task-20220331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

_______________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____________to______________

Commission File Number: 001-40482

_______________________

TaskUs, Inc.

(Exact name of registrant as specified in its charter)

_______________________


Delaware			83-1586636
State or other jurisdiction of incorporation or organization			I.R.S. Employer Identification No.

1650 Independence Drive, Suite 100 New Braunfels, Texas			78132
Address of principal executive offices			Zip Code

(888) 400-8275

Registrant’s telephone number, including area code

N/A

Former name, former address and former fiscal year, if changed since last report

_______________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

TASK

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 5, 2022, the number of shares outstanding of the registrant’s common stock was as follows: Class A common stock, par value $0.01 per share: 27,723,772; Class B common stock, par value $0.01 per share: 70,032,694.

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TASKUS, INC.

Quarterly Report on Form 10-Q

For Quarterly Period Ended March 31, 2022

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		Page No.

	CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	1

	WEBSITE AND SOCIAL MEDIA DISCLOSURE	2

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets	3

	Unaudited Condensed Consolidated Statements of Operations	4

	Unaudited Condensed Consolidated Statements of Comprehensive Income	5

	Unaudited Condensed Consolidated Statements of Shareholders’ Equity	6

	Unaudited Condensed Consolidated Statements of Cash Flows	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	24

PART II.	OTHER INFORMATION	25

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3.	Defaults Upon Senior Securities	25

Item 4.	Mine Safety Disclosures	25

Item 5.	Other Information	25

Item 6.	Exhibits	26

Signatures		27

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which involve certain known and unknown risks and uncertainties. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “predicts,” “intends,” “trends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Our actual results or outcomes may differ materially from those anticipated. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Our actual results may differ significantly from any results expressed or implied by any forward-looking statements. A summary of the principal risk factors that might cause our actual results to differ from our forward-looking statements is set forth below. The following is only a summary of the principal risks that may materially adversely affect our business, financial condition and results of operations. This summary should be read in conjunction with the more complete discussion of the risk factors we face, which are set forth under Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (our "Annual Report") as filed with the Securities and Exchange Commission (the “SEC”), as such risk factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Such risks and uncertainties include, but are not limited to, the following:

•our business is dependent on key clients, and the loss of a key client could have an adverse effect on our business and results of operations;

•our contracts are typically one to three years in length with automatic renewal provisions, but certain contracts may provide for termination at the client's convenience with advance notice and may or may not include penalties or required payments in the event the termination right is exercised. Our clients may terminate contracts before completion or choose not to renew contracts, and our clients may be unable or unwilling to pay for services we performed. A loss of business or non-payment from significant clients could materially affect our results of operations;

•we may fail to cost-effectively acquire new, high-growth clients, which would adversely affect our business, financial condition and results of operations;

•if we provide inadequate service or cause disruptions in our clients’ businesses or fail to comply with the quality standards required by our clients under our agreements, it could result in significant costs to us, the loss of our clients and damage to our corporate reputation;

•unauthorized or improper disclosure of personal or other sensitive information, or security breaches and incidents, whether inadvertent or purposeful, including as the result of a cyber-attack, could result in liability and harm our reputation, each of which could adversely affect our business, financial condition, results of operations and prospects;

•content security, including content monitoring and moderation services, is a large portion of our business. The long term impacts on the mental health and well-being of our employees doing this work are unknown. This work may lead to stress disorders and may create liabilities for us. This work is also subject to significant press and regulatory scrutiny. As a result, we may be subject to negative publicity or liability, or face difficulties retaining and recruiting employees, any of which could have an adverse effect on our reputation, business, financial condition and results of operations;

•our failure to detect and deter criminal or fraudulent activities or other misconduct by our employees, or third parties such as contractors and consultants that may have access to our data, could result in loss of trust from our clients and negative publicity, which would have an adverse effect on our business and results of operations;

•global economic and political conditions, especially in the social media and meal delivery and transport industries from which we generate significant revenue, could adversely affect our business, results of operations, financial condition and prospects;

•our business is heavily dependent upon our international operations, particularly in the Philippines and India, and any disruption to those operations would adversely affect us;

•our business is subject to a variety of U.S. federal and state, as well as international laws and regulations, including those regarding privacy and data security, and we or our clients may be subject to regulations related to the processing of

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certain types of sensitive and confidential information; any failure to comply with applicable privacy and data security laws and regulations could harm our business, results of operations and financial condition;

•our business depends in part on our capacity to invest in technology as it develops, and substantial increases in the costs of technology and telecommunications services or our inability to attract and retain the necessary technologists could have a material adverse effect on our business, financial condition, results of operations and prospects;

•our results of operations and ability to grow could be materially affected if we cannot adapt our services and solutions to changes in technology and client expectations;

•fluctuations against the U.S. dollar in the local currencies in the countries in which we operate could have a material effect on our results of operations;

•our business depends on a strong brand and corporate reputation, and if we are not able to maintain and enhance our brand, our ability to expand our client base will be impaired and our business and operating results will be adversely affected;

•competitive pricing pressure may reduce our revenue or gross profits and adversely affect our financial results;

•the success of our business depends on our senior management and key employees;

•the ongoing COVID-19 pandemic, including the resulting global economic uncertainty and measures taken in response to the pandemic, has adversely impacted our business, financial condition and results of operations;

•affiliates of Blackstone Inc. and our Co-Founders Bryce Maddock and Jaspar Weir control us and their interests may conflict with ours or yours in the future;

•the dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our common stock prior to the completion of our June 2021 initial public offering ("IPO"), and it may depress the trading price of our Class A common stock; and

•the market price of shares of our Class A common stock has been, and may continue to be, volatile and may decline regardless of our operating performance, which could cause the value of your investment to decline.

We urge you to carefully consider the foregoing summary together with the risks discussed under “Risk Factors” in the Annual Report and in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report.

WEBSITE AND SOCIAL MEDIA DISCLOSURE

We use our website and our social media outlets, such as Facebook, Instagram, YouTube, LinkedIn, and Twitter as channels of distribution of Company information. The information we post through these channels may be deemed material. Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s website at ir.taskus.com, its Facebook page at facebook.com/TaskUs/, its Instagram page at instagram.com/taskus/, its LinkedIn page at linkedin.com/company/taskus/, its YouTube account at youtube.com/c/Taskus/, and its Twitter account at twitter.com/taskus. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” section of our investor relations website at ir.taskus.com. The contents of our website and social media channels are not, however, a part of this Quarterly Report.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TASKUS, INC.

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share data)


Assets	March 31, 2022		December 31, 2021
Current assets:
Cash	$	77,074	$	63,584
Accounts receivable, net of allowance for doubtful accounts of $2,298 and $1,819, as of March 31, 2022 and December 31, 2021, respectively	172,391		162,895
Other receivables	669		597
Prepaid expenses	12,498		10,939
Income tax receivable	160		3,863
Other current assets	5,218		4,428
Total current assets	268,010		246,306
Noncurrent assets:
Property and equipment, net	87,639		80,046
Deferred tax assets	1,442		1,441
Intangibles	216,737		221,448
Goodwill	195,735		195,735
Other noncurrent assets	5,202		5,022
Total noncurrent assets	506,755		503,692
Total assets	$	774,765	$	749,998
Liabilities and Shareholders’ Equity
Liabilities:
Current liabilities:
Accounts payable and accrued liabilities	$	39,774	$	40,890
Accrued payroll and employee-related liabilities	34,716		36,670
Current portion of debt	52,447		51,135
Current portion of income tax payable	3,348		2,416
Deferred revenue	4,873		4,095
Deferred rent	481		735
Total current liabilities	135,639		135,941
Noncurrent liabilities:
Income tax payable	2,886		2,886
Long-term debt	183,441		187,240

Deferred rent	3,386		2,749
Accrued payroll and employee-related liabilities	2,078		1,813
Deferred tax liabilities	40,235		40,235
Total noncurrent liabilities	232,026		234,923
Total liabilities	367,665		370,864
Commitments and Contingencies (See Note 8)
Shareholders’ equity:
Class A Common stock, $0.01 par value. Authorized 2,500,000,000; 27,523,669 and 27,431,264 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	275		275
Class B Convertible Common stock, $0.01 par value. Authorized 250,000,000; 70,032,694 shares issued and outstanding as of March 31, 2022 and December 31, 2021	700		700
Additional paid-in capital	574,554		556,418
Accumulated deficit	(164,510)		(176,096)
Accumulated other comprehensive loss	(3,919)		(2,163)
Total shareholders’ equity	407,100		379,134
Total liabilities and shareholders’ equity	$	774,765	$	749,998

See accompanying notes to unaudited condensed consolidated financial statements.

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TASKUS, INC.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)


	Three months ended March 31,
		2022		2021
Service revenue		$	239,680	$	152,871
Operating expenses:
Cost of services		141,282		88,030
Selling, general, and administrative expense		64,247		31,498
Depreciation		8,901		6,203
Amortization of intangible assets		4,711		4,712
Loss (gain) on disposal of assets		(15)		27

Total operating expenses		219,126		130,470
Operating income		20,554		22,401
Other expense		1,053		754
Financing expenses		1,602		1,581
Income before income taxes		17,899		20,066
Provision for income taxes		6,313		3,559
Net income		$	11,586	$	16,507
Net income per common share:
Basic		$	0.12	$	0.18
Diluted		$	0.11	$	0.18
Weighted-average number of common shares outstanding:
Basic		97,481,412		91,737,020
Diluted		104,122,026		91,737,020

See accompanying notes to unaudited condensed consolidated financial statements.

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TASKUS, INC.

Unaudited Condensed Consolidated Statements of Comprehensive Income

(in thousands)


	Three months ended March 31,
		2022		2021
Net income		$	11,586	$	16,507
Retirement benefit reserves		9		(5)
Foreign currency translation adjustments		(1,765)		(850)
Comprehensive income		$	9,830	$	15,652

See accompanying notes to unaudited condensed consolidated financial statements.

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TASKUS, INC.

Unaudited Condensed Consolidated Statements of Shareholders’ Equity

(in thousands, except share data)


	Capital stock and additional paid-in capital								Accumulated deficit		Accumulated other comprehensive income		Total shareholders’ equity
	Class A Common stock			Class B Common stock			Additional paid-in capital
	Shares	Amount		Shares	Amount
Balance as of December 31, 2020	—	$	—	91,737,020	$	917	$	398,202	$	(67,398)	$	3,416	$	335,137
Net income	—	—		—	—		—		16,507		—		16,507
Other comprehensive loss	—	—		—	—		—		—		(855)		(855)
Balance as of March 31, 2021	—	$	—	91,737,020	$	917	$	398,202	$	(50,891)	$	2,561	$	350,789


	Capital stock and additional paid-in capital								Accumulated deficit		Accumulated other comprehensive loss		Total shareholders’ equity
	Class A Common stock			Class B Common stock			Additional paid-in capital
	Shares	Amount		Shares	Amount
Balance as of December 31, 2021	27,431,264	$	275	70,032,694	$	700	$	556,418	$	(176,096)	$	(2,163)	$	379,134
Issuance of common stock for settlement of RSUs	137,794	1		—	—		(1)		—		—		—
Shares withheld related to net share settlement	(45,389)	(1)		—	—		(1,468)		—		—		(1,469)
Stock-based compensation expense	—	—		—	—		19,605		—		—		19,605
Net income	—	—		—	—		—		11,586		—		11,586
Other comprehensive loss	—	—		—	—		—		—		(1,756)		(1,756)
Balance as of March 31, 2022	27,523,669	$	275	70,032,694	$	700	$	574,554	$	(164,510)	$	(3,919)	$	407,100

See accompanying notes to unaudited condensed consolidated financial statements.

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TASKUS, INC.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Three months ended March 31,
	2022		2021
Cash flows from operating activities:
Net income	$	11,586	$	16,507
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	8,901		6,203
Amortization of intangibles	4,711		4,712
Amortization of debt financing fees	139		114
Loss (gain) on disposal of assets	(15)		27
Provision for losses on accounts receivable	479		231
Unrealized foreign exchange losses on forward contracts	759		1,820
Deferred taxes	(19)		—
Stock-based compensation expense	19,605		—
Changes in operating assets and liabilities:
Accounts receivable	(9,979)		(6,106)
Other receivables, prepaid expenses, and other current assets	(2,478)		1,558
Other noncurrent assets	(223)		(297)
Accounts payable and accrued liabilities	(1,071)		471
Accrued payroll and employee-related liabilities	(1,392)		8,755
Income tax payable	4,686		5,037
Deferred revenue	779		666
Deferred rent	422		224
Net cash provided by operating activities	36,890		39,922
Cash flows from investing activities:
Purchase of property and equipment	(17,770)		(10,127)
Net cash used in investing activities	(17,770)		(10,127)
Cash flows from financing activities:

Payments on long-term debt	(2,625)		(1,313)



Payments for taxes related to net share settlement	(1,469)		—

Net cash used in financing activities	(4,094)		(1,313)
Increase in cash and cash equivalents	15,026		28,482
Effect of exchange rate changes on cash	(1,536)		(717)
Cash and cash equivalents at beginning of period	63,584		107,728
Cash and cash equivalents at end of period	$	77,074	$	135,493

See accompanying notes to unaudited condensed consolidated financial statements.

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TASKUS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business and Organization

TaskUs, Inc. (“TaskUs” and, together with its subsidiaries, the “Company,” “we,” “us” or “our”) was formed by investment funds affiliated with Blackstone Inc. (“Blackstone”) as a vehicle for the acquisition of TaskUs Holdings, Inc. (“TaskUs Holdings”) on October 1, 2018 (the “Blackstone Acquisition”). Prior to the Blackstone Acquisition, TaskUs had no operations and TaskUs Holdings operated as a standalone entity. TaskUs, Inc. was incorporated in Delaware in July 2018, and is headquartered in New Braunfels, Texas.

The Company provides digital outsourced services, focused on serving high-growth technology companies to represent, protect and grow their brands. The Company's global, omni-channel delivery model is focused on Digital Customer Experience, Content Security and Artificial Intelligence (AI) Services (formerly known as AI Operations). The Company has designed its platform to enable it to rapidly scale and benefit from its clients’ growth. Through its agile and responsive operational model, the Company delivers services from multiple delivery sites that span globally from the United States, Philippines, and other parts of the world.

The Company’s major service offerings are described in more detail below:

•Digital Customer Experience: Principally consists of omni-channel customer care services primarily delivered through digital (non-voice) channels.

•Content Security: Principally consists of review and disposition of user and advertiser generated content for purposes which include removal or labeling of policy violating, offensive or misleading content.

•AI Services: Principally consists of data labeling, annotation and transcription services performed for the purpose of training and tuning AI algorithms through the process of machine learning.

2. Summary of Significant Accounting Policies

(a) Basis of Presentation

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Our Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report"), as filed with the Securities and Exchange Commission (the “SEC”), includes a discussion of the significant accounting policies used in the preparation of our consolidated financial statements. There were no material changes to our significant accounting policies during the three months ended March 31, 2022.

These unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with US GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2021 included in the Annual Report. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of March 31, 2022 and its results of operations, comprehensive income (loss) and shareholders’ equity for the three months ended March 31, 2022 and 2021, and cash flows for the three months ended March 31, 2022 and 2021. The condensed consolidated balance sheet as of December 31, 2021, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.

In connection with the Company’s June 2021 initial public offering (“IPO”), on June 10, 2021, the Company amended and restated its certificate of incorporation to effect a ten-for-one forward stock split of its outstanding common stock and authorized two classes of ownership interests. The accompanying financial statements and related notes to the financial statements give retroactive effect to the stock split for all periods presented.

(b) Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the determination of useful lives and impairment of fixed assets; allowances for doubtful accounts and other receivables; the valuation of deferred tax assets; valuation of foreign currency exchange rate forward contracts; valuation of

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stock-based compensation; valuation and impairment of intangibles and goodwill and reserves for income tax uncertainties and other contingencies.

As of March 31, 2022, the impact of the novel coronavirus (“COVID-19”) pandemic, including as a result of new strains and variants of the virus and uncertainty of acceptance of vaccines and their effectiveness, continues to unfold. As a result, many of our estimates and assumptions required increased judgement and carry a higher degree of variability and volatility. We continue to closely monitor the outbreak and the impact on our operations and liquidity. As events continue to evolve and additional information becomes available, our estimates may change materially in the future.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company has no involvement with variable interest entities.

(d) Concentration Risk

Most of the Company’s clients are located in the United States. Clients outside of the United States are concentrated in Europe and Canada.

For the three months ended March 31, 2022 and 2021, the following clients represented greater than 10% of the Company’s service revenue:


Client	Service revenue percentage
	Three months ended March 31,
	2022		2021
A	24	%	29	%
B	10	%	11	%

As of March 31, 2022 and December 31, 2021, the following clients represented greater than 10% of the Company’s accounts receivable:


	Accounts receivable percentage
Client	March 31, 2022		December 31, 2021
A	18	%	22	%
B	Less than 10%		12	%
C	12	%	Less than 10%

The Company’s principal operations, including the majority of its employees and the fixed assets owned by its wholly owned subsidiaries, are located in the Philippines.

(e) Recent Accounting Pronouncements

The Company currently qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Accordingly, the Company is provided the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. The Company has elected to adopt new or revised accounting guidance within the same time period as private companies.

Recently issued accounting pronouncements

In February 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") ASU 2016-02, Leases (Topic 842), which supersedes FASB Accounting Standards Codification ("ASC"), Leases (Topic 840). The standard is intended to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In June 2020, the FASB postponed the effective date for ASC 842 for private companies. This ASU will be effective for the Company beginning in fiscal year 2022, with early adoption permitted. The Company plans to adopt this standard during 2022, using the modified retrospective method and the effective date as the date of initial application. The Company currently expects to recognize right-of-use assets and lease liabilities of approximately $43 million to $51 million to the consolidated balance sheet. The Company expects to elect the "package of practical expedients," which permits the Company not to reassess under ASC842 any prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to apply the short-term lease exception and will therefore recognize a right-of-use asset and lease liability for all leases. The Company does

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not expect adoption of the lease standard to have a material impact on the consolidated statement of operations nor on its consolidated cash flow statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The revised standard relates to measurement of credit losses on financial instruments, and requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The guidance replaces the incurred loss model with an expected loss model referred to as current expected credit loss ("CECL"). The CECL model requires us to measure lifetime expected credit losses for financial instruments held at the reporting date using historical experience, current conditions and reasonable supportable forecasts. The guidance expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating credit losses and requires new disclosures of the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. This ASU will be effective for the Company beginning in fiscal year 2023 with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2016-13 on the Company’s consolidated financial statements.

3. Revenue

Disaggregation of Revenue

The Company's revenues are derived from contracts with customers related to business outsourcing services that it provides. The following table presents the breakdown of the Company’s revenues by service offering:


	Three months ended March 31,
(in thousands)		2022		2021
Digital Customer Experience		$	159,731	$	99,711
Content Security		45,852		36,127
AI Services		34,097		17,033
Service revenue		$	239,680	$	152,871

The majority of the Company’s revenues are derived from contracts with customers who are located in the United States. However, the Company delivers its services from geographies outside of the United States. The following table presents the breakdown of the Company’s revenues by geographical location, based on where the services are provided from:


	Three months ended March 31,
(in thousands)		2022		2021
Philippines		$	120,080	$	84,578
United States		79,131		50,757
Rest of World		40,469		17,536
Service revenue		$	239,680	$	152,871

Contract Balances

Accounts receivable, net of allowance for doubtful accounts includes $89.4 million and $75.5 million of unbilled revenues as of March 31, 2022 and December 31, 2021, respectively.

4. Forward Contracts

The Company transacts business in various foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency exchange rate risk. During 2022 and 2021, the Company entered into foreign currency exchange rate forward contracts, with two commercial banks as the counterparties, with maturities of generally 12 months or less, to reduce the volatility of cash flows primarily related to forecasted costs denominated in Philippine pesos. In addition, the Company utilizes foreign currency exchange rate contracts to mitigate foreign currency exchange rate risk associated with foreign currency-denominated assets and liabilities, primarily intercompany balances. The Company does not use foreign currency exchange rate contracts for trading purposes. The exchange rate forward contracts entered into by the Company are not designated as hedging instruments. Any gains or losses resulting from changes in the fair value of these contracts are recognized in other expense in the consolidated statements of operations. The forward contract payable resulting from changes in fair value was recorded under accounts payable and accrued liabilities.

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The following table presents the Company's settled forward contracts and realized and unrealized losses (gains) associated with our derivative contracts:


	Three months ended March 31,
(in thousands)	2022		2021
Total notional amount of settled forward contracts	$	40,382

SEC Form 10-Q filed by TaskUs Inc.