Shares of work-outsourcing company TaskUs (TASK 2.25%) skyrocketed on Tuesday after reporting encouraging financial results for the third quarter of 2022. As of 11:30 a.m. ET, TaskUs stock was up an eye-popping 31%.
In Q3, TaskUs generated revenue of $232 million, an increase of 15.5% year over year. On a discouraging note, that's its slowest quarterly revenue growth rate as a public company. However, on the bright side, management had guided for revenue of $226 million at best, so its top line provided a nice surprise for investors.
TaskUs has clients in the cryptocurrency space, and those clients have pulled back their spending because of what's known as "crypto winter." However, the company was able to win new clients during the quarter to more than offset these losses and still provide surprising revenue growth on top.
Finally, TaskUs is profitable according to generally accepted accounting principles (GAAP) and had GAAP net income of almost $5.4 million during the quarter. That was down from $11.6 million in the same quarter last year. The main culprit for the drop was a decrease in its gross profit margin from about 44% last year to 42% this year.
The drop in gross margin is because many of TaskUs's clients are outsourcing more work to international locations than in times past. And revenue sourced offshore currently has a lower profit margin for TaskUs. Still, this dynamic didn't appear to faze investors today.
TaskUs expects growth to slow further in the fourth quarter. Management is guiding for Q4 revenue of $231 million to $233 million, which is only a 2% year-over-year increase. However, this is slightly better than what management had been forecasting for Q4.
The market is celebrating today, but it might go into wait-and-see mode hereafter. TaskUs serves enterprises, and many companies are pulling back spending because of the possibility of a global economic recession. This means TaskUs's opportunity for 2023 is uncertain.
Management intends to give more color for 2023 when it reports Q4 financial results. Therefore, the market might be content to wait for more clarity from TaskUs's outlook before the stock makes a major move again.