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United States securities and exchange commission logo
December 3, 2020
Jeffrey Chugg
Vice President, Legal
TU TopCo, Inc.
1650 Independence Drive, Suite 100
New Braunfels, TX 78132
Re: TU TopCo, Inc.
Draft Registration
Statement on Form S-1
Submitted November
6, 2020
CIK: 0001829864
Dear Mr. Chugg:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Form S-1 DRS filed November 6, 2020
Summary
Growth Strategy, page 7
1. We note your disclosure
that revenue from TaskUs clients who generated $500,000 or
more in revenue grew by
171% from 2017 through 2019. To provide appropriate context,
please disclose the
number of clients that generated $500,000 or more in revenue each
year and clarify the
percentage of total revenue represented by those clients.
Our Clients, page 13
2. Please disclose the
criteria that you used to select and prominently highlight Zoom, Uber,
Oscar, Coinbase and
Netflix as customers in the prospectus summary. To the extent
Jeffrey Chugg
FirstName
TU TopCo,LastNameJeffrey Chugg
Inc.
Comapany3,
December NameTU
2020 TopCo, Inc.
December
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material, disclose the percentage of revenue generated by these five
companies.
3. Please disclose that your largest client, Facebook, generated 35% and
23% of your service
revenue in 2019 and 2018, respectively, and that Doordash generated
11% of total revenue
in 2019. Discuss the material terms of your agreements with Facebook
and Doordash in
the business section, such as the term of the agreements, termination
provisions and any
minimum volume requirements.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Trends and Factors Affecting our Performance, page 82
4. We note that your ACV signings from new clients decreased from $146.1
million in
2018 to $86.3 million in 2019. Please discuss the underlying factors
and material business
drivers that led to the decrease in ACV signings.
COVID-19
Cash and Cost Management, page 85
5. Please expand the discussion to quantify the impact on cash management
of CARES Act
provisions for NOL carryovers and carrybacks and the deferral of
employer taxes. Please
also expand the discussion of cost management to quantify the costs
associated with the
transformations of your operations in response to the pandemic and
quantify the
amount of accounts receivables written-off, if material.
Critical Accounting Policies and Estimates
Share-Based Compensation, page 101
6. We note on page F-25 that you granted 616,714 stock options in 2019
and that you did not
issue any other shares of common stock in 2019. Please expand MD&A to
include a more
detailed analysis of the fair value of your stock at the grant date
compared to the IPO
price, addressing assumptions and methodology in detail.
Executive and Director Compensation
Summary Compensation Table, page 138
7. Please revise the table to include any shares credited as TopCo
phantom shares under a
deferred compensation plan that will be issued as actual shares upon
termination of
employment. Also revise to include the awards of phantom shares
denominated in shares
that have been made but no shares will be issued until the performance
targets are met.
Refer to Question 106.03 of C&DI for Regulation S-K last updated
September 21,
2020 for guidance.
8. Please provide the executive compensation disclosure for the year
ended December 31,
2019 which is the company's last completed fiscal year. See Item 402
of Regulation S-K
and Instructions to Item 402(c).
Jeffrey Chugg
FirstName
TU TopCo,LastNameJeffrey Chugg
Inc.
Comapany3,
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2020 TopCo, Inc.
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Equity Awards, page 140
9. We note your disclosure that 828,652 phantom shares are subject to the
Phantom Stock
Plan. We further note that Messrs. Sekar and Johnson have 70,531 and
70,530 phantom
shares, respectively. Please revise to provide additional disclosure
regarding the issuance
of the additional 687,597 phantom shares. Also, if any of proceeds
will be used to satisfy
the payments relating to the vested phantom shares held by your
officers and directors,
please disclose that in the Use of Proceeds section.
Certain Relationships and Related Person Transactions
Support and Services Agreement, page 150
10. Please clarify the type of information that you are required to make
available to
Blackstone pursuant to your Support and Services Agreement.
Description of Capital Stock
Exclusive Forum, page 162
11. We note that the federal district courts of the United States of
America will be the
exclusive forum for the resolution of any complaint asserting a cause
of action arising
under the federal securities laws of the United States of America.
Given that Section 22 of
the Securities Act creates concurrent jurisdiction for federal and
state courts over all suits
brought to enforce any duty or liability created by the Securities Act
or the rules and
regulations thereunder, revise your prospectus to state that there is
uncertainty as to
whether a court would enforce such provision and that investors cannot
waive compliance
with the federal securities laws and the rules and regulations
thereunder.
Financial Statements
Note (2) Summary of Significant Accounting Policies
(j) Revenue Recognition, page F-11
12. Refer to your disclosure of contracts on pages 16 and 24. We note that
you state that you
"are not guaranteed payment for services performed under contract".
Please expand your
revenue recognition accounting policy to address this provision in
your contracts and how
it impacts the amount and timing of revenue recognition on the
contracts. Please also
expand the Risk Factor on page 24 accordingly.
13. Please expand your policy disclosure to explain your rationale for
recognizing revenue
over time as performance obligations are satisfied, i.e. the reason
you recognize revenue
over time rather than at a point in time when the performance
obligation is satisfied.
Note (10) Employee Compensation, page F-24
14. Refer to your description of awards under the Phantom Stock Plan on
page 142. We note
that the Phantom Stock Plan provides for grants of phantom shares
which are the right to a
cash or stock payment. Regarding the rollover phantom stock awards
issued to replace the
Jeffrey Chugg
TU TopCo, Inc.
December 3, 2020
Page 4
TaskUs phantom shares not yet paid out or vested, please indicate on
pages 140 and F-24
whether they have terms including a right to receive shares of TopCo. If
so, please revise
your accounting policy for earnings per share on page F-14 to
characterize such rollover
phantom shares as dilutive and revise the Dilution table on page 75
accordingly. If the
terms only provide for cash settlement, please revise the Capitalization
table on page 74 to
include the cash outlay to settle vested rollover phantom shares and
also clarify the
disclosure on pages 140, 142 and F-24 accordingly.
15. We note on pages F-24 and F-25 that TaskUs recognized a liability for
the cash settlement
of TaskUs phantom awards. We also note that you believe that the
associated expense
was not attributable to either the Predecessor or Successor. Tell us the
basis for your
belief that the related expense is not an expense of the Predecessor
since a liability was
recorded by the Predecessor and the Successor assumed this liability.
Note (11) Income Taxes, page F-26
16. Please expand the disclosure to explain the basis for the State taxes,
net of federal benefit
of 28% pursuant to ASC 740-10-50-14.
Note (14) Subsequent Events, page F-29
17. Please expand the disclosure to quantify the impact of the CARES Act
provisions for
NOL carryover and carrybacks and the deferral of employer taxes.
General
18. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Claire DeLabar, Staff Accountant, at (202) 551-3349 or
Robert
Littlepage, Accounting Branch Chief, at (202) 551-3361 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Matthew Derby, Staff
Attorney, at (202) 551-3334 or Jan Woo, Legal Branch Chief, at (202) 551-3453
with any other
questions.
Sincerely,
FirstName LastNameJeffrey Chugg
Division of
Corporation Finance
Comapany NameTU TopCo, Inc.
Office of
Technology
December 3, 2020 Page 4
cc: Edgar J. Lewandowski, Esq.
FirstName LastName