Shares of work-outsourcing company TaskUs (TASK -1.97%) got hammered on Tuesday after the company reported financial results for the second quarter of 2022. Q2 results weren't the problem. Rather, its outlook for the remainder of the year spooked the market. And that's why TaskUs stock was down 21% as of 10:20 a.m. ET.
In Q2, TaskUs generated revenue of nearly $247 million, up roughly 37% from the same quarter of 2021. For perspective, management had guided for revenue of $243.5 million at best.
After reporting first-quarter results, TaskUs management guided for full-year 2022 revenue of $980 million to $1 billion. However, with its Q2 report, management now only expects full-year revenue of $930 million to $950 million. In other words, even though Q2 results were better than expected, second-half demand is falling off more than management anticipated just three months ago. This understandably has investors nervous.
TaskUs may have lowered full-year revenue guidance, but it actually added in some guidance for free cash flow (FCF). TaskUs has a history of profitability -- which is surprising for a small-cap tech stock -- and expects to generate around $100 million in FCF this year. Considering it's already generated $43.6 million in FCF year to date, this implies profitability in the back half of the year will be better than the front half despite the revenue slowdown.
Now trading at a market capitalization of just $1.8 billion, TaskUs trades at just 18 times this year's FCF, which is relatively reasonable considering it still expects to grow its top line more than 20% year over year.
One final encouraging takeaway is that TaskUs has reduced its full-year guidance primarily because its clients in the cryptocurrency space are cutting back their spend. By contrast, its top 20 clients increased spending 30% in Q2. This suggests that TaskUs' struggles in the back half of the year could be temporary, providing an opportunity for investors today.