Platform businesses, from social media platforms to food delivery apps, have surged in popularity, requiring scalable customer service solutions to support their growth. 

TaskUs (TASK) addresses this need by providing AI-driven customer experience and content moderation services, helping these businesses manage essential operations cost-effectively. 

The company supports high-profile clients like OpenAI and focuses on complex services like fraud prevention and data annotation, setting it apart in the outsourcing market. 

Despite strong performance, market concerns about competition and client concentration persist. 

TaskUs is diversifying its client base to reduce reliance on major accounts and capitalize on growth opportunities, positioning itself for long-term success in a competitive industry.

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Platform businesses have been all over the headlines for the last decade, and their popularity is increasing every single day.

Even some established companies are shifting focus from their traditional business model to becoming a platform business.

Whatever you think of the embracing of these platform businesses, be they social media platforms, food delivery apps, or ride-sharing services, they all are growing in usage.

That means they all need one thing, functional customer service, and assistance that can scale with them.

This is where TaskUs (TASK) comes in, by providing AI-driven customer experience solutions that can help these businesses with the background of needed business functions.

TaskUs helps to manage customer service and moderate content on social media platforms with a workforce in countries like the Philippines and elsewhere.

These are services that would be too prohibitive to bring “in-house,” so the company is called in.

Outsourcing continues to gain traction as businesses look for ways to cut costs and focus on what they do best.

TaskUs plays a key role in this market, offering services in customer experience, trust and safety, and AI-related support.

These aren’t just basic outsourcing tasks; they involve complex areas like content moderation, fraud prevention, and data annotation for machine learning models.

These specialized services help TaskUs stand out in a market where routine tasks are increasingly being automated.

The company has built strong relationships with high-profile clients, providing essential services that support their operations.

Its partnership with OpenAI shows its ability to work with cutting-edge technology firms. OpenAI uses the company across multiple service areas, showing the depth and value of this relationship.

However, this reliance on large clients also creates risks. Around 30% of TaskUs’ revenue comes from its top two clients, which makes diversification a priority for the company.

AI is both a challenge and an opportunity for TaskUs. Automation threatens to reduce demand for some of its services, but AI also creates new opportunities in areas where human oversight is still critical.

For example, trust and safety services, like monitoring content and preventing fraud, remain essential as companies adopt AI on a larger scale.

TaskUs is taking steps to reduce its reliance on its biggest clients by growing its business with smaller and newer accounts.

This diversification makes the company less vulnerable to spending cuts by any single client and gives it a more stable revenue base.

It’s a smart move, especially in a tough economic environment where companies are watching their budgets closely.

All these factors combined enabled the company to achieve a 37% Uniform return on assets ”ROA” and 10% asset growth last year.

However, its 12x Uniform P/E implies that while the company’s returns are appealing, the market is wary of intense competition in the outsourcing space.

We can see this through our Embedded Expectations Analysis (“EEA”) framework.

The EEA starts by looking at a company’s current stock price. From there, we can calculate what the market expects from the company’s future cash flows. We then compare that with our own cash-flow projections.

In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today.

At the current stock price, the market predicts that the company’s Uniform ROA will fall to around 15%.

As some of TaskUs’ major clients move from cutting costs to investing in growth, TaskUs could benefit from increased spending.

This shift could provide the company with the boost it needs to strengthen its position in the market and grow its share of the outsourcing business.

At the same time, its focus on efficiency and tailored services should help it stay competitive.

The company’s client relationships, growing service lines, and efforts to diversify its revenue base all point to a company that’s working hard to stay ahead.

With a solid strategy and the right focus, TaskUs has the potential to exceed market expectations and find opportunities for further growth in an increasingly competitive industry.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research