; digital customer experience is our biggest service line. We have not seen anywhere near the same volume impact across any other vertical than we have seen in the FinTech vertical as it relates to cryptocurrency and equity trading clients over the course of the last quarter.

That is helpful, thank you. And then as we think about your ability to service offshore or onshore, can you comment a little bit on where you are seeing demand currently? It seems like some of the new signings may have an onshore component. Is that still the preferred way to start engagements, or are you starting to see more clients willing to embrace offshore from the get-go?

Broadly, we have seen an uptick in interest in our offshore delivery locations. We have seen clients who have a presence in our onshore locations ask us about supplementing their teams with offshore locations to help bring down costs. We have also seen a lot more interest in our new logo clients in our offshore offerings. I think this is to be expected given the macro environment; people are looking for ways to operate more efficiently, but that doesn’t mean that we are not seeing any new clients in our domestic operations. As I mentioned, we signed a brand new travel client who turned to TaskUs to build a center of excellence in Texas. We are going to be hiring hundreds of teammates to support that client between now and the back half of the year. We have also signed multiple smaller deals in the last quarter in our U.S. operations. So while overall we have seen a decline in our U.S. operations in Q2, we do see continued interest from some of our new logos.

Hey thanks for taking my question. Just wanted to continue on that topic. I know you mentioned you signed a travel client, and you have seen some increased interest from traditional enterprise clients. So I was wondering how you go about kind of assessing those in-bounds? Are you trying to only work with kind of the highest growth, highest margin opportunities that come in? And to what extent could some of this kind of traditional enterprise interest be used to offset some of the client-specific pressures you are seeing in areas like FinTech?

Thanks, Ryan. So we had some concerns after our last call and our discussion about the digital transformation deal that we signed with an airline. I think some people thought that was a sign that we were returning to traditional call center work. It is not. We are working with these clients on their digital transformations. Most of these deals are being done at margins that are actually accretive to the rest of our business. So broadly, we are really excited about the enterprise deals that we have closed. We think that there is massive upside as we expand our addressable market and see an increased interest from clients in this space. As I mentioned on the call, we are finding that most of the interest for our domestic delivery capability today is coming from enterprise clients. We think that these clients have the ability to drive a disproportionate amount of our revenue growth in the quarters to come.

Got it. And then one question on your AI services offering, with your TaskVerse platform launching last quarter, I was just wondering if you could give some color on the kind of adoption you have seen on it so far, and how you are going about to attract freelancers to the platform. Could M&A be used potentially to help scale its offering and broadly kind of how do you view growth there?

Yes, so it is obviously early days for us in the TaskVerse, but we have seen great interest in this product from our clients. There aren’t a ton of scaled offerings that can do crowdsourced data labeling and AI services. And there is huge appetite amongst our innovative clients for disruptors in this space. As I said on the call, we have signed a few really exciting deals, two big tech clients, one of which is brand new to TaskUs. One of our top 10 clients in the e-commerce space has also become a user of the TaskVerse platform. So there is huge upside here, and we are starting from zero. So the sky is kind of the limit. When I think about freelancer onboarding, we are trying to be the best platform for freelancers and the way that we feel we are the best company in the BPO space for our teammates. We have actively recruited freelancers from all over the world. We are working hard to ensure that they are paid promptly and that they have a healthy flow of tasks to keep them busy. So we are really excited about that as well. We are very interested in continuing to pursue M&A across all of our specialized service lines, and we do think that buying other businesses in this space could be a way to supplement not only the crowd that we are building but also the underlying platform.

Thank you for taking our questions. And this concludes the question-and-answer session. And we have reached the end of today's conference, which also concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.