© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, and welcome to the TaskUs Second Quarter 2023 Investor Call. My name is John, and I will be your conference facilitator today. [Operator Instructions] And now I'd like to introduce Alan Katz, Vice President of Investor Relations. Thank you, Alan. You may begin.
Good afternoon and thank you for joining us for the TaskUs second quarter 2023 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 our website, including an investor presentation and an Excel-based metrics file.Please note that this call is being simultaneously webcast on the IR section of the website. Before I 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 in our Annual Report on Form 10-K, which was filed with the SEC on March 6, 2023. 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 on the IR section of our website.I will now turn the call over to Bryce Maddock, Co-Founder and Chief Executive Officer of TaskUs. Bryce?
Thank you, Alan. Good afternoon, everyone, and thank you for joining us. In the second quarter, we outperformed both our revenue and adjusted EBITDA guidance arrangements. We delivered $229.2 million in revenue compared to the top end of our guidance range of $228 million. We delivered adjusted EBITDA of $54.7 million for an adjusted EBITDA margin of 23.8%, also above our guidance of a 23% margin. These results were once again stronger than our expectations. This is the result of the tireless efforts of our global team.However, similar to other players in our industry, a number of our clients in the tech space have continued to focus on driving efficiencies, thereby reducing volume expectations for the remainder of the year. As a result of this reduction and the continued lengthening of our sales pipeline, our revenue outlook for the remainder of the year has decreased, and we've updated our guidance range to reflect this. Given the lower revenue outlook and the investments that we're making to drive growth, we've returned our adjusted EBITDA guidance to 23% for the full year, in line with our initial guidance. Our team has made great progress on our efficiency program, which has protected our margins despite top line headwinds.I'll spend some time going through the details of our Q2 performance and signings, and we'll then discuss in more detail some of the investments that we're making to drive our three strategic growth initiatives. Balaji will then walk through our financials as well as our updated guidance ranges for Q3 and the remainder of 2023. Starting with growth with our current clients, revenue from our top 20 clients declined by 12% year-over-year in Q2 impacted by the transition of [indiscernible] offshore our largest client and the declines in volume at our largest crypto and equity trading clients. If we exclude those three clients, our largest 17 clients grew 7% year-over-year.Revenue from clients outside the top 20 also grew by 7% year-on-year. Looking at our service offerings; Digital Customer Experience revenue declined by 9.9% compared with Q2 of 2022 as expansions with existing clients and new client signings were more than offset by the decline in revenues from crypto and equity trading clients and the impact of lower volumes from certain other clients. In terms of major DCX signings, we're winning business from the competition and are continuing to see internal volumes from certain clients shift to us to drive cost savings.In Q2, we had strong wins in the retail space. We signed DCX deals with two large well-known global retail clients. For the first client, a global sports brand will be providing Spanish language support for their Latin American customers from our site in Calle, Colombia. This major brand ultimately chose to work with us because of our ability to support Spanish at scale, our heavy focus on driving volume to digital channels and our ability to effectively help customers while driving revenue through commercial conversations. We will be providing support for another high-end retail brand out of our operations in Mexico.We won this business due to our ability to enhance the overall learning experience for the front line, and we expect to deliver significant cost savings for this client without sacrificing the quality assurance. We continue to see strong demand for our nearshore solutions. In fact, revenue from this region has increased by approximately 70% year-over-year. Based on this demand, we opened our newest site in Medellin, Colombia and launched our first client in that site last month. We also signed two new DCX contracts with clients in the HealthTech space.The first, a fast-growing non-emergency medical transportation service was experiencing high levels of attrition and inconsistent quality with their prior provider. They turned to TaskUs as an experienced nearshore supplier with mature operational capabilities to stabilize and grow their member experience operations. The second client is a disruptive mental health startup that helps patients connect with therapists they can afford. TaskUs is supporting patient eligibility and provider verification services and will soon be adding other operational support services. This client selected TaskUs to help streamline current operations so they can scale more efficiently.We were selected based on our reputation as a provider that leverages innovative technologies and data-driven insights for our clients. Moving on to Trust & Safety; revenues in this service offering declined by 2.4% compared with Q2 of 2022, driven by the impact of our largest client moving work to our locations in the Philippines and India. However, our volumes in the Trust & Safety Service offering continued to grow in Q2. The number of Trust & Safety teammates at TaskUs increased 31% year-over-year as volumes grew across our clients. This quarter, we signed a contract with a leading web browser to provide content moderation out of the Philippines for their upcoming social media platform launch.They signed with us based on our expertise and content moderation and industry-leading wellness program. We won additional work from one of the world's leading multichannel social communications platforms. We started working with this client about a year ago and have already expanded into additional service lines and geographies. We're now moving our Trust & Safety work into Malaysia after delivering strong performance for them from the Philippines. Expansion into Malaysia will allow us to support a group of Asian languages as well as provide alternatives for low-cost English support.We also signed an expansion with a client in the FinTech space for dispute support, adding to the DCX work that we already do for them. We won this business based on our ability to drive cost savings while improving performance. The client has told us that our performance has consistently been the highest out of all their outsourcing partners. Moving on to our AI Service offering; revenue grew 1% in Q2 compared with Q2 of 2022, driven primarily by growth with new clients, including those in the Generative AI space. This quarter, we began working with a leading measurement, data and analytics provider to provide data training and annotation support in Spanish, Portuguese and French.We will be providing new services out of India, which has become a very attractive location for tagging work across multiple languages. We see the opportunity to expand with this client to provide Korean, German and Japanese support in the near future. We have also been leveraging our TaskVerse platform to bring in specific talent for the Generative AI space. Finding nuance experts in certain fields is a unique capability that positions us to win against competitors. This past quarter, we also combined the TaskVerse platform with TaskGPT to streamline the research and copywriting process at one of our clients.This is a great example of how our investments in the new technologies are positioning us to win share and drive savings at our clients. We also highlighted the launch of TaskGPT this quarter with our inaugural client MoneyLion. This is a great partner, a fast-paced forward-thinking FinTech that is looking to leverage our expertise and technology to drive efficiency and augment our teammates' performance. We've integrated TaskGPT to expand and enhance our customer service capabilities across this client's business. Before I move on to our verticals, given the impact across our service offerings, I wanted to discuss our largest client.Our relationship here remains strong, and we believe we are continuing to take share from our competitors. That said we've seen a continued focus on cost savings and efficiency. In addition, we've also seen a continued shift away from certain R&D projects, leading to additional impacts on our projected revenues from this client. We have multiple opportunities with this client in the pipeline. But as of today, we would expect to show a double-digit revenue decline from them in 2023 and likely a more modest decline in 2024 revenues given the annualization of the changes we're currently making. Turning to our industry verticals; we're seeing particular strength from our technology vertical, which grew at 50% year-over-year.This was largely driven by our continued traction with some of the world's largest technology companies. We're also seeing strength in our entertainment and gaming vertical, which grew in the mid-teen percentages year-over-year. Our work with the leading multichannel social communications platform that I mentioned earlier as well as growth with our largest gaming and streaming media clients is driving this traction. In terms of other trends, last quarter, I highlighted our margin expansion at one of our large clients, where we use an outcome-based pricing model. We continue to make progress this quarter, driving process improvement.These process improvement initiatives drove lower teammate counts and revenues in the near-term, but drove improved service level performance for the client while expanding our margins, which positions us well to keep or even take share from our competitors. As a result of efficiency gains as well as lower volumes from certain clients, we ended Q2 with 47,000 teammates, up by 4% compared with Q2 of last year, but down slightly from the prior quarter. At the start of this year, we discussed three areas of focus to return to revenue growth, expanding with our large technology and enterprise accounts, serving increasingly global clients in new geographies and focusing on our specialized services.Let me discuss some of the investments that we're making to support these growth initiatives. First, in terms of expanding with our global technology and enterprise accounts, we've made significant progress. Over the past year, we highlighted signings with some of the largest global tech companies and some of the world's largest retailers. Since that time, we've expanded with these clients. For example, one of these clients typically has increased seasonal volumes around the holidays, and we would have expected them to reduce volumes in the first half of this year. Not only were we able to maintain volumes, but this client has grown with us every sequential quarter since we signed them.For another client, one of the world's largest technology companies, we have a multiyear partnership to provide highly skilled learning experience services out of the U.S., including instructional design, rapid design work and more. Recently, we expanded this partnership to the Philippines, while keeping the work that we do in the U.S. In terms of investment, we've built out our client service and engagement team, bringing on additional talent to manage client relationships at some of the largest global tech and retail companies in the world. These individuals are uncovering new opportunities to add value to our clients.Second, we continue to expand to serve clients in new geographies. We're seeing particularly strong traction in Latin America, where we have increased revenues by 70% year-over-year. We opened operations last year in Malaysia, and we're seeing strong demand for this region to cover Asian languages. We also continue to grow our operations in Greece and Croatia, providing European language services to our global clients. We're expanding our go-to-market talent in key geographies, and our investment here is beginning to pay off. We've seen a number of European clients increase by approximately 30% compared with Q2 of last year.Lastly, in terms of specialized services, we're seeing traction across our offerings. We're working with our clients to build Generative AI into their workflows to drive efficiencies. We've already launched with a number of clients, including MoneyLion, which I mentioned earlier. We expect to see this technology embedded in additional client processes this quarter. As I mentioned, we have continued to expand our learning experience services with some of the biggest technology companies in the world turning to us for instructional design and LMS maintenance.We also continue to see global demand for our Trust & Safety work, expanding into Malaysia to support one of the world's leading multichannel social communication apps. Furthermore, inside Trust & Safety, our fraud and investigation work has continued to gain traction over the past several quarters. This past quarter, we signed an expansion of an e-commerce client for fraud and investigations work. We started working with this client less than a year ago doing Tier 1 fraud work. Their Tier 2 risk and [ charge back] work is being done by internal teams in the U.S. and Japan as well as another outsourced partner. But given our strong performance, they've centralized all this work with us.In terms of investment, we've launched our Technology and Innovation center in Chennai, India. This office is our hub for Generative AI talent to support TaskGPT. Also, within our sales organization, we continue to bring on talent with specific expertise selling AI services. Our progress on these growth initiatives is encouraging, and I'm confident they will drive revenue growth over time. However, we no longer expect to return to growth by the end of 2023 and have lowered our revenue outlook for the remainder of the year. We now expect that revenue for the full year will be between $900 million and $910 million.At the top end of our range, we would expect to see a stabilization in sequential revenues by year-end. In terms of margins, we're continuing to focus on our cost structure and have made very good progress on this front. Our multiyear efficiency program is more than offsetting the impact of lower revenue. However, we are also focused on making investments to get back to growth. Given these investments, our adjusted EBITDA margin for the year is now approximately 23%. We would expect to return to higher margins as revenues stabilize and we return to growth.Our outlook on free cash flow has not changed. We continue to expect to deliver greater than $100 million of free cash flow at any point in our guidance range, excluding the earn-out payment associated with the heloo acquisition. We're optimizing working capital and balancing CapEx investments with current growth needs. In this environment, we are very focused on using our cash to drive shareholder value. As I discussed, our first priority is to invest in the business to drive growth. We continue to see M&A as a potential use of cash to drive value in the future. However, we've not seen private market valuations match with public market realities.Given our low leverage ratio of just 0.5 turn, we're well positioned to move quickly on M&A when the valuations look more attractive. Given the current public valuation of TaskUs, we see repurchases as the most attractive use of cash today. As of the quarter end, we've repurchased almost 5.3 million shares since the start of our share repurchase program. We were much more active in the market during the second quarter, driven by our dynamic repurchase plan that allows us to purchase more shares at lower prices. We see repurchasing our stock as a very attractive use of capital and believe that as growth returns our repurchases at these levels will result in significant value creation. We remain focused on executing against our strategic initiatives and investing for growth, while at the same time, remaining diligent on our cost structure.With that said, I'll hand it over to Balaji to go through the Q2 financials in a bit more detail and provide our outlook for Q3 and the year ahead.
Thanks, Bryce, and good afternoon, everyone. I'm going to discuss our financial results for the second quarter of 2023. 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 $229.2 million, a decrease of 7% compared to Q2 of 2022. We outperformed compared to our guidance as a result of revenue from new client signings coming in slightly stronger than expected, primarily within our Digital Customer Experience service line. In the second quarter, our DCX offering generated $150.9 million for a year-over-year decline of 9.9%, driven by the impact of lower revenues from our largest client and from crypto and equity trading clients as well as the impact of process improvement at an outcome-based client.Our Trust & Safety business declined by 2.4% compared to Q2 of 2022, resulting in $45.2 million of revenues. This decline was the result of the geographic mix shift from our largest client, moving volumes offshore and lower volumes from one of our equity trading clients. Our AI Services business grew 1% year-over-year for revenues of $33 million as a result of expansion with both existing and new clients, partially offset by the geographic mix shift from our largest client moving volumes offshore. Our client base has continued to diversify in Q2. Our revenue concentration with our largest client was approximately 19%, down from 22% in Q2 2022, primarily driven by the shift from onshore to offshore.Our top 10 and top 20 clients accounted for 55% and 69%, down from 58% and 73% in Q2 of last year. In the second quarter, we generated 55% of our revenues in the Philippines, 16% of our revenues in the United States, 13% of our revenues in India and 16% of our revenue from the rest of the world. We saw particularly strong growth in Latin America and Asia. Our cost of service as a percentage of revenue was 58.3% in the second quarter compared to 58.2% in Q2 of the prior year.The increase was due to wage inflation and return to office expenses as we have more people back in the office compared with last year, which was partially offset by the gains from the stronger dollar in the current quarter compared with Q2 of 2022 and the transition of work from our onshore to offshore locations, which have a lower cost of service. In the second quarter, our SG&A expenses were $58.2 million or 25.4% of revenue. This compares to SG&A in Q2 of 2022 of $68.9 million or 28% of revenue. Excluding the impact of severance cost, the earn-out accrual associated with our heloo acquisition and stock-based compensation for the quarter, SG&A as a percentage of revenue would have been 18.6%.The impact of our cost optimization and other efficiency efforts will continue to drive improvement in our G&A spend. However, as we invest in sales and marketing to drive growth, and we see the impact of lower revenue, we expect total SG&A as a percentage of revenue could increase in the back half of the year. In the second quarter of 2023, we earned adjusted EBITDA of $54.7 million, a 23.8% margin compared to $55.7 million and 22.6% in the second quarter of 2022, mainly driven by the cost optimization initiative in G&A that I just discussed. We came in higher than our guidance for the quarter driven by our higher-than-expected revenues and operational efficiency gains.Adjusted net income for the quarter was $31.8 million and adjusted earnings per share was $0.32. By comparison, in the year-ago period, we earned adjusted net income of $38.7 million and adjusted EPS of $0.38. The decline in adjusted net income was primarily due to higher financing expenses compared to last year due to the impact of higher interest rates and a higher accrual for taxes due to increased income before taxes. Now moving on to the balance sheet; cash and cash equivalents were $153.6 million as of June 30, 2023, compared with the December 31, 2022 balance of $134 million. In the quarter, we utilized approximately $38 million for share repurchases, buying back approximately 3.2 million shares at an average price of $11.76.As of quarter end, we had approximately $124.8 million of authorization left on our plan. Our net leverage ratio continues to be healthy and was 0.5x as of quarter end. Cash generated from operations was $38.5 million for the second quarter of 2023 as compared to $36.1 million in Q2 of 2022. Our capital expenditure decreased in the second quarter of 2023 to $9.8 million compared to $11.6 million in Q2 of 2022. The decrease was primarily driven by lower technology and facilities-related expenses as employees have returned to the office. We now expect CapEx to be $35 million for the year. Free cash flow was $28.7 million or 52.6% of adjusted EBITDA.Given our current outlook for CapEx spend and working capital, we expect to see a slightly lower conversion rate for the remainder of the year. Year-to-date, we have generated $67.2 million of free cash flow, representing 61.1% conversion rate from adjusted EBITDA. In terms of our financial outlook for the remainder of the year, we have updated our guidance. We now anticipate full year 2023 total revenues to be in the range of $900 million to $910 million. We expect to earn a full year 2023 adjusted EBITDA margin of approximately 23%, which aligns with our outlook at the start of the year.And we expect to deliver greater than $100 million of free cash flow at any point in our guidance range, excluding the earn-out payment associated with the heloo acquisition, which implies a conversion rate of 45% to 50% of adjusted EBITDA. For the third quarter, we expect revenue to be in the range of $220 million to $222 million, and we expect our adjusted EBITDA margin to be approximately 22.4% for the quarter. This adjusted EBITDA margin guidance for the third 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 revenues is built and collected in U.S. dollars, so we do not see the impact of U.S. dollar fluctuation in our revenues.I'll now hand it back to Bryce before we take your questions.
Thank you, Balaji. Before we open up for questions, I want to share another TaskUs teammate story. Next month, TaskUs will celebrate our 15th anniversary. One of the most meaningful parts of our incredible journey is seeing our teammates grow here at TaskUs. Almost as long as TaskUs has been around, I've worked with [ Faith Colonia; Faith ] has been with us for over 13 years. She began her journey of the teammate in the Philippines right after graduating from college. Over the years, Faith demonstrated strong skills and a dedication to her work, leading to her promotion to Team Leader.And today, Faith is an Operations Manager for our brand-new site in Molino, Philippines, which we call Greenhouse. She's doing a tremendous job. One of the things that makes me most proud is how TaskUs has supported Faith's personal journey. As a single mom, Faith was among the first recipients of our TaskUs Scholars program. And for the past 7 years, we've paid almost 100% of her son's tuition fees at private school. As part of our commitment to fostering even greater impact, we recently announced the expansion of the program for our 15th anniversary aiming to provide tuition support to 1,500 students worldwide. Faith's story shows the potential of our people-first culture in creating rewarding lives and careers for our teammates.With that, I'll ask the operator to open our line for a question-and-answer session. Operator?
[Operator Instructions] And the first question comes from the line of Puneet Jain with J.P. Morgan.
Quick questions on the guidance cut. So first, what gives you confidence that the worst is behind you and there should not be any incremental surprises this year? And also, given the exit rate implied for Q4 in high single digits or maybe low double-digit decline can you share qualitative comments on next year's growth rates?
Yeah, Puneet, thanks so much for the question. So clearly, over the past 18 months, we've seen our clients shift their focus to cost reduction. Many of our clients have laid off internal employees and they have cut their outsourcing budgets. They've driven efficiency into their outsourced relationships by shifting work from high-cost to low-cost geographies, in some cases, improving their own product and process to contain more contacts and finally deciding to simply stop supporting certain noncritical workflows.These shifts that our clients have been a headwind to revenue growth, and they've also slowed our sales as companies reducing spending are less likely to introduce new vendors. With that being said, there is a limit to how much these efficiency improvements can drive volumes down. There remain millions of customer interactions to respond to millions of pieces of content to moderate in addition to exciting new investment areas like creating and rating content from generated AI applications. So while I'm not ready to predict exactly where we're at in this cycle of efficiency, I do believe that we're closer to the end than the beginning. And while we're not providing guidance for 2024 at this stage, I do feel confident we will return to growth next year.
That's fair. And then your largest customer said the weakness there stem from content moderation volume or was it like some other initiatives that you have been working on for that client? And the clarification, like in Balaji's comments like about increased offshore mix there. I'm assuming that year-on-year change and not necessarily on a sequential basis.
So let me take the first question, and then I'll hand the second question to Balaji. At our largest client, we continue to have a very strong relationship. We have more people supporting our largest client currently than we did at this stage last year. So we've seen volume growth. The revenue decline has been driven primarily by moving work from high-cost onshore markets to low-cost offshore markets, which we obviously described prior. And apology, I'll have you jump in on the next question.
Yeah, Puneet, you're right. So the numbers that I provided is year-on-year comparison there for the largest client, where we approximate 19% when compared to 22% in Q2 of 2022.
Got it. So on a sequential basis, there is -- there was no incremental increase in low-cost labor mix there -- because it was already low as of last quarter.
Yeah. Last quarter, we were approximately at about 20%. And this quarter, we are about 19%.
And the next question comes from the line of Maggie Nolan with William Blair.
On the volumes, can you help us translate that into what kind of visibility you have into the guidance that you put out? What kind of factors specifically are impacting those volumes? And then are you assuming any sort of recovery in the back half of any of those volumes?
Yeah. So as we've demonstrated in the past, we've got very strong visibility into the current quarter. Given that we're already more than halfway through the year and halfway through Q3, we've got less potential variability in our range than we had when we guided at the start of this year. We have incorporated every main risk from a client perspective into our forecast and have embedded further conservatism into our expectations around new sales and around client volumes. We feel reasonably confident in our visibility into client volumes headed into 2024 as well.
And then can you give us some idea of how you're viewing AI and Generative AI in terms of the opportunity and threat from a more granular level, like across your different service lines, I imagine there will be different impacts there.
Yeah. We ultimately believe that Generative AI is going to be a net positive for us. We launched TaskGPT, which is our Generative AI agent assist tool that's based on OpenAI's GPT for API. We've been integrating TaskGPT into client workflows and driving efficiency gains that we're sharing with clients. And we believe that our progress on this front is increasing our competitiveness. We do believe that certain Digital Customer Experience workflows are likely to be further automated. However, our customer support work is mostly complex, involving real-time interactions with multiple systems and changing variables. And we believe that this work is less likely to be automated in the near-term.Additionally, we believe strongly that ChatGPT and Generative AI in general, is going to create significant demand for Trust & Safety services. It's hard to imagine all of the workflows that are going to be created as a result of this. But when you think about the amount of content, both image, video and text that is going to be generated using these generative AI tools, the potential here is massive. We also believe that we're going to continue to see growth in demand for AI services to support the development of these Generative AI models. So ultimately, we're very aware that Generative AI may automate some of the work that we do today, but we believe it has the potential to create a lot more work as well.
And the next question comes from the line of Ryan Potter with Citi.
I wanted to double-click on the lowered outlook one more time. I guess regarding the demand environment, where would you say things have moved incrementally worse since last earnings in terms of service offerings and verticals? And did the softer client volumes concentrate more in certain larger clients or is it more of a broad-based [indiscernible] across the general client base?
Yeah. Let me comment on this, and I'll have Balaji add any color. Ultimately, the lower outlook is being driven by lower volumes at existing clients and a slowdown in our overall sales pipeline. The size of the pipeline remains robust, but the velocity is significantly slower than it was at this stage last year. We're seeing existing clients really push the boundaries of how they can drive efficiency. We've gone through a wave of moving work from high-cost geos to low-cost geos. We have worked with clients to automate certain workflows and [ pallet client instructions ] on not supporting certain noncritical workflows. As I said, I do believe that we're closer to the end of this efficiency cycle than we are to the beginning. But those are the things that have driven the review -- the revised guidance. Balaji, do you have anything you want to add that?
No, I'll just kind of reiterate what Bryce mentioned just from a forecasting process perspective. So one is that we do have very strong visibility in the current quarter so for this year, we are halfway through the year, halfway through Q3. So we have less potential variability. And also in terms of risk assessment, we do capture name risk at the client level and then further conservative on -- into the expectations around both client volumes and new sales from a forecast perspective.
Got it. And then on your U.S. delivery, have you seen any incremental client reductions away from the U.S. beyond the client that you kind of called out last quarter. Is there any change in your expectations in terms of U.S. delivery going to 10% in terms of what's embedded in the outlook?
Yeah. So between last call and this call, there hasn't been a material change in our expectations for U.S. delivery. This revision in guidance has been driven more by volume reductions across client at a global scale. So we would still expect the U.S. to represent 10% or perhaps more of our revenues at the end of the year and into next year.
And the next question comes from the line of Matt VanVliet with BTIG.
I just wanted to dig in a little bit on the HealthTech vertical, an area that has been emerging for you. And curious what you're seeing in terms of trends there -- really kind of outside of the bigger tech realm, but curious on how much you're seeing, you called out the mental health start-up but any other commentary that you can have to give us some directionality on that group?
Yeah. HealthTech has been a huge driver of growth for us in the past year. We've seen a lot of demand from mental health startups, both counselors and psychiatrists that are available remotely to patients. And we've been also real expertise in that area as well as across the HealthTech space more generally. Right now, what we need to do is use our credentials in the HealthTech space to get into the enterprise healthcare space. We've been making solid progress, but have yet to close any material deals in that area. I think that represents a potential upside as we continue to expand into more enterprise customers.
And then I guess on a similar vein, earlier -- or over the last several quarters, you talked about getting into kind of newer areas of -- or newer business units across more traditional enterprise customers. Any updates on maybe potential new business or at least pipeline generation, trying to get into traditional enterprise that are looking to be a little more disruptive or guard against other disruptors coming into their space.
We've made really good progress on the retail front here. We signed two enterprise-class retailers in this past quarter, both to deliver out of our Latin American operations, and we see meaningful upside there. Right now, healthcare is an area, obviously, that's very interesting for us, yet to make significant progress in terms of closing deals, but have a strong pipeline. We're also interested in more traditional banking and financial services. We're making investments to bring on sales leaders who have enterprise expertise, and we expect that to accelerate our sales pipeline going forward.
And the next question comes from the line of James Faucette with Morgan Stanley.
I wanted to ask in terms of the efficiency programs, etcetera. And Bryce, I understand the comments that we may be near the end, particularly for those that have been undertaking that for the last few quarters. But how are you feeling about the broader segment of clients that you have and where they're at in those processes? And do you think that there -- like what are the things that you're looking for to -- that may be indicators that they may want to start to undertake their own efficiency programs, etcetera?
Yeah. So the bulk of the efficiency programs have been at our largest clients. And as we said in the past, we've gone on a journey with many of our clients from venture-funded start-ups to publicly traded enterprises. And this is a chapter in that journey as they shift their focus from growth at all costs to being more efficient and profitable. And so at this stage, we have seen early signs of demand reviving at certain of our larger clients. We're actively in discussions at most of them about new exciting opportunities and areas of potential expansion. But clearly, in the near-term, we've seen a decline just as a result of the three factors I mentioned earlier.
Got it. Got it. And then you made interesting comments there on outcome-based pricing. Can you break down percentage of contracts maybe that are outcome-based right now versus time and materials? And just kind of help us think through what the potential trajectory is for outcome-based pricing and the impact they could have on the business and what kind of timeframe?
As we said, we've got one large client that we have on an outcome-based agreement. And over the past two quarters, we've seen material improvements in their margins as we've driven additional efficiencies into the business. This has resulted in lower top line revenue, but expanded margins and a strong relationship with the client. At this stage, we've got a low double-digit percentage of our revenues that is derived from outcome-based contracts. But in an environment in which our clients are so focused on efficiency, we continue to have lots of conversations about making the shift. We believe that the future of the business will be more outcome-based agreements supported by tech-enabled talent.
And the next question comes from the line of Kathy Chan with Bank of America.
So first, I just wanted to ask a little bit about geography. You guys mentioned some strong traction in newer countries in LatAm and Europe, for example, Colombia, I guess how much -- and then at the same time, you guys mentioned your headcount sort of declined 700 -- about [ 700,000 ] or 47,000. So a two-part question. The first is how much of that is net versus gross, voluntary versus involuntary and then the expectations for headcount in the back half of the year? And then the second is related to that offshore and geography pieces -- how big is offshore in terms of your total global delivery model now? And are you expecting any margin impact from continuing to expand offshore?
Yeah. Kathy, thanks so much for the question. So clearly, the Latin American nearshore region has been a huge driver of growth -- over the course of the last year, we grew revenues by approximately 70% there. The slight decrease in headcount over the course of the last quarter was driven mostly in the United States. Although we have seen, I would say, a modest flattening of growth in our offshore regions. Philippines and India continue to be the bulk of our business, and that's good because we make higher margins in those geographies and feel like we've got a more robust product to sell. But in recent quarters, we've seen our clients really more interested in buying a nearshore product versus the offshore product. And so we'll have to keep an eye on that going forward.
Okay. And then switching gears, I saw that you guys also launched TaskGPT with MoneyLion, I think that's pretty new. That's exciting. Can you just give us a little bit of insight about how that partnership has been going, who initiated that conversation initially? And are you guys able to maybe take that as an initial use case and then easily implement that with other customers? Are you seeing some interest in that as well?
Yeah. So the product is totally applicable to other customers. In fact, we've launched with a number of other clients. But we've made great progress with MoneyLion, increasing the efficiency and accuracy of the teammates that we have supporting their clients. So we're very excited about that, and we expect to see similar results across our other clients.
There are no further questions at this time. Now I would like to turn the floor back over to Bryce for any closing comments.
Thanks so much. In closing, I wanted to thank every one of our incredible teammates around the globe. In the face of challenges, this team has continued to work tirelessly to return TaskUs to growth. We look forward to updating you on our progress towards that goal on our next earnings call.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.