This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
Operator
came from existing clients. We saw that basically invert in the first half of this year with 60% of our sales coming from existing clients and 40% of our sales coming from new logos. And obviously we've seen that trend continue into Q3 with over two-thirds of our sales coming from existing clients. As far as the second question goes, we definitely are seeing a trend towards a broad-based embrace of outsourcing. I think this is being driven by the rapid rise of digital disruptors and also the COVID pandemic, which has forced us all to embrace new ways of working that are increasingly remote. So at Task Us, we're focused on identifying the next generation of digital disruptors and delivering the specialized services that they're going to need in order to scale. The one challenge of getting larger, I will say, is that it does become more difficult to deal with companies in the very, very early stages. We have a product called Launch by TaskUs, which enables us to work with companies who need as few as five full-time resources. It's sort of perfectly built for companies in the Series A stage, and we've had a lot of success with that product.
Matt Van Leet
Great. And then, you know, tremendous success in the AIOps group of business there. Are you finding yourself in a larger variety of potential engagements there, or is it really just embracing some of the specialties that you've already developed and your proven ability to train models so effectively?
Operator
We're finding demand is really expanding because the applications of artificial intelligence themselves are growing. We've gone from in the beginning doing a lot of work in the autonomous vehicle space where we continue to focus to working with clients across the social media space and other verticals who are looking to train their own models in various situations. So certainly as the applications of artificial intelligence continue to expand, the demand for training data for those services will continue to expand as well.
Matt Van Leet
All right, great. Thank you for taking the question.
Bryce
Thank you. Thank you. Our next question comes from Praneet Jain with JPMorgan. Your line is open.
Praneet Jain
Hey, thanks for taking my question. It was a great quarter. Can you comment on the outlook you see for content moderation business, specifically given the largest client has been in the news so much over the last few months? What does all that news flow mean for near-term outlook of content moderation for you?
Operator
Yeah, Puneet, thanks for the question. So obviously we can't comment on specifics of any individual customer, but let me talk about the social media space in general. Clearly, social media is facing increasing scrutiny and regulatory pressure here in the United States. And today, the most advanced regulatory regime probably exists in Europe. There, we've seen increased regulations lead to increased demand for essential services like content security and AI operations from European service providers. So our belief is that as our clients in the social media space face this scrutiny, they're likely to continue to expand their investments in these services. Given our reputation as a best-in-class provider of content security services, we stand to benefit from this growth. I'll also say that, you know, we're finding more and more clients are turning to us for content security services. So today, essentially anywhere content is being generated and shared, content security services are needed. We provide these services to job listing sites, dating apps, e-commerce, and travel marketplaces. But by far, the largest purchasers of these services today are the social media companies themselves, and in particular, the three largest social networks in the world.
Praneet Jain
Got you. No, that's good to know. Thanks for that. And then second, with expectations of 25% or higher growth next year, and very strong exit rate to this year at around 50% plus, how should we think about phasing of growth rates across the four quarters next year? Or if there is like any seasonality that we should expect like different than usual seasonality next year in terms of growth rates.
Operator
Let me take on the growth question and then I'll have Balaji talk about seasonality. Clearly, we've had an amazing 2021. And when we look at the year, Q1 is the quarter in which we had the strongest sales quarter in our company's history. Q2 and Q3 were also incredibly strong quarters, basically on par with one another, but well above the sales targets that we set for ourselves. And so I think that kind of sets the stage for the growth that we've seen in 2021. In 2022, we're expecting to see sustainable revenue growth and world-class margins, and clearly, you know, we're not in the stage to give a formal outlook, but I will say we're very confident in our ability to grow at or above 25% into the medium term, so well beyond next year. And then, Balaji, maybe you want to touch on seasonality. Yeah, thanks, Bryce.
Balaji
So for Q4, we are currently forecasting sequential quarterly growth of 7% at the midpoint and year-over-year growth of 55%. While not seeing huge seasonal swings in our business, Q4 does have some seasonal attainments. In Q4, we see major growth from e-commerce and to a lesser degree from food delivery clients. It is also important to note that this tends to work against us in Q1 when e-commerce and full delivery demand is generally at its lowest. Q1 has the additional challenge of having two fewer working days when compared to Q4. And like Bryce mentioned, we will provide additional detail on Q1 and FY22 outlook in our Q4 call.
Bryce
Got you. Thank you.
Bryce
Thank you. Our next question comes from Maggie Nolan with William Blair. Your line is open.
William Blair
Thank you.
Maggie
Congrats. Bryce, you commented a little bit on Europe. So I'm wondering how large you hope Europe can be or how fast you hope Europe can grow in the next couple of years here? And then what's given you the confidence that you can grow internationally with your clients that are either already global or are becoming increasingly global?
Operator
Thanks, Maggie. Yeah, we've seen this incredible explosion of international expansion amongst our client base. And for that reason, we're really confident that we're going to see huge growth in Europe over the next few years. As I said, I got the chance to travel to London and sit down with a lot of our clients. A few of these folks that I was able to meet with, we just signed deals with in Q3. There's just a tremendous amount of innovation that's happening in London and Amsterdam and across the continent. And so we're really excited to launch our third site in Europe in 2022. You know, we're not going to be able to provide specific numbers and guidance But I think that Europe could be as big for us as a delivery geography as the United States is today.
Maggie
Very good. And then on the delivery point, you know, you put in the press release that the Indian offices have grown substantially, fastest growing country in TASCIS history. Can you talk a little bit about the growth prospects for headcount in India versus Philippines and where you want that mix to land? kind of medium-term, and Balaji, if there are any margin implications from any mixed shifts that we should consider in our longer-term models?
Operator
Yeah, let me start. I think that India has the potential to be as large for us as the Philippines over the medium term. It is incredible what our team there has built. We've got an incredible country leader in Sapna Bambani, and the culture that we created in India reminds me a lot of what we created in the Philippines over a decade ago. So I'm incredibly bullish on the region for TASCAS. I'll let Balaji answer the question on margin impact.
Balaji
Yeah, and Maggie, geographies are key drivers of margin for us, and India margins are very comparable to the Philippines. Hence, growth in India is going to be margin accretive from a mixed perspective.
William Blair
All right. Thank you both.
Bryce
Thank you. And our next question comes from Jason Coverberg with Bank of America. Your line is open.
Jason Coverberg
Hey, guys. This is Cassie on for Jason. I guess just following up on the hiring question previously, you know, what are your expectations in terms of hiring trends for the remainder of the year? Is there seasonality that we should be aware of? And kind of, you know, what are your attrition expectations as well, you know, in conjunction with that. Thanks.
Operator
Thanks, Cassie. Yeah, we expect to continue to hire roughly at the same rate that we have in the first three quarters of the year. I'm really proud of the team for their focus on attrition this year. We've seen our attrition rates considerably lower than the rates that we had in 2019. Obviously, attrition rates in 2020 were artificially depressed or lower as a result of the COVID environment. But given the more challenging labor market that we're facing globally, to be at an attrition rate that is significantly lower than what we saw in 2019 is a remarkable accomplishment. So we're seeing the investments that we've made in our employee value proposition since day one begin to pay off now more than they ever have. In Q3, we added 4,100 net new teammates. We did that with an on-time hiring SLA of 99%, despite the fact that our clients have some very aggressive hiring timelines. So I'm very proud of what our team has been able to accomplish in this environment. I will say the market in the U.S. is a bit more challenging, and we expect to see wage pressure here at a higher level than we have historically. However, if we take a step back, We're not the only company facing that wage pressure. Our clients themselves are facing a lot of that same pressure for internal hires. And so we believe that as our customers look to hire the talent in the best spot in the world, that they'll increasingly embrace nearshore and offshore models where we're very well positioned to deliver and where our gross margins will actually be higher than they are onshore.
Jason Coverberg
All right, that's really helpful. Thanks. And I guess if I could ask a follow-up. I know you mentioned in your prepared remarks that, you know, you're very disciplined on M&A. You know, just wanted to get an update on your appetite or willingness to engage in that. Would you use it to sort of accelerate some of the growth opportunities you're seeing, whether that's international or in additional verticals outside of your core kind of aid or so? Thanks.
Operator
Yeah, great question. So we are very serious about M&A. We've hired an SVP to lead our efforts here named Trent Thrash, who's absolutely fantastic. And our focus really is on getting additional specialized services that we can sell to our customers or additional geographic delivery locations where we can add additional customers. And we're really... focusing on trying to find companies that are as similar to TaskUs as possible in terms of growth and margin profile. And one place where we absolutely will not compromise is that they need to be culturally accrued to TaskUs. So that limits the universe within which we can do transactions. We're very focused on finding very high-quality assets, and we'll be ready to pay a market price when we do.
Jason Coverberg
Perfect. Very helpful, guys. Thanks.
Bryce
Thank you. Our next question comes from David Koenig with Baird. Your line is open.
David Koenig
Yeah. Thanks, guys. Good job. And I guess, you know, maybe first of all, kind of piggybacking on the last question a little bit, gross margins really good in Q3, despite what seems like an environment of a ton of wage inflation. I guess, you know, how are you managing that? And as we look in the future, it sounds like margins are expected to go up, gross margins go up. Is it a balance of wage inflation is a little negative, but the mix of India and Philippines, the growth and those kind of offsets and net benefits you? Is that the best way to think about it?
Balaji
Yes, I'll take that question. So, hey, thanks, Dave. So, from a gross margin perspective, yes, that's an important point in terms of the way the mix is shifting that is helping us from a gross margin perspective in terms of protecting the future. And one more thing is like majority of our client contracts have annual COLA provisions that allows for price increases based on wage inflation up to a cap. And so these price increases are enforced annually. And in some cases, we can trade increases for additional volume. But given the headline around wage increases, we are having an easier time increasing rates this year than any other time that I can remember. So that is one lever. And the third, I'd probably say the third lever from a Forex perspective, is while the Filipino peso was had appreciated last year and stayed relatively flat um so you're starting to see that depreciating q3 and we kind of see that trend going forward so that is also going to be helpful from a gross margin perspective gotcha now that that's really helpful and I guess operationally I mean it seems like you guys are just doing like everything right in
David Koenig
How hard is it? It seems like you've done some things different. You create platforms. It seems really hard for clients to either move away from you or move to other split volumes or anything. Maybe explain a little bit about that, just about your ability to retain and not have to split volumes with other vendors and how that's all working.
Operator
Yeah, thanks for the question. It is really about identifying the area of most need for our customers. And generally that's a specialized service that brings a degree of sophistication that is difficult to deliver. And so we want to go on a journey with our clients. We want to start with whatever they're initially comfortable outsourcing. And very often that can be fairly basic work. But as they get more comfortable outsourcing more sophisticated functions, TaskUs wants to be the provider who moves up the market with our clients' needs. And so there are many, many cases that I can point to where we've been successful in doing that. And so I think it's a combination of that. Also, it's worth mentioning the technical investments that we've made. We've got an incredible team of technologists, and our focus isn't on building, you know, huge enterprise systems or CRM systems. Instead, we're building lightweight browser-based extensions that actually sit on top of our client systems and suggest next best actions to our teammates or automate large portions of our teammates' manual workflow. Using this approach, we built chatbots, workflow automation tools, and a suite of tools that improve the experience of our teammates on the front lines of content security. So I think it's a combination of sophistication of service, level of technical enablement that really makes the difference when it comes to task us. Gotcha. Thanks. Great job.
Bryce
Thank you. Our next question comes from James Fossetti with Morgan Stanley. The line is open.
James Fossetti
Thank you very much.
James
And I guess... You know, one of the things that you're obviously having a lot of success doing right now is hiring. And if you contrast that with a lot of your customers, it seems like you definitely have an advantage from that perspective and you're being rewarded. But I'm wondering if that is leading to them approaching you to take on additional work and how that fits into both your hiring and planning prospects, especially when, you know, like, In one of our most recent surveys, I think 85% of chief information officers we surveyed said that they had shortages in their IT departments generally. So just wondering how that is factoring into your thinking about areas and capabilities you want to be adding to TASC's catalog of offering.
Operator
Yeah, James, it's a very great question. We've seen our clients approach us with opportunities to rebadge some of their employees and locations. And, in fact, we've done a number of these engagements in the United States now very successfully. And so I think it speaks to the employee value proposition that we've been able to develop and our success in both attracting and retaining talent. I think that will be a big growth level for us in the years to come.
James
And then you, you know, obviously growth is great, but I'm wondering if you can give us a little bit of insight into what the drivers are across different business segments. And I guess what I'm really trying to understand is how sustainable is the demand and growth trajectory that you're seeing right now, and what are the key things that you're trying to watch to to assess whether it's continuing to – that that trajectory can continue, can accelerate, or perhaps can accelerate?
Operator
Yeah, it's something I think a lot about. We're ultimately a way to play the high-growth Internet space. And if that space is growing, we should be growing, too. We do that by – delivering the three specialized services that we deliver today and moving up the value chain as our customers' sourcing needs become more sophisticated. We also do that by identifying the next generation of services that our customers are going to be demanding. So FinTech is a vertical that I've talked about in the past. exciting space for us where we've been adding lots of new customers and lots of new lines of service with existing customers. We've moved into the area of financial crimes, anti-money laundering, know your customer work. And then we're also looking at existing service lines like content security and saying, can we introduce an offering that gets ahead of some of what some of our cryptocurrency clients are doing in the non-fungible token space or NFT space? So I think, you know, to answer the question, our growth is going to be largely based on our success, continuing to deliver the specialized services that our customers need effectively, and then staying a step ahead, identifying the next generation of specialized services customers are going to be demanding and developing an offering for them.
spk00
Thanks, Bryce. Appreciate it.
Bryce
Thank you. And I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Bryce Maddock, co-founder and chief executive officer of Taskus, for closing remarks.
Operator
Thank you so much. I want to take another moment to thank our teammates, our clients, and our shareholders for joining us on this journey. It is very humbling to have our second earnings call now in the books, and we look forward to seeing you all on our annual earnings call early next year.
Bryce
This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day. Thank you. Thank you. Thank you. you you music music Thank you. Thank you. Hello, and welcome to the Task Us third quarter 2021 investor conference call. My name is Norma, and I will be your conference facilitator today. At this time, all participants have been placed on mute to avoid any background noise. After the speaker's remarks, there will be a question and answer session period. To ask a question, you'll need to press star 1. To remove yourself from the queue, please press the pound key. I would now like to introduce Alan Kass, Vice President of Investor Relations. Alan, you may begin.
Norma
Good afternoon, and thank you for joining the Task Us third quarter 2021 earnings call. Joining me on the call today are Bryce Maddock, our co-founder and chief executive officer, and Balaji Sekhar, 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. Please note that this call is simultaneously being webcast on the investor relations section of the company's corporate 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 Law, including, but not limited to, statements regarding TASCUS's 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 materially from forward-looking statements can be found in our updated prospectus filed with the SEC on October 22, 2021, which is accessible on the SEC's website at www.sec.gov and is also available on our website at ir.tascus.com and may be supplemented with subsequent periodic reports we file with the SEC. Any forward-looking statements made in this conference call, including responses to questions, are based on current expectations as of today, and TASCUS assumes no obligation to update or revise them, whether as a result of new development or otherwise, except as required by law. The following discussion contains non-GAAP financial measures. For reconciliation of each of these non-GAAP financial measures, to the most directly comparable gap metric, please see our earnings press release, which is available in the IR section of our website at ir.tascus.com. Now, I will turn the call over to Bryce Maddock, co-founder and chief executive officer of TaskUs.
Operator
Bryce? Thank you, Alan. Good afternoon, everyone, and thank you for joining us. We delivered another strong quarter of growth in Q3 and came in well above the high end of our guidance. Before we get into the numbers, I want to provide an update on the health and safety of our teammates. As I mentioned on the last call, in Q2, we began providing vaccines to our teammates and their families in India. In the third quarter, I'm proud to report we were able to do the same in the Philippines. To date, over 27,000 TaskUs teammates, approximately 75% of our global population, have been vaccinated against COVID-19. And over 90% of our teammates working from an office are vaccinated. Taskus provided many of these vaccines to our teammates. I'll also note that we completed a successful follow-on offering in mid-October and look forward to engaging with new shareholders, as well as those who've been with us since our IPO. In terms of financials, in Q3, we delivered another quarter of strong top and bottom line growth. Revenue grew organically by 64.2% year-on-year to $201.1 million, above the top end of our guidance range of $186 million. Adjusted EBITDA grew 60% year-on-year to $48.1 million for an adjusted EBITDA margin of 23.9%, also above the top end of our guidance of 23.5%. Our Q3 performance was the result of continued progress executing on our five growth levers. Last quarter, I discussed these five levers, which position us for continued above-market growth over the long term. We made progress on all these fronts in this quarter, and I'd like to dig a bit deeper into the specifics. First, we continued to expand with our current clients, who are growing extremely fast themselves and accelerating their outsourcing spend as their businesses mature and embrace an increasingly distributed workplace. Growth from existing clients accounts for over two-thirds of our signings in Q3. As our base business has grown, we've seen expansion with existing clients drive an increasing percentage of our total growth. Given our focus on early-stage, high-growth startups, we are often the first service provider a client works with, and as they grow, we grow with them. In digital customer experience, we expanded with several food delivery clients and saw increasing demand in the ride-sharing space as people began to travel again. In this space, we took significant share at one of our top 10 clients. We're launching three new locations with that client, taking on health and safety lines, as well as premium user support and payments work. We also saw continued expansion in the service offering for fintech clients. where we're moving up the value chain and taking on more complex interactions. We expanded our content security service offering with several clients in the social media and retail and e-commerce verticals in the corner. As we enter the holiday season, we expect continued strong performance from this offering in the e-commerce space. Finally, our AI operations service line continued to grow, In Q3, we increased revenue from AI operations at an astounding 145% year-on-year. This was driven by expansion with clients in the social media and travel and transportation spaces. From our second growth lever, we saw the addition of new clients across verticals. To name just a few, we started working with two rapidly growing fintech brands, one in the buy now, pay later space, and another that's disrupting the credit card business. We signed multiple new clients in the media and entertainment vertical as well, including in the event ticketing space where in-person activity has begun to mount a strong comeback. We also saw lots of momentum in health tech, where we brought on several new clients and upsized some recent signings in the space. In one case, an existing client proactively reached out to a health tech executive to suggest that they speak with us. We went through a brief evaluation, and have now partnered with a fast-growing app that delivers lab tests on demand. We're providing them with digital customer experience via chat, email, voice, and video, where our experts are able to remotely support some lab tests. Health tech has become a high-growth vertical for us. Given the complex and regulated environment these clients operate within, it's exactly the type of work where we succeed. Following our third lever of growth, we expanded our service offerings. Our constant security team has responded to the rise of non-fungible tokens, or NFTs, by rolling out a service focused on securing the marketplaces or games where these digital assets are bought and sold. This leverages our existing capabilities and brings an adjacent offering to the market. Additionally, we've begun building a platform to expand the reach of our AI operations work. We see the need for a system that can supplement the work we do for our large-scale AI operations engagements and deliver rapid results by leveraging a combination of Taskus employees and globally distributed freelance experts. Developing these service offerings are great examples of the team being hyper-focused on where the puck is going. Our go-to-market team has this in their DNA. We closely watch trends in the startup and venture capital space working with founders and investors to develop custom service offerings. This approach has earned us the opportunity to support the fastest-growing companies in history well before anyone else. Fourth, we finalized plans to expand our global delivery footprint and drive more sales by offering new locations and languages to our clients. I took my first international business trip in over 18 months at the start of September. I went to London and had the chance to meet with our teams from Ireland and Greece and with a number of our clients. We added multiple new European based clients in the quarter, including a fast growing automotive e-commerce brand. It's great to see fast returns on the sales and marketing investments that we've made in the region. We plan to further expand our European delivery footprint in 2022 to develop additional language capabilities. We'll use a capital light hub and spoke model in which teammates work from the office part of the time and from home part of the time. This will give teammates the flexibility and convenience of working from home while still maintaining the face-to-face connectivity needed to support team building, coaching, and culture. We believe we'll see significant growth in Europe in the years to come. We also announced additional office expansions in six locations this past quarter, including new locations in the US, India, the Philippines, and Colombia. We entered India in October of 2019. As of September of 2021, just two years after launching, we had nearly 5,000 teammates in the region, making India the fastest growing region in Taskus history. In terms of M&A, our fifth growth lever, We're taking a very disciplined approach here. Since we started Task Us, our growth has been entirely organic. As we begin to review acquisition opportunities, we're looking for ways to offer our clients new specialized services or additional geographic delivery capabilities. We're looking for businesses that are as similar to us as possible in terms of growth rate and margin profile, and most importantly, that are aligned with our culture. I'm proud of the progress our team has made on our five growth levers this quarter. Our success on all of these levers is ultimately the result of the hard work of our teammates. Last quarter, I talked about our culture as a core part of our competitive strategy. This quarter, I want to go a bit deeper into what makes our culture unique and why we invest so heavily in our Taskus teammates. Since we started Taskus, we've been able to attract incredible talent to our company. We've also built an environment at Taskus that allows an individual to begin their career on the front lines in customer service or content security and grow into a leadership role fairly quickly. We helped to foster this talent by investing in education and training, as well as mentoring new managers. In Q3, we took this a step further and launched the Taskus Academy, a formalized program to provide training and guidance to frontline teammates looking to move into leadership roles. We saw over 800 employees enroll in the first month of the program. The Academy will help us retain the great teammates that we have today and provide task us with an internal talent development resource. Retaining great talent is more important than ever in this environment. Across the globe, we see increasing competition for talent, which makes me very proud to report that in Q3, our attrition remains well below 2019 levels. our ability to attract and retain talent continues to be key to our stellar performance. The investments that we've made over the years and the employee experience are paying off today more than ever. We added approximately 4,100 net new Taskus teammates in Q3 and achieved an on-time hiring SLA of 99%. As of September 30th, our Glassdoor score was 4.7 stars and and approximately 90% of Taskus teammates around the globe continue to work safely from home. As we look towards 2022, we expect to begin to gradually return some teammates to our offices, but we will continue delivering some of our services from home for the foreseeable future. One of the biggest areas of focus for me personally this year has been adding more world-class leaders to our team. We recently hired Claudia Walsh as our new general counsel, and Kelly Tuminelli, chief financial officer of TriNet, was recently appointed to our board of directors. Earlier in the year, Rajneesh Sinha, chief people officer, and Stephon Doe, chief operating officer, also joined our executive leadership team. All of these individuals are experienced and passionate leaders who bring a wealth of knowledge to task us. I am so excited to be working with them. Before I wrap up, I again want to acknowledge the tremendous performance from the team in a tough operating environment. We had another strong sales quarter delivered operationally for our clients and continue to attract amazing talent to our company. With that, I'll hand it over to Balaji to go through the financials in a bit more detail and provide our outlook for the remainder of the year.
Balaji
Thanks, Bryce, and good afternoon, everyone. I'm going to discuss our financial results for the third quarter of 2021. 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 third quarter, we earned total revenues of $201.1 million, an increase of 64.2% over the prior year. We saw growth in each of our three specialized service offerings. In the third quarter, our digital customer experience offering generated $125.3 million for a year-over-year growth rate of 64.3%, fueled by growth from fintech, retail, and e-commerce, and on-demand transportation clients. Our content security business grew 34.3% versus Q3 2020, resulting in $45.4 million of revenue, And our air operations business grew 145.2% year over year for revenues of $30.4 million. In Q3, we also saw continued revenue growth from our top client. However, that growth was exceeded by the ongoing expansion of our entire client base. As a result, our revenue concentration with our largest client was just below 27%. approximately flat compared with Q2, but less than the 32% of 2020 revenues. Our second largest client was 11% of our revenue down from 12% in Q2. Our top 10 and top 20 clients accounted for 61 and 76% of revenues respectively in the quarter. Revenue concentration continues to improve in our top 10 and top 20 clients both year over year and quarter over quarter. Our cost of service as a percentage of revenues and as a result, our margin profile is primarily driven by the geographic location from which services are provided rather than the specific service line. In the third quarter, we generated 52% of our revenues in the Philippines 33% of our revenues in the United States and 15% of our revenues from the rest of the world, mainly driven by our operations in India and Mexico. Our cost of service as a percentage of revenue was 55.9% in the third quarter, compared to 53.4% in the prior year. The increase was primarily driven by additional charges that we incurred in Q3 2021 as we continue to leverage a virtual operating model, as well as the expansion cost we incurred as we prepare to return to the office next year. As we move a greater percentage of our teammates back to the office in 2022, we should see our cost of service as a percentage of revenues increase slightly. I will note that we are also seeing wage pressure globally. This pressure is most significant in the US. This dynamic is pushing clients to move more quickly to an overseas delivery model. Our ability to ramp quickly and attract talent is a differentiator for us here. Net-net, we think this environment will ultimately be a benefit for us, given the higher margin profile of overseas operations, and our ability to meet our client's needs. In the third quarter, our SG&A expenses were $60.3 million, or 30% of revenues. As I discussed on the last call, in Q3, we incurred a full quarter of stock compensation expenses of $19.2 million relating to equity grants, including new grants awarded in the third quarter. as compared to the previous quarter of $5.8 million, which had costs only from the IPO date on June 11th. We were not accruing any stock compensation expenses in Q3 of 2020 when we were not a public company. In the third quarter, we also incurred full quarter public company related expenses, as well as some transaction related expenses for the secondary offering. SG&A in Q3 2020 was $32.2 million, or 26.3% of revenues, which included $3.6 million of lease termination and severance costs. In the third quarter of 2021, we earned adjusted EBITDA of $48.1 million and a 23.9% margin, compared to $30.1 million and a 24.6% margin earned in the third quarter of 2020. The reduction in adjusted EBITDA margin was primarily driven by public company costs and investments in digital initiatives. Adjusted net income for the quarter was $32.8 million, and adjusted earnings per share was $0.30. By comparison, in the year-ago period, we earned adjusted net income of $22.2 million and adjusted EPS of $0.24. Now moving on to the balance sheet. Cash and cash equivalents were $61.3 million as of September 30, 2021, compared with the June 30th balance of $195.9 million. Recall that the cash balance at the end of Q2 included IPO proceeds of $120.7 million received in June of 2021. We used these IPO proceeds in the third quarter to settle the phantom share and non-recurring teammate IPO bonuses that were earned in Q2 of $133.7 million. Cash from operations was a use of $109.1 million for the third quarter as compared to cash generation of $23 million in Q3 of 2020. As a reminder, This quarter's cash flow from operations included $133.7 million impact of the IPO-related bonus and phantom stock expense that I just discussed. In Q2, I briefly discussed the increase in accounts receivable as a result of our strong revenue growth. We saw the impact of strong revenue growth on receivables again in Q3 as AR increased by $29.7 million from Q2 of 2021. We are implementing a new order-to-cash process as we onboard new clients and expect to reduce our DSO in 2022. Our capital expenditure increased in the third quarter to $15.2 million compared to $3.1 million in Q3 of 2020. The increase was primarily driven by the purchases of computer equipment due to increased headcount and the facility expansion as part of our return to office plans. At this point, I will outline our financial outlook for the remainder of the year. We anticipate full year 2021 total revenues to be in the range of $747 million to $751 million, representing year-over-year growth of 56.7% at the midpoint. We expect to earn a full year 2021 adjusted EBITDA margin of 24% to 24.2%. I will note that on an year-over-year basis, in Q4, our adjusted EBITDA margins will continue to be impacted by public company expenses, as well as expenses associated with returning a portion of our teammates to the office. Also, we continue to ramp up our investments in digital innovation, sales, and development of new service offerings, which will drive our above-market growth in the long term. Finally, Q4 typically has slightly higher seasonal operating costs due to the number of holidays in the quarter. We expect to have an overall small tax benefit this year. This was driven by the gap net loss we incurred in the first half of the year due to the one-time expenses related to phantom shares and non-recurring teammate IPO bonus in Q2 of this year. In closing, we had a tremendous 2021, nearly doubling our growth rate from 2020. As we head into 2022, we expect to deliver sustainable revenue growth and world-class margins. While we aren't giving a formal outlook for the next year yet, I will reaffirm that we remain confident in our ability to grow at or above 25% in the medium term. Thank you, and I'm going to hand it back to Bryce before we take your questions.
Operator
Thank you, Balaji. Before we get to Q&A, I want to share another TaskUs teammate story. Our teammates are the key to everything we do here at TaskUs, and our commitment goes well beyond the four walls of our offices. We care deeply about the health of our coworkers and their family members. In September, Chris, one of our team leaders based out of the Philippines, discovered that his father was very ill and rushed him to the hospital for immediate medical attention. This was in the middle of a serious COVID spike in the country, and unfortunately, the hospital was unable to provide Chris's father with a bed. Over the next few hours, Chris's father's situation deteriorated rapidly. He was struggling to breathe. Chris texted his fellow teammates for help. He knew that in response to COVID, TASCUS had stockpiled supplies of oxygen for our team. Our team responded immediately and brought Chris the supplemental oxygen his father desperately needed. This bought Chris and his father the time required to transport him to a hospital further away. I'm happy to say that Chris's father is back home recovering today, thanks in part to the Task Us team. I am so proud of our team for acting quickly to support Chris and his father. I'm also incredibly proud of the Task Us family health insurance program which ensured that Chris and his family were able to afford the quality of care his father needed without facing insurmountable debt. Stories like these remind us why investing in people is not only the best business strategy, but the right thing to do. With that, I'll ask the operator to open the line for our question and answer session. Operator?
Bryce
Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Matt Van Leet with BTIG. Your line is open.
Matt Van Leet
Hey, guys. Thanks for taking my question. Really nice job on the quarter, and congratulations on continuing that run just two quarters in. So I guess with the first question, you mentioned that two-thirds of your signings came from existing logos. Maybe a couple-part question here. So, one, what has been the trend there over the last several quarters in terms of the overall mix? Is that higher or is that sort of in line with where we've been? And then secondarily, are you finding that, you know, your customers, potentially net new customers investing in Task Us and your capabilities earlier on in their life cycles are to where you are sort of landing smaller, but the long-term opportunity is much greater. Thanks.
Operator
Yeah, Matt, thanks so much for the question. So as far as new versus existing sales, we've definitely seen a trend towards more of our sales coming from existing customers. And that's exactly what we expect to see as the set of customers we're working continues to expand. A few years ago, I know that about 60% of our sales came from new logos and 40% came from existing clients. We saw that basically invert in the first half of this year with 60% of our sales coming from existing clients and 40% of our sales coming from new logos. And obviously, we've seen that trend continue into Q3 with over two-thirds of our sales coming from existing clients. As far as the second question goes, we definitely are seeing a trend towards a broad-based embrace of outsourcing. I think this is being driven by the rapid rise of digital disruptors and also the COVID pandemic, which has forced us all to embrace new ways of working that are increasingly remote. So at Task Us, we're focused on identifying the next generation of digital disruptors and delivering the specialized services that they're going to need in order to scale. The one challenge of getting larger, I will say, is that it does become more difficult to deal with companies in the very, very early stages. We have a product called Launch by Task Us, which enables us to work with companies who need as few as five full-time resources. It's sort of perfectly built for companies in the Series A stage, and we've had a lot of success with that product.
Matt Van Leet
Great. And then, you know, tremendous success in the AIOps group of business there. Are you finding yourself in a larger variety of potential engagements there or Or is it really just embracing some of the specialties that you've already developed and your proven ability to train models so effectively?
Operator
We're finding demand is really expanding because the applications of artificial intelligence themselves are growing. We've gone from, in the beginning, doing a lot of work in the autonomous vehicle space where we continue to focus, to working with clients across the social media space and other verticals. who are looking to train their own models in various situations. So certainly, as the applications of artificial intelligence continue to expand, the demand for training data for those services will continue to expand as well.
Matt Van Leet
All right, great. Thank you for taking the question.
Bryce
Thank you. Thank you. Our next question comes from Praneet Jain with J.P. Morgan. Your line is open.
Praneet Jain
Hey, thanks for taking my question. It was a great quarter. Can you comment on the outlook you see for content moderation business, specifically given the largest client has been in the news so much over the last few months? What does all that news flow mean for near-term outlook of content moderation for you?
Operator
Yeah, Puneet, thanks for the question. So obviously we can't comment on specifics of any individual customer, but let me talk about the social media space in general. Clearly social media is facing increasing scrutiny and regulatory pressure here in the United States. And today the most advanced regulatory regime probably exists in Europe. There we've seen increased regulations lead to increased demand for essential services like content security and AI operations from European service providers. So our belief is that as our clients in the social media space face this scrutiny, they're likely to continue to expand their investments in these services. Given our reputation as a best-in-class provider of content security services, we stand to benefit from this growth. I'll also say that we're finding more and more clients are turning to us for content security services. So today, essentially anywhere content is being generated and shared, content security services are needed. We provide these services to job listing sites, dating apps, e-commerce, and travel marketplaces. But by far, the largest purchasers of these services today are the social media companies. and in particular the three largest social networks in the world.
Praneet Jain
Got you. No, that's good to know. Thanks for that. And then second, with expectations of 25% or higher growth next year and very strong exit rate to this year at around 50% plus, how should we think about phasing of growth rates across the four quarters next year? Or if there is like any seasonality that we should expect, like different than usual seasonality next year in terms of growth rates.
Operator
Let me take on the growth question and then I'll have biology talk about seasonality. Clearly, we've had an amazing 2021. And when we look at the year Q1 is the quarter in which we had the strongest sales quarter in our company's history. Q2 and Q3 were also incredibly strong quarters, basically on par with one another, but well above the sales targets that we set for ourselves. And so I think that kind of sets the stage for the growth that we've seen in 2021. In 2022, we're expecting to see sustainable revenue growth and world-class margins. And clearly, you know, we're not in the stage to give a formal outlook, but I will say we're very confident in our ability to grow at or above 25% into the medium term, so well beyond next year. And then Balaji, maybe you want to touch on seasonality. Yeah, thanks, Bryce.
Balaji
So for Q4, we are currently forecasting sequential quarterly growth of 7% at the midpoint and year-over-year growth of 55%. While we do not see huge seasonal swings in our business, Q4 does have some seasonal attainments. In Q4, we see major growth from e-commerce and to a lesser degree from food delivery clients. It is also important to note that this tends to work against us in Q1 when e-commerce and food delivery demand is generally at its lowest. Q1 has the additional challenge of having two fewer working days when compared to Q4. And like Bryce mentioned, we will provide additional detail on Q1 and FY22 outlook in our Q4 call.
Bryce
Got you. Thank you.
Bryce
Thank you. Our next question comes from Maggie Nolan with William Blair. Your line is open.
William Blair
Thank you.
Maggie
Congrats. Bryce, you commented a little bit on Europe, so I'm wondering how large you hope Europe can be or how fast you hope Europe can grow in the next couple of years here, and then what's given you the confidence that you can grow internationally with your clients that are either already global or are becoming increasingly global?
Operator
Thanks, Maggie. Yeah, we've seen this incredible explosion of international expansion amongst our client base. And for that reason, we're really confident that we're going to see huge growth in Europe over the next few years. As I said, I got the chance to travel to London and sit down with a lot of our clients. A few of these folks that I was able to meet with, we just signed deals with in Q3. There's just a tremendous amount of innovation that's happening in London and Amsterdam and across the continent. And so we're really excited to launch our third site in Europe in 2022. You know, we're not going to be able to provide specific numbers and guidance, but I think that Europe could be as big for us as a delivery geography as the United States is today.
Maggie
Very good. And then on the delivery point, you know, you put in the press release that the Indian offices have grown substantially, fastest growing country in TASCIS history. Can you talk a little bit about the growth prospects for headcount in India versus Philippines and where you want that mix to land kind of medium term? And Balaji, if there are any margin implications from any mix shifts that we should consider in our longer-term model?
Operator
Yeah, let me start. I think that India has the potential to be as large for us as the Philippines over the medium term. It is incredible what our team there has built. We've got an incredible country leader in Sapna Bambani. And the culture that we created in India reminds me a lot of what we created in the Philippines over a decade ago. So I'm incredibly bullish on the region for TaskFest. I'll let Balaji answer the question on margin impact.
Balaji
Yeah, and Maggie, geographies are key drivers of margin for us. And India margins are very comparable to the Philippines. Hence, growth in India is going to be margin accretive from a mixed perspective.
William Blair
All right. Thank you both.
Bryce
Thank you. And our next question comes from Jason Coverberg with Bank of America. Your line is open.
Jason Coverberg
Hey, guys. This is Cassie on for Jason. I guess just following up on the hiring question previously, you know, what are your expectations in terms of hiring trends for the remainder of the year? Is there seasonality that we should be aware of? And kind of, you know, what are your attrition expectations as well, you know, in conjunction with that. Thanks.
Operator
Thanks, Cassie. Yeah, we expect to continue to hire roughly at the same rate that we have in the first three quarters of the year. I'm really proud of the team for their focus on attrition this year. We've seen our attrition rates considerably lower than the rates that we had in 2019. Obviously, attrition rates in 2020 were artificially depressed or lower as a result of the COVID environment. But given the more challenging labor market that we're facing globally, to be at an attrition rate that is significantly lower than what we saw in 2019 is a remarkable accomplishment. So we're seeing the investments that we've made in our employee value proposition since day one begin to pay off now more than they ever have. In Q3, we added 4,100 net new teammates. We did that with an on-time hiring SLA of 99%, despite the fact that our clients have some very aggressive hiring timelines. So I'm very proud of what our team has been able to accomplish in this environment. I will say the market in the U.S. is a bit more challenging, and we expect to see wage pressure here at a higher level than we have historically. However, if we take a step back, We're not the only company facing that wage pressure. Our clients themselves are facing a lot of that same pressure for internal hires. And so we believe that as our customers look to hire the talent in the best spot in the world, that they'll increasingly embrace nearshore and offshore models where we're very well positioned to deliver and where our gross margins will actually be higher than they are onshore.
Jason Coverberg
All right, that's really helpful. Thanks. And I guess if I could ask a follow-up. I know you mentioned in your prepared remarks that, you know, you're very disciplined on M&A. You know, just wanted to get an update on your appetite or willingness to engage in that. Would you use it to sort of accelerate some of the growth opportunities you're seeing, whether that's international or in additional verticals outside of your core kind of aid or so? Thanks.
Operator
Yeah, great question. So we are very serious about M&A. We've hired an SVP to lead our efforts here named Trent Thrash, who's absolutely fantastic. And our focus really is on getting additional specialized services that we can sell to our customers or additional geographic delivery locations where we can add additional customers. And we're really... focusing on trying to find companies that are as similar to Taskos as possible in terms of growth and margin profile. And one place where we absolutely will not compromise is that they need to be culturally accrued to Taskos. So that limits the universe within which we can do transactions. We're very focused on finding very high-quality assets, and we'll be ready to pay a market price when we do.
Jason Coverberg
Perfect. Very helpful, guys. Thanks.
Bryce
Thank you. Our next question comes from David Koenig with Baird. Your line is open.
David Koenig
Yeah. Thanks, guys. Good job. And I guess, you know, maybe first of all, kind of piggybacking on the last question a little bit, gross margins really good in Q3, despite what seems like an environment of a ton of wage inflation. I guess, you know, how are you managing that? And as we look in the future, it sounds like margins are expected to go up, gross margins. Is it a balance of wage inflation is a little negative, but the mix of India and Philippines, the growth and those kind of offsets and net benefits you? Is that the best way to think about it?
Balaji
Yes, I'll take that question. So, hey, thanks, Dave. So, from a gross margin perspective, yes, that's an important point in terms of the way the mix is shifting that is helping us from a gross margin perspective in terms of protecting into the future. And one more thing is like majority of our client contracts have annual COLA provisions that allows for price increases based on wage inflation up to a cap. And so these price increases are enforced annually. And in some cases, we can trade increases for additional volume. But given the headline around wage increases, we are having an easier time increasing rates this year than any other time that I can remember. So that is one lever. And the third, I'd probably say the third lever from a Forex perspective is while the Filipino peso had appreciated last year and stayed relatively flat. So you're starting to see that depreciating Q3 and we kind of see that trend going forward. So that is also going to be helpful from a gross margin perspective.
David Koenig
Gotcha. Now that's really helpful. And I guess operationally, I mean, it seems like you guys are just doing, like, everything right. And how hard is it? Like, it seems like you've done some things different. You create platforms. It seems really hard for clients to either move away from you or move to other, you know, kind of split volumes or anything. Maybe explain a little bit about that, just about, you know, your ability to kind of retain and not have to, like, split volumes with other vendors and how that's all working.
Operator
Yeah, thanks for the question, Kevin. it is really about identifying the area of most need for our customers. And generally that's a specialized service that brings a degree of sophistication that is difficult to deliver. And so we want to go on a journey with our clients. We want to start with whatever they're initially comfortable outsourcing. And very often that can be fairly basic work. But as they get more comfortable outsourcing more sophisticated functions, TaskUs wants to be the provider who moves up the market with our clients' needs. And so there are many, many cases that I can point to where we've been successful in doing that. And so I think it's a combination of that. Also, it's worth mentioning the technical investments that we've made. We've got an incredible team of technologists, and our focus isn't on building, you know, huge enterprise systems or CRM systems. Instead, we're building lightweight browser-based extensions that actually sit on top of our client systems and suggest next best actions to our teammates or automate large portions of our teammates' manual workflow. Using this approach, we built chatbots, workflow automation tools, and a suite of tools that improve the experience of our teammates on the front lines of content security. So I think it's a combination of sophistication of service, level of technical enablement that really makes the difference when it comes to task us. Gotcha. Thanks. Great job.
Bryce
Thank you. Our next question comes from James Fossetti with Morgan Stanley. The line is open.
James Fossetti
Thank you very much.
James
And I guess... You know, one of the things that you're obviously having a lot of success doing right now is hiring. And if you contrast that with a lot of your customers, it seems like you definitely have an advantage from that perspective and you're being rewarded. But I'm wondering if that is leading to them approaching you to take on additional work and how that fits into both your hiring and planning prospects, especially when, you know, like, In one of our most recent surveys, I think 85% of chief information officers we surveyed said that they had shortages in their IT departments generally. So just wondering how that is factoring into your thinking about areas and capabilities you want to be adding to TASCA's catalog of offering.
Operator
Yeah, James, it's a very great question. We've seen our clients approach us with opportunities to rebadge some of their employees and locations. And, in fact, we've done a number of these engagements in the United States now very successfully. And so I think it speaks to the employee value proposition that we've been able to develop and our success in both attracting and retaining talent. I think that will be a big growth level for us in the years to come.
James
And then you, you know, obviously growth is great, but I'm wondering if you can give us a little bit of insight into what the drivers are across different business segments. And I guess what I'm really trying to understand is how sustainable is the demand and growth trajectory that you're seeing right now, and what are the key things that you're trying to watch to to assess whether it's continuing to – that that trajectory can continue, can accelerate, or perhaps decelerate?
Operator
Yeah, it's something I think a lot about. We're ultimately a way to play the high-growth Internet space. And if that space is growing, we should be growing, too. We do that by – delivering the three specialized services that we deliver today and, you know, moving up the value chain as our customers' sourcing needs become more sophisticated. We also do that by identifying the next generation of services that our customers are going to be demanding. So FinTech is a vertical that I've talked about in the past. It's incredible. exciting space for us where we've been adding lots of new customers and lots of new lines of service with existing customers. We've moved into the area of financial crimes, any money laundering, know your customer work. And then we're also looking at existing service lines like content security and saying, can we introduce an offering that gets ahead of some of what our, some of our cryptocurrency clients are doing in the non-fungible token space or NFT space. So I think, you know, to answer the question, our growth is going to be largely based on our success, continuing to deliver the specialized services that our customers need effectively, and then staying a step ahead, identifying the next generation of specialized services customers are going to be demanding and developing an offering for them.
spk00
Thanks, Bryce. Appreciate it.
Bryce
Thank you. And I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Bryce Maddock, co-founder and chief executive officer of Taskus, for closing remarks.
Operator
Thank you so much. I want to take another moment to thank our teammates, our clients, and our shareholders for joining us on this journey. It is very humbling to have our second earnings call now in the books, and we look forward to seeing you all on our annual earnings call early next year.
Bryce
This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
Disclaimer