SECURITIES AND EXCHANGE COMMISSION


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Delaware						82-2668392
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

200 East Randolph Street, 25th Floor

Chicago, Illinois 60601

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

TWKS

Nasdaq Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of ~~November 11, 2021,~~May 5, 2022, there were approximately ~~305,117,043~~310,325,400 shares of the registrant's common stock outstanding.

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” "strive," “will,” “would” or similar expressions and the negatives of those ~~terms.~~terms but the absence of these words does not mean that the statement is not forward-looking. The forward-looking statements are ~~generally~~ contained principally in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements may include information concerning our possible or assumed future results of operations, client demand, business strategies, technology developments, financing and investment plans, competitive position, our industry and regulatory environment, ~~effects from the COVID-19 pandemic,~~ potential growth opportunities and the effects of competition.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report. You should read this Quarterly Report and the documents that we have filed as exhibits ~~to the registration statement, of which this Quarterly Report is a part,~~hereto, completely and with the understanding that our actual future results may be materially different from what we expect.

Important factors that could cause actual results to differ materially from our expectations include:

•the COVID-19 pandemic has impacted our business and operations, and future business and operational challenges posed by the COVID-19 pandemic could materially adversely affect us;

•we may be unable to implement our growth strategy;

•our ability to generate and retain business depends on our reputation in the marketplace;

•we must successfully attract, hire, train and retain skilled professionals to service our clients’ projects and we must productively deploy our professionals to remain profitable;

•increases in wages, equity compensation and other compensation expenses could prevent us from sustaining our competitive advantage and ~~could~~ increase our costs;

•our business and operations may be harmed if we cannot positively evolve and preserve our Thoughtworks culture;

•our global business exposes us to operational, geopolitical, regulatory, legal and economic risks;

•our business, financial condition and results of operations may be adversely affected by fluctuations in foreign currency exchange rates or changes in our effective tax rates;

•if we fail to adequately innovate, adapt and/or remain at the forefront of emerging technologies and related client demands, we could be materially adversely affected;

•we may not be successful at attracting new clients or retaining and expanding our relationships with our existing clients;

•we face intense competition and operate in a rapidly evolving industry, which makes it difficult to evaluate our future prospects;

•we generally do not have long-term commitments or contracts with our clients;

•we face risks associated with having a long selling and implementation cycle for our ~~services that require us to make significant resource commitments prior to realizing revenues for those~~ services;

•our profitability could suffer if we cannot accurately price our solutions and services, maintain favorable pricing for our solutions and services, are unable to collect on receivables from clients or fail to meet our contractual and other obligations to clients;

•we face risks associated with security breaches as well as privacy and data protection regulations, and we may incur significant liabilities if we fail to manage those risks;

•we may not be able to prevent unauthorized use of our intellectual property, and our intellectual property rights may not be adequate to protect our business and competitive position;

•~~Funds~~investment funds advised by Apax Partners L.L.P. control us, and such control may give rise to actual or perceived conflicts of interests;

•our status as a “controlled company” will grant us exemptions from certain corporate governance requirements, and our status as an “emerging growth company” will allow us to comply with reduced public company reporting requirements; and

other factors disclosed in the section entitled “Risk Factors” in the ~~final prospectus filed September 16, 2021, which forms part of the Registration Statement~~Annual Report on Form ~~S-1 declared effective as of~~10-K for the ~~same date~~fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the ~~“IPO Prospectus”~~“SEC”) ~~and in this Quarterly Report.~~on March 8, 2022 (the "2021 Annual Report").

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, include, but are not limited to, those disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report and in our ~~IPO Prospectus.~~2021 Annual Report. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other Securities and Exchange Commission (“SEC”) filings and public communications. You should evaluate all forward-looking statements made in this Quarterly Report in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

PART I. FINANCIAL INFORMATION

~~THOUGHTWORKS HOLDING, INC.~~


THOUGHTWORKS HOLDING, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data and per share data)
	March 31, 2022		December 31, 2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	339,638	$	368,209
Trade receivables, net of allowance of $10,431 and $8,916, respectively	146,835		145,874
Unbilled receivables	139,917		104,057
Prepaid expenses and other current assets	74,067		60,799

Total current assets	700,457		678,939
Property and equipment, net	34,526		34,500
Right-of-use assets	39,377		—
Intangibles and other assets:
Goodwill	345,595		346,719
Trademark	273,000		273,000
Customer relationships, net	123,315		125,867
Other non-current assets	29,610		25,125
Total assets	$	1,545,880	$	1,484,150
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	6,379	$	4,773
Long-term debt - current	7,150		7,150
Income taxes payable	20,029		15,693
Accrued compensation	107,598		79,460
Deferred revenue	5,230		13,807
Value-added tax and sales tax payable	5,096		7,954
Accrued expenses	29,845		51,693
Lease liabilities, current	14,426		—
Total current liabilities	195,753		180,530
Lease liabilities, non-current	27,695		—
Long-term debt, less current portion	495,785		497,380
Deferred tax liabilities	74,160		78,944
Other long-term liabilities	17,581		18,805
Total liabilities	810,974		775,659
Commitments and contingencies	0		0



Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 100,000,000 shares authorized, zero issued and outstanding at March 31, 2022 and December 31, 2021, respectively	—		—
Common stock, $0.001 par value; 1,000,000,000 shares authorized, 360,854,572 and 356,117,752 issued, 310,024,807 and 305,132,181 outstanding at March 31, 2022 and December 31, 2021, respectively	361		356



Treasury stock, 50,829,765 and 50,985,571 shares at March 31, 2022 and December 31, 2021, respectively	(627,484)		(629,424)
Additional paid-in capital	1,481,524		1,390,630
Accumulated other comprehensive loss	(16,542)		(10,863)
Retained deficit	(102,953)		(42,208)
Total stockholders' equity	734,906		708,491
Total liabilities and stockholders' equity	$	1,545,880	$	1,484,150

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(In thousands, except share data and per share data)~~

September 30, 2021 December 31, 2020
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 452,810 $ 490,841
Trade receivables, net of allowance for doubtful accounts of $9,085 and $10,385, respectively 118,420 113,183
Unbilled receivables 126,517 88,340
Prepaid expenses 11,086 9,442
Other current assets 40,402 9,960
Total current assets 749,235 711,766
Property and equipment, net 35,038 26,347
Intangibles and other assets:
Goodwill 346,831 318,151
Intangible assets, net 401,820 402,055
Other non-current assets 17,688 16,904
Total assets $ 1,550,612 $ 1,475,223
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:
Accounts payable $ 6,060 $ 4,349
Long-term debt - current 7,150 4,565
Income taxes payable 15,840 11,032
Accrued compensation 74,085 49,896
Deferred revenue 9,054 11,720
Value-added tax and sales tax payable 3,584 6,846
Accrued expenses 65,122 29,749
Total current liabilities 180,895 118,157
Long-term debt, less current portion 597,004 435,192
Deferred tax liabilities 86,329 98,310
Other long-term liabilities 17,051 16,052
Total liabilities 881,279 667,711
The accompanying notes form an integral part of the condensed consolidated financial statements.

THOUGHTWORKS HOLDING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME (unaudited)

(In thousands, except share and per share data)


	Three Months Ended March 31,
	2022		2021
Revenues	$	320,940	$	237,662
Operating expenses:
Cost of revenues	263,349		134,791
Selling, general and administrative expenses	111,734		66,516
Depreciation and amortization	5,846		4,346
Total operating expenses	380,929		205,653
(Loss) income from operations	(59,989)		32,009
Other income (expense):
Interest expense	(4,647)		(6,194)
Net realized and unrealized foreign currency gain (loss)	4,945		(2,668)
Other income, net	88		61
Total other income (expense)	386		(8,801)
(Loss) income before income taxes	(59,603)		23,208
Income tax expense	301		4,623
Net (loss) income	$	(59,904)	$	18,585

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	(5,679)		(3,968)
Comprehensive (loss) income	$	(65,583)	$	14,617

Net (loss) earnings per common share:
Basic (loss) earnings per common share	$	(0.20)	$	0.06
Diluted (loss) earnings per common share	$	(0.20)	$	0.06

Weighted average shares outstanding:
Basic	306,189,816		242,471,720
Diluted	306,189,816		249,125,028

The accompanying notes form an integral part of the condensed consolidated financial statements.

~~Table of Contents~~

~~THOUGHTWORKS HOLDING, INC.~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(In thousands, except share data and per share data)~~

September 30, 2021 December 31, 2020
(unaudited)
Commitments and contingencies (See Note 9) 0 0
Redeemable, convertible preferred stock:
Series A redeemable convertible preferred stock, $0.001 par value; zero and 217,902,632 shares authorized, zero and 23,493,546 issued and outstanding at September 30, 2021 and December 31, 2020, respectively — 322,800
Series B redeemable convertible preferred stock, $0.001 par value; zero shares authorized, zero issued and outstanding at September 30, 2021 and December 31, 2020, respectively — —
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 100,000,000 and zero shares authorized, zero issued and outstanding at September 30, 2021 and December 31, 2020, respectively — —
Common stock, $0.001 par value; 1,000,000,000 and zero authorized, 356,102,614 and zero shares issued, 305,117,043 and zero shares outstanding at September 30, 2021 and December 31, 2020, respectively 356 —
Class A common stock, $0.001 par value; zero and 416,194,027 authorized, zero and 272,054,182 shares issued, zero and 272,054,182 shares outstanding at September 30, 2021 and December 31, 2020, respectively — 272
Class B common stock, $0.001 par value; zero and 116,577,908 authorized, zero and 5,002,488 shares issued, zero and 4,474,514 shares outstanding at September 30, 2021 and December 31, 2020, respectively — 5
Class C common stock, $0.001 par value; zero and 55,565,172 authorized, zero and 1,838,757 shares issued, zero and 1,794,020 shares outstanding at September 30, 2021 and December 31, 2020, respectively — 2
Treasury stock, 50,985,571 and 572,711 shares at September 30, 2021 and December 31, 2020, respectively (629,424) (1,608)
Additional paid-in capital 1,316,075 381,172
Accumulated other comprehensive loss (10,591) (1,589)
Retained (deficit) earnings (7,083) 106,458
Total stockholders' equity 669,333 484,712
Total liabilities, redeemable convertible preferred stock and stockholders' equity $ 1,550,612 $ 1,475,223

~~The accompanying notes form an integral part of the condensed consolidated financial statements.~~

~~THOUGHTWORKS HOLDING, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME (unaudited)~~

~~(In thousands, except share data and per share data)~~

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Revenues $ 285,051 $ 196,549 $ 783,145 $ 597,082
Operating expenses:
Cost of revenues 183,945 114,849 471,047 351,750
Selling, general and administrative expenses 113,019 42,073 248,366 139,498
Depreciation and amortization 4,173 4,343 13,007 12,587
Total operating expenses 301,137 161,265 732,420 503,835
(Loss) income from operations (16,086) 35,284 50,725 93,247
Other (expense) income:
Interest expense (6,734) (6,016) (20,316) (19,833)
Net realized and unrealized foreign currency (loss) gain (1,934) 938 (3,608) 2,369
Other income (expense), net 162 12 306 139
Total other expense (8,506) (5,066) (23,618) (17,325)
(Loss) income before income taxes (24,592) 30,218 27,107 75,922
Income tax expense 643 8,336 15,605 16,243
Net (loss) income $ (25,235) $ 21,882 $ 11,502 $ 59,679
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments (7,109) 9,940 (9,002) (7,321)
Comprehensive (loss) income $ (32,344) $ 31,822 $ 2,500 $ 52,358
Net (loss) earnings per common share:
Basic (loss) earnings per common share $ (0.10) $ 0.08 $ (0.20) $ 0.21
Diluted (loss) earnings per common share $ (0.10) $ 0.08 $ (0.20) $ 0.21
Weighted average shares outstanding:
Basic 241,351,052 278,218,732 237,121,811 278,202,291
Diluted 241,351,052 285,073,748 237,121,811 284,165,048

~~The accompanying notes form an integral part of the condensed consolidated financial statements.~~

~~Table of Contents~~

THOUGHTWORKS HOLDING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (unaudited)

(In thousands, except share data)


	Redeemable, Convertible Preferred Stock			Common Stock			Treasury			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained (Deficit) Earnings
	Shares	Amount		Shares	Amount		Shares	Amount								Total
Balance as of December 31, 2020	23,493,546	$	322,800	278,322,716	$	279	572,711	$	(1,608)	$	381,172	$	(1,589)	$	106,458	$	484,712
Net income	—	—		—	—		—	—		—		—		18,585		18,585
Other comprehensive loss, net of tax	—	—		—	—		—	—		—		(3,968)		—		(3,968)
Issuance of common stock on exercise of options	—	—		27,184	—		—	—		62		—		—		62
Issuance of common stock	—	—		133,313	—		—	—		1,873		—		—		1,873
Issuance of Series A redeemable convertible preferred stock, net of issuance costs of $9.0 million	27,765,084	380,994		—	—		—	—		—		—		—		—
Other	—	—		—	—		—	—		(104)		—		—		(104)
Tender offer	—	—		(50,412,860)	—		50,412,860	(627,816)		(10,391)				(79,222)		(717,429)
Stock-based compensation expense	—	—		—	—		—	—		1,874		—		—		1,874
Balance as of March 31, 2021	51,258,630	$	703,794	228,070,353	$	279	50,985,571	$	(629,424)	$	374,486	$	(5,557)	$	45,821	$	(214,395)

Balance as of December 31, 2021	—	$	—	305,132,181	$	356	50,985,571	$	(629,424)	$	1,390,630	$	(10,863)	$	(42,208)	$	708,491
Net loss	—	—		—	—		—	—		—		—		(59,904)		(59,904)
Other comprehensive loss, net of tax	—	—		—	—		—	—		—		(5,679)		—		(5,679)

Issuance of common stock for equity incentive awards, net of withholding taxes	—	—		4,736,820	5		—	—		(28,047)		—		—		(28,042)
Reissuance of treasury shares for equity incentive awards	—	—		155,806	—		(155,806)	1,940		(1,796)		—		—		144
Stock-based compensation expense	—	—		—	—		—	—		120,737		—		—		120,737
Cumulative effect related to adoption of ASU 2016-13	—	—		—	—		—	—		—		—		(841)		(841)
Balance as of March 31, 2022	—	$	—	310,024,807	$	361	50,829,765	$	(627,484)	$	1,481,524	$	(16,542)	$	(102,953)	$	734,906

Redeemable, Convertible Preferred Stock Common Stock Treasury Additional
Paid-In Capital Accumulated Other Comprehensive Loss Retained (Deficit)
Earnings
Shares Amount Shares Amount Shares Amount Total
Balance as of June 30, 2020 — $ — 278,198,070 $ 279 572,711 $ (1,608) $ 379,993 $ (27,328) $ 64,972 $ 416,308
Net income — — — — — — — — 21,882 21,882
Other comprehensive income, net of tax — — — — — — — 9,940 — 9,940
Issuance of common stock on exercise of options, net of withholding taxes — — 27,408 — — — 63 — — 63
Stock-based compensation expense — — — — — — 292 — — 292
Balance as of September 30, 2020 — $ — 278,225,478 $ 279 572,711 $ (1,608) $ 380,348 $ (17,388) $ 86,854 $ 448,485
Balance as of June 30, 2021 59,489,958 $ 826,022 228,080,650 $ 279 50,985,571 $ (629,424) $ 103,785 $ (3,482) $ 18,152 $ (510,690)
Net loss — — — — — — — — (25,235) (25,235)
Other comprehensive loss, net of tax — — — — — — — (7,109) — (7,109)
Issuance of common stock upon initial public offering, net of issuance costs of $30.3 million — — 16,429,964 16 — — 314,700 — — 314,716
Conversion of redeemable convertible preferred stock to common stock (59,489,958) (826,022) 59,489,958 60 — — 825,962 — — 826,022
Issuance of common stock on exercise of options, net of withholding taxes — — 1,116,471 1 — — (972) — — (971)
Stock-based compensation expense — — — — — — 72,600 — — 72,600
Balance as of September 30, 2021 — $ — 305,117,043 $ 356 50,985,571 $ (629,424) $ 1,316,075 $ (10,591) $ (7,083) $ 669,333

The accompanying notes form an integral part of the condensed consolidated financial statements.

Table of Contents


THOUGHTWORKS HOLDING, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands)
	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net (loss) income	$	(59,904)	$	18,585
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization expense	8,582		6,884
Bad debt recovery	(100)		(168)
Deferred income tax benefit	(6,461)		(1,252)
Stock-based compensation expense	120,737		1,874
Unrealized foreign currency exchange (gains) losses	(5,847)		3,929
Non-cash lease expense on right-of-use assets	4,153		—
Other operating activities, net	314		707
Changes in operating assets and liabilities:
Trade receivables	(1,130)		27,579
Unbilled receivables	(35,314)		(20,422)
Prepaid expenses and other assets	(4,963)		(20,045)
Lease liabilities	(2,358)		—

Accounts payable	1,613		1,036
Accrued expenses and other liabilities	(25,417)		11,054
Net cash (used in) provided by operating activities	(6,095)		29,761
Cash flows from investing activities:
Purchase of property and equipment	(5,134)		(5,584)
Proceeds from disposal of fixed assets	136		77
Acquisition of businesses, net of cash acquired	—		(44,759)
Net cash used in investing activities	(4,998)		(50,266)
Cash flows from financing activities:

Proceeds from issuance of Series A redeemable convertible preferred stock, net of issuance costs	—		380,994

Proceeds from issuance of common stock	—		1,873
Payments of obligations of long-term debt	(1,788)		(131,346)
Payments of debt issuance costs	—		(7,176)


Proceeds from borrowings on long-term debt	—		401,285
Proceeds from issuance of common stock on exercise of options, net of employee tax withholding	704		62
Shares and options purchased under tender offer	—		(702,173)

Withholding taxes paid on tender offer	(15,469)		—
Withholding taxes paid on dividends previously declared	(5,903)		—
Withholding taxes paid related to net share settlement of equity awards	(7,307)		—
Other financing activities, net	(29)		(139)
Net cash used in financing activities	(29,792)		(56,620)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	182		(1,204)
Net decrease in cash, cash equivalents and restricted cash	(40,703)		(78,329)
Cash, cash equivalents and restricted cash at beginning of the period	394,942		492,199
Cash, cash equivalents and restricted cash at end of the period	$	354,239	$	413,870

Table of Contents

~~THOUGHTWORKS HOLDING, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (unaudited)~~

~~(In thousands, except share data)~~

Redeemable, Convertible Preferred Stock Common Stock Treasury Additional
Paid-In Capital Accumulated Other Comprehensive Loss Retained (Deficit)
Earnings
Shares Amount Shares Amount Shares Amount Total
Balance as of December 31, 2019 — $ — 278,193,711 $ 279 572,711 $ (1,608) $ 379,209 $ (10,067) $ 27,175 $ 394,988
Net income — — — — — — — — 59,679 59,679
Other comprehensive loss, net of tax — — — — — — — (7,321) — (7,321)
Issuance of common stock on exercise of options, net of withholding taxes — — 31,767 — — — 73 — — 73
Stock-based compensation expense — — — — — — 1,066 — — 1,066
Balance as of September 30, 2020 — $ — 278,225,478 $ 279 572,711 $ (1,608) $ 380,348 $ (17,388) $ 86,854 $ 448,485
Balance as of December 31, 2020 23,493,546 $ 322,800 278,322,716 $ 279 572,711 $ (1,608) $ 381,172 $ (1,589) $ 106,458 $ 484,712
Net income — — — — — — — — 11,502 11,502
Other comprehensive loss, net of tax — — — — — — — (9,002) — (9,002)
Issuance of common stock upon initial public offering, net of issuance costs of $30.3 million — — 16,429,964 16 — — 314,700 — — 314,716
Issuance of Redeemable Convertible Preferred Stock, net of issuance costs of $11.8 million 35,996,412 503,222 — — — — — — — —
Conversion of redeemable convertible preferred stock to common stock (59,489,958) (826,022) 59,489,958 60 — — 825,962 — — 826,022
Issuance of common stock on exercise of options, net of withholding taxes — — 1,153,952 1 — — (886) — — (885)
Issuance of common stock — — 133,313 — — — 1,873 — — 1,873
Dividends — — — — — — (279,191) — (45,821) (325,012)
Tender Offer — — (50,412,860) — 50,412,860 (627,816) (10,391) — (79,222) (717,429)
Stock-based compensation expense — — — — — — 82,836 — — 82,836
Balance as of September 30, 2021 — $ — 305,117,043 $ 356 50,985,571 $ (629,424) $ 1,316,075 $ (10,591) $ (7,083) $ 669,333


THOUGHTWORKS HOLDING, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In thousands)
	Three Months Ended March 31,
	2022		2021
Supplemental disclosure of cash flow information:
Interest paid	$	4,355	$	5,067
Income taxes paid	$	2,383	$	3,394

Supplemental disclosures of non-cash financing activities:
Withholding taxes payable included within accrued expenses	$	4,575	$	15,469
Withholding taxes payable included within accrued compensation	$	21,930	$	—
Option costs receivable included within prepaid expenses and other current assets	$	635	$	—






Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	339,638	$	397,291
Restricted cash included in other current assets	13,376		15,256
Restricted cash included in other non-current assets	1,225		1,323
Total cash, cash equivalents and restricted cash	$	354,239	$	413,870

The accompanying notes form an integral part of the condensed consolidated financial statements.

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~~THOUGHTWORKS HOLDING, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)~~

~~(In thousands)~~

Nine Months Ended September 30,
2021 2020
Cash flows from operating activities:
Net income $ 11,502 $ 59,679
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 21,702 19,327
Bad debt provision (611) 6,713
Stock-based compensation expense 82,836 1,066
Unrealized foreign currency exchange loss 3,912 165
Other operating activities, net (10,849) 4,863
Changes in operating assets and liabilities:
Trade receivables (3,960) 36,830
Unbilled receivables (39,670) (30,812)
Prepaid expenses (1,610) (5,131)
Other assets (27,537) 825
Accounts payable 1,602 (1,126)
Accrued expenses and other liabilities 58,182 6,844
Net cash provided by operating activities 95,499 99,243
Cash flows from investing activities:
Purchase of property and equipment (21,504) (9,005)
Proceeds from disposal of fixed assets 375 101
Acquisition of businesses, net of cash acquired (44,759) —
Net cash used in investing activities (65,888) (8,904)
Cash flows from financing activities:
Proceeds from initial public offering, net of issuance costs and underwriting discounts 314,716 —
Proceeds from issuance of Series A Redeemable Convertible Preferred Stock, net of issuance costs 380,994 —
Proceeds from issuance of Series B Redeemable Convertible Preferred Stock, net of issuance costs 122,228 —
Payments of obligations of long-term debt (234,921) (3,424)
Payments of debt issuance costs (7,098) (111)
Proceeds from borrowings on revolving credit facility — 29,000
Payments on revolving credit facility — (29,000)
Proceeds from borrowings on long-term debt 401,285 —
Proceeds from issuance of common stock on exercise of options, net of employee tax withholding (885) 73
Shares and options purchased under Tender offer (701,960) —
Proceeds from issuance of common stock 1,873 —
Dividends paid (315,003) —
Other financing activities, net 1,317 105
Net cash used in financing activities (37,454) (3,357)

~~The accompanying notes form an integral part of the condensed consolidated financial statements.~~

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~~THOUGHTWORKS HOLDING, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)~~

~~(In thousands)~~

Nine Months Ended September 30,
2021 2020
Effect of exchange rate changes on cash, cash equivalents and restricted cash (3,394) (574)
Net (decrease) increase in cash, cash equivalents and restricted cash (11,237) 86,408
Cash, cash equivalents and restricted cash at beginning of the period 492,199 57,156
Cash, cash equivalents and restricted cash at end of the period $ 480,962 $ 143,564
Supplemental disclosure of cash flow information:
Interest paid $ 18,736 $ 18,364
Income taxes paid $ 21,307 $ 9,470
Withholding taxes payable $ 34,539 $ —
Supplemental disclosures of non-cash investing and financing activities:
Conversion of convertible preferred stock to common stock $ 826,022 $ —
Net settlement on exercise of shares $ 3,611 $ —

~~The accompanying notes form an integral part of the condensed consolidated financial statements.~~

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THOUGHTWORKS HOLDING, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Business and Summary of Significant Accounting Policies

Thoughtworks Holding, Inc.~~, formerly known as Turing Holding Corp.,~~ (together with its subsidiaries, the “Company”) develops, implements, and services complex enterprise application software, and provides business technology ~~consulting, and licenses technology practitioner tools which are used for software development.~~consulting. The Company conducts business in Australia, Brazil, Canada, Chile, China, Ecuador, Finland, Germany, Hong Kong, India, Italy, the Netherlands, Romania, Singapore, Spain, Thailand, the United Kingdom and the United States. Thoughtworks Holding, Inc. is the ultimate parent holding company of Thoughtworks, Inc. among other subsidiaries.

~~Initial Public Offering~~

The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective on September 14, 2021 and the Company’s common stock began trading on the Nasdaq Global Select Market on September 15, 2021. The Company's final prospectus (the “IPO Prospectus”) was filed with the SEC on September 16, 2021. On September 17, 2021 (the “IPO Closing Date”), the Company closed its IPO pursuant to which an aggregate of 42,368,421 shares of its common stock were sold, which includes the issuance and sale of 16,429,964 shares of the Company's common stock, the sale by selling stockholders of 20,412,142 shares of the Company's common stock, and the full exercise of the underwriters' option to purchase 5,526,315 additional shares of common stock from certain of the selling stockholders, at the IPO price of $21.00 per share. The Company received net proceeds of $314.7 million, after deducting the underwriting discounts and commissions and other offering expenses of approximately $30.3 million. Prior to the completion of the IPO, all shares of the Company's Class A, Class B and Class C common stock then outstanding were converted into ~~5,259,163~~ shares of common stock on a 1-for-1 basis, and upon the completion of the IPO, all 1,365,058 shares of the Company’s outstanding Series A and B redeemable convertible preferred stock converted into an equivalent number of shares of common stock on a 1-for-1 basis.

Additionally, after the conversion described above and prior to the completion of the IPO, the Company effected an approximate 43.6-for-1 split of each outstanding share of common stock (the "Stock Split"). All share and per share information has been retroactively adjusted to effect the Stock Split for all periods presented, except where otherwise noted.

Post-IPO, offering expenses, which consist of direct incremental legal, accounting, and consulting fees relating to the IPO, were recorded as equity issuance costs as a reduction to additional paid-in capital on the condensed consolidated statement of stockholders' equity. These offering expenses, net of reimbursement received from the underwriters upon completion of the IPO, totale~~d approximately $30.3~~ ~~million, of which $19.0 million related to underwriting discounts and commissions and $11.3 million related to offering expenses, as of September 30, 2021.~~

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Thoughtworks Holding, Inc. and its subsidiaries. All ~~significant~~ intercompany accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the ~~condensed~~ consolidated financial statements and notes included in the Company’s ~~IPO Prospectus.~~2021 Annual Report.

Certain amounts in the prior period consolidated financial statements and notes have been reclassified to conform to the 2022 presentation. These reclassifications had no effect on results of operations previously reported.

Preparation of Financial Statements and Use of Estimates

The preparation of the unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020. The preparation of these condensed consolidated financial statements is in conformity with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

regulations of the SEC regarding interim financial reporting. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, the Company evaluates its estimates, including those related to the allowance for ~~doubtful accounts,~~credit losses, valuation and impairment of goodwill and long-lived assets, income taxes, accrued bonus, contingencies, stock-based compensation ~~including the underlying deemed fair value of common stock (prior to the completion of the IPO),~~ and litigation costs. The Company bases its estimates on current expectations and historical experience and on other assumptions that its management believes are reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of assets and liabilities when those values are not readily apparent from other sources. Actual results can differ from those estimates, and such differences may be material to the condensed consolidated financial ~~statements.~~statements in the future. Operating results for ~~the~~ interim periods are not necessarily indicative of results that may be expected to occur for the entire year. In management’s opinion, all adjustments considered necessary for a fair presentation of the accompanying unaudited condensed consolidated financial statements have been included, and all adjustments are of a normal and recurring nature.

~~Segments~~

The Company operates as 1 operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and assess performance.

While the Company has offerings in multiple modern digital businesses and operates in multiple countries, the Company’s business operates in 1 operating segment because most of the Company's service offerings are delivered and supported on a global basis, most of the Company's service offerings are deployed in a nearly identical way, and the Company’s CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis.

~~Long-Lived Assets~~

The North America geographic region encompasses the Company’s country of domicile (United States) and Canada, of which long-lived assets including property and equipment, net of depreciation, are principally held within the United States. The United States comprised $7.0 million, or 20.0%, and $4.6 million, or 17.4%, of the Company’s long-lived assets as of September 30, 2021 and December 31, 2020, respectively. Canadian long-lived assets were determined to be immaterial given property, and equipment was less than 10% of the Company's long-lived assets as of September 30, 2021 and December 31, 2020.

The Company holds material long-lived assets in the foreign geographic locations of Brazil, China, and India of $5.8 million, $8.1 million, and $7.6 million as of September 30, 2021, respectively, compared to $2.8 million, $7.6 million, and $5.3 million as of December 31, 2020, respectively. Long-lived assets in all other foreign geographic locations, including Canada, totaled $6.5 million and $6.0 million as of September 30, 2021 and December 31, 2020, respectively.

~~Stock-Based Compensation~~

~~The Company accounts for employee and non-employee equity-based compensation in accordance with ASC 718,~~ ~~Compensation –~~ Stock ~~Compensation~~. Accordingly, compensation expense for employee and non-employee services received in exchange for equity awards is based on the grant date fair value of those awards and is recognized over the requisite service period for the respective award. Prior to the IPO, the fair market value of the Company’s common stock was determined by the estimated fair market value of the Company’s common stock at the time of grant. Upon the completion of the IPO, the Company uses the market closing price of its common stock on the date of grant to determine the fair market value of the common stock, or if there is no market closing price on the date of grant, the closing price reported on the most recent trading date on Nasdaq.

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

The Company’s equity-based awards issued to employees include stock option awards issued by the Company, which vest based on either time or the achievement of certain performance and market conditions. The Company records forfeitures as they occur. Compensation expense resulting from time vesting based awards will be recognized in the Company’s consolidated statement of operations and comprehensive income (loss), primarily within general and administrative expenses, at the grant date fair value over the requisite service period (typically ~~one~~ to four years on an accelerated basis for time vested awards). Compensation expense resulting from performance awards will be recognized over the requisite service period when it is probable that the performance condition will be met. The calculated compensation expense for performance awards is adjusted based on an estimate of awards ultimately expected to vest.

~~Common Stock Valuation Prior to the IPO Closing Date~~Split

Prior to the ~~IPO Closing Date, due to the absence of an active market for the Company’s common stock,~~Company's initial public offering (the "IPO") which closed on September 17, 2021, the Company ~~utilized methodologies in accordance with the framework~~effected an approximate 43.6-for-1 split of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of common stock. The valuation methodology included estimates and assumptions that required the Company’s judgment. These estimates and assumptions included a number of objective and subjective factors, including external market conditions affecting the industry sector, and the likelihood of achieving a liquidity event, such as an IPO, reverse merger or sale. Significant changes to the key assumptions used in the valuations resulted in different fair valueseach outstanding share of common stock ~~at each valuation date.~~

~~The Company’s equity-based awards also include restricted stock units ("RSUs"~~(the "Stock Split"),. All share and per share information has been retroactively adjusted to effect the ~~fair value of each RSU is based on the fair value of the Company’s common stock on the date of grant.~~

~~Refer to Note 11,~~ ~~Stock-Based Compensation~~,Stock Split for ~~more information on equity-based awards and the related activity that occurred in connection with the IPO.~~all periods presented.

Restricted Cash

Restricted cash is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Restricted cash is restricted as to withdrawal or use. The Company has restricted cash held on deposit at various financial institutions. The amounts are held in escrow for income tax withholdings, to secure bank guarantees of amounts related to government requirements, and collateral for a corporate credit card. ~~A reconciliation~~

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Government Assistance

The Company has historically received government subsidies in the form of cash ~~cash equivalents~~in China and ~~restricted cash~~Singapore related to expenses such as rent, wages, training benefits and taxes. The subsidies are recorded against the related expense within selling, general and administrative ("SG&A") expense or cost of revenues in the condensed consolidated ~~balance sheet~~statements of (loss) income and comprehensive (loss) income. The Company recorded an immaterial amount for the three months ended March 31, 2022.

Allowance for Credit Losses

The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) in the first quarter of 2022. See “—Recently Adopted Accounting Standards” below for further discussion. The Company is exposed to credit risk primarily through trade receivables and unbilled receivables. Activity related to the Company’s allowance for credit losses is as follows (in thousands):

As of
September 30, 2021
As of
December 31, 2020
Cash and cash equivalents $ 452,810 $ 490,841
Restricted cash included in other current assets 26,827 —
Restricted cash included in other non-current assets 1,325 1,358
Total cash, cash equivalents, and restricted cash $ 480,962 $ 492,199


	Three Months Ended March 31,
	2022
Allowance for credit losses, beginning balance	$	(8,916)
Impact of accounting standard adoption	(841)
Current provision for expected credit losses	100
Write-offs charged against allowance	—
Recoveries of amounts previously written off	—
Changes due to exchange rates	(774)
Allowance for credit losses, ending balance	$	(10,431)

Recently Adopted Accounting Standards

In ~~August 2018,~~February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. ~~2018-13,~~ ~~Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which amends Accounting Standards Codification (“ASC”) 820,~~ ~~Fair Value Measurement~~. This ASU modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The effective date is the first quarter of fiscal year 2020, with early adoption permitted for the removed disclosures and delayed adoption until fiscal year 2020 permitted for the new disclosures. The removed and modified disclosures were adopted on a retrospective basis and the new disclosures will be adopted on a prospective

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

~~basis. The adoption of ASU 2018-13 did not have a material impact on the Company’s condensed consolidated financial statements.~~

~~In August 2018, the FASB issued ASU 2018-15,~~ ~~Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract~~. ASU 2018-15 is intended to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The ASU is effective for annual reporting periods beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted. In the third quarter of 2021, the Company early adopted ASU 2018-15 and this adoption did not have a material impact on the Company’s condensed consolidated financial statements.

~~In December 2019, the FASB issued ASU No. 2019-12,~~ ~~Income Taxes (Topic 740)~~: ~~Simplifying the Accounting for Income Taxes~~, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance became effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

~~In February 2016, the FASB issued ASU No.~~ 2016-02, Leases (Topic 842), which amends existing accounting standards for lease accounting and requires lessees to recognize virtually all ~~their~~ leases on the balance sheet by recording a right-of-use asset and a lease liability (for other than short term leases). The Company ~~is in~~early adopted the ~~preliminary stages of gathering data~~standard effective January 1, 2022. The Company elected the modified retrospective transition method, and ~~assessing~~as a result, the ~~impact of~~Company did not adjust its comparative period financial information or make the new required lease ~~standard.~~disclosures for periods before the date of adoption. The Company ~~anticipates that~~elected to use the ~~adoption~~package of ~~this standard will materially affect~~practical expedients, which permits the ~~consolidated balance sheet~~Company to not reassess: (i) whether a contract is or contains a lease, (ii) lease classification, and ~~may require changes to~~(iii) initial direct costs resulting from the ~~processes used to account for leases.~~lease. The Company did not elect the hindsight practical expedient, which permits the use of hindsight when determining lease term and impairment of operating lease assets. The Company is ~~currently in~~electing not to apply the ~~process~~recognition requirements to short-term leases of ~~evaluating~~12 months or less and instead will recognize lease payments as expense on a straight-line basis over the ~~impact~~lease term. The Company also elected the option to combine lease and non-lease components as a single component for the Company's entire population of lease assets. Upon adoption, the ~~adoption~~Company recorded $40.9 million of ~~Topic 842 on the condensed consolidated financial statements~~right-of-use assets ("ROU") and ~~will adopt this new standard in the fiscal year beginning January 1, 2022, based on its status as an emerging growth company.~~$43.7 million of lease liabilities. Refer to Note 5, Leases, for further discussion.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,, which amends the ~~current~~ accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions, and reasonable and supportable forecasts, or a current expected credit loss (“CECL”) model. For trade receivables, loans, and other financial instruments, companies ~~will be~~are required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. In November 2019, the FASB issued ASU 2019-10 which delayed the effective date for the CECL standard. ~~This~~The guidance and related amendments isare effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal ~~years.~~ years, with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date.

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The Company ~~is currently assessing~~early adopted the ~~impact~~accounting standard by recording a cumulative effect adjustment to retained earnings as of January 1, 2022 using a modified retrospective approach. The adoption mainly impacts trade receivables and unbilled receivables. The Company analyzed its historical credit loss experience and considered current conditions and reasonable forecasts in developing the expected credit loss rates. The adoption of this ~~ASU~~new standard did not have a material impact on the Company's condensed consolidated financial ~~statements~~statements.

In November 2021, the FASB issued ASU 2021-10, Disclosures by Business Entities About Government Assistance (Topic 832), which requires business entities to provide certain disclosures when they (1) have received government assistance and ~~will adopt this new standard~~(2) use a grant or contribution accounting model by analogy to other accounting guidance. The guidance is effective for all entities for fiscal years beginning after December 15, 2021. Entities may apply the ASU’s provisions either (1) prospectively to all transactions within the scope of ASC 832 that are reflected in the ~~fiscal year beginning~~financial statements as of the adoption date and all new transactions entered into after the date of adoption or (2) retrospectively. The Company adopted the standard on January 1, ~~2023, based~~2022 on ~~its status as an emerging growth company.~~a prospective basis. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,, which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The optional amendments are effective as of March 12, 2020 through December 31, 2022. The Company is currently assessing the impact of this ASU on the condensed consolidated financial statements and will adopt this new standard in the fiscal year beginning January 1, ~~2023 based on its status as an emerging growth company.~~

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

2023.

Concentration of Credit Risk and Other Risks and Uncertainties

Revenue generated from the Company's operations outside of the United States for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 was ~~66%~~63% and ~~65%, respectively, and for the three and nine months ended September 30, 2020 was 62% and 60%~~64%, respectively.

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, approximately ~~71%~~68% and ~~74%~~73%, respectively, of trade accounts receivable and unbilled accounts receivable was due from customers located outside the United States. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company had net fixed assets of ~~$28.0~~$26.2 million and ~~$21.8~~$26.6 million, respectively, outside the United States.

Note 2 – Revenue Recognition

The Company disaggregates revenues from contracts with customers by ~~both~~ geographic customer location, industry vertical and revenue contract types. Geographic customer location is pertinent to understanding the Company's revenues, as the Company generates its revenues from providing professional services to customers in various regions across the world. The Company groups customers into one of 5 industry verticals. Revenue contract types are differentiated by the type of pricing structure for customer contracts, which is predominantly time-and-materials, but also includes fixed price contracts.

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Disaggregation of Revenues

The following ~~tables present~~table presents the disaggregation of the Company’s revenues by customer location ~~for the three and nine months ended September 30, 2021 and 2020~~ (in thousands):


		Three Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Customer Location:

North America (1)	North America (1)	$	103,769	$	76,649	North America (1)	$	121,949	$	89,795
APAC (2)	APAC (2)	98,756		64,457		APAC (2)	102,206		72,590
Europe (3)	Europe (3)	69,522		46,623		Europe (3)	82,926		64,114
LATAM	LATAM	13,004		8,820		LATAM	13,859		11,163
Revenues		$	285,051	$	196,549
Total revenues						Total revenues	$	320,940	$	237,662

(1) ~~North America encompasses the Company’s country of domicile (United States) and Canada, of which revenue is principally generated within the United States. During~~For the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and September 30, 2020,~~ the United States ~~represented 33.9%~~represented 35.9%, or ~~$96.5~~$115.1 million, and ~~37.3%~~ 36.1%, or ~~$73.4~~$85.9 million, respectively, of the Company’s total ~~revenues, respectively.~~revenues. Canadian operations were determined to be immaterial given the revenues generated from such operations as a percentage of total North America revenues was less than 10% for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~September 30, 2020.~~2021.

(2) ~~During~~For the three months ended ~~September 30,~~March 31, 2022 and 2021, Australia ~~which is included in the Asia-Pacific region ("APAC"),~~ represented ~~10.9%~~11.3%, or ~~$31.0~~$36.3 million, and 11.1%, or $26.5 million, respectively, of the Company’s total revenues.

(3)For the three months ended March 31, 2022 and 2021, the United Kingdom represented 11.7%, or $37.7 million, and 12.0%, or $28.6 million, respectively, of the Company’s total revenues. ~~During~~For the three months ended ~~September 30,~~March 31, 2021, the revenues generated in ~~China~~Germany represented 11.0%, or $26.0 million, of the Company’s total revenues. For the three months ended March 31, 2022, revenues generated in Germany as a percentage of the Company’s total revenues was less than 10%. For the three months ended September 30, 2020, the revenues generated in Australia and China represented 10.0%, or $19.7 million, and 11.9%, or $23.4 million, of the Company’s total revenues respectively.

(3) During the three months ended September 30, 2021, Germany and the United Kingdom, which are included in the Europe region, represented 10.5%, or $30.0 million, and 10.5%, or $30.0 million, of the Company’s total revenues, respectively. For the three months ended September 30, 2020, the revenues generated in Germany and the United King~~dom represented 10.1%, or $19.8 million, and 10.6%, or $20.8 million, of the Company’s total revenues, respectively.~~

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

Other foreign countries were determined to be immaterial given the revenues generated from such operations as a percentage of the Company’s total revenues was less than 10% for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~September 30, 2020.~~2021.

Nine Months Ended September 30,
2021 2020
Customer Location:
North America (1) $ 290,954 $ 243,797
APAC (2) 260,928 181,738
Europe (3) 196,476 143,673
LATAM 34,787 27,874
Revenues $ 783,145 $ 597,082

~~(1) During~~The following table presents the ~~nine months ended September 30, 2021 and September 30, 2020, the United States represented 35.1%, or $275.0 million, and 39.1%, or $233.5 million,~~disaggregation of the Company’s ~~total~~ revenues respectively. Canadian operations were determined to be immaterial given the revenues generated from such operations as a percentage of total North America revenues was less than 10% for the nine months ended September 30, 2021 and September 30, 2020.by industry vertical (in thousands):

(2) During the nine months ended September 30, 2021, Australia, which is included in the APAC region, represented 10.7%, or $83.7 million of the Company’s total revenues. For the nine months ended September 30, 2020, the revenues generated in Australia as a percentage of the Company’s total revenues was less than 10%.

(3) During the nine months ended September 30, 2021, Germany and the United Kingdom, which are included in the Europe region, represented 10.7%, or $84.2 million, and 10.7%, or $83.5 million, of the Company’s total revenues, respectively. For the nine months ended September 30, 2020, the revenues generated in Germany and the United Kingdom represented 10.0%, or $59.9 million, and 11.0%, or $65.7 million, of the Company’s total revenues, respectively.

Other foreign countries were determined to be immaterial given the revenues generated from such operations as a percentage of the Company’s total revenues was less than 10% for the nine months ended September 30, 2021 and September 30, 2020.


	Three Months Ended March 31,
	2022		2021
Technology and business services	$	85,349	$	66,210
Energy, public and health services	77,110		63,664
Retail and consumer	62,435		41,133
Financial services and insurance	58,464		34,254
Automotive, travel and transportation	37,582		32,401

Total revenues	$	320,940	$	237,662

The following ~~tables present~~table presents the disaggregation of the Company’s revenues by contract type ~~for the three and nine months ended September 30, 2021 and 2020~~ (in thousands):

Three Months Ended September 30,
2021 2020
Contract Types:
Time-and-material $ 237,533 $ 161,202
Fixed-price 47,518 35,319
Licensing — 28
Revenues $ 285,051 $ 196,549


	Three Months Ended March 31,
	2022		2021

Time-and-material	$	271,363	$	189,174
Fixed-price	49,577		48,488

Total revenues	$	320,940	$	237,662

1713

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

Nine Months Ended September 30,
2021 2020
Contract Types:
Time-and-material $ 635,608 $ 504,710
Fixed-price 147,537 92,029
Licensing — 343
Revenues $ 783,145 $ 597,082

Contract Balances

The following table is a summary of the Company’s contract assets and contract liabilities (in thousands):


		As of September 30, 2021		As of December 31, 2020			As of March 31, 2022		As of December 31, 2021
Contract assets included in unbilled receivables	Contract assets included in unbilled receivables	$	29,264	$	19,790	Contract assets included in unbilled receivables	$	28,491	$	25,408
Contract liabilities included in deferred revenue	Contract liabilities included in deferred revenue	$	9,054	$	11,720	Contract liabilities included in deferred revenue	$	5,230	$	13,807

Contract liabilities represent amounts collected from the Company’s customers for revenues not yet earned. Such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. ~~During~~For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, the Company recognized ~~$0.5~~$10.1 million and ~~$11.2~~$6.2 million, ~~of revenues,~~ respectively, ~~that were included in current liabilities at December 31, 2020. During the three and nine months ended September 30, 2020, the Company recognized $0.6 million and $8.2 million~~ of revenues that were included in current liabilities at ~~December 31, 2019.~~the prior year end.

Costs to Obtain a Customer Contract

The Company incurs certain incremental costs to obtain a contract that the Company expects to recover. The Company applies a practical expedient and recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs would primarily relate to commissions paid to our account executives and are included in ~~selling, general~~SG&A expenses. The Company did not have long term contracts to capitalize related costs prior to the fourth quarter of 2021.

The following table is a summary of the Company’s costs to obtain contracts and ~~administrative expenses.~~related amortization and impairment where the amortization period of the assets is greater than one year (in thousands):


	Three Months Ended March 31,
	2022		2021
Costs to obtain contracts, beginning balance	$	2,039	$	—
Costs to obtain contracts capitalized	91		—
Amortization of capitalized costs	(315)		—
Impairment of costs to obtain contracts	—		—
Changes due to exchange rates	(1)		—
Costs to obtain contracts, ending balance	$	1,814	$	—

Transaction Price Allocated to Remaining Performance Obligations

The Company does not have material future performance obligations that extend beyond one year. Accordingly, the Company has applied the optional exemption for contracts that have an original expected duration of one year or less.

Note 3 – ~~Acquisitions~~Income Taxes

The Company acquired 2 businesses, Gemini Solutions LLC (“Gemini”) and Fourkind Global Oy (“Fourkind”) during the first quarter of 2021 for an aggregate gross purchase price of $46.6 million, or $44.8 million net of cash acquired of $1.8 million. These acquisitions were intended to complement existing operations and to expand into new geographic markets. The Company accounted for these acquisitions under ASC 805, ~~Business Combinations~~. The goodwill identified by these acquisitions reflects the benefits expected to be derived from expansion, as well as certain operational synergies. The fair value of the net assets acquired for these businesses was determined using Level 3 inputs, for which little or no market data exists, requiring the Company to develop assumptions regarding future cash flow projections. Upon consummation of these acquisitions, each of these businesses is now wholly-owned by the Company. The results of operations for the Company include the results of these businesses from their respective dates of acquisition. The operating results subsequentPrior to the ~~acquisition date did not have a significant impact on the condensed consolidated financial statements of the Company.~~

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

~~The Company's preliminary allocation of the fair value of underlying assets acquired and liabilities assumed as of the acquisition date is as follows (in thousands):~~


	~~Total~~
~~Customer Relationship~~	$	~~11,100~~
~~Property and Equipment~~	~~259~~
~~Other assets/liabilities, net~~	~~4,228~~
~~Deferred Taxes~~	~~(1,646)~~
~~Goodwill~~	~~32,615~~
~~Total gross purchase pric~~e	$	~~46,556~~

Goodwill represents the excess of the purchase price over the fair values of assets acquired and liabilities assumed. For the Fourkind acquisition, the changes in fair value allocated to goodwill, tangible and intangible assets are not deductible for tax purposes. The Gemini acquisition was considered an asset acquisition for tax purposes; therefore, goodwill is deductible for tax purposes.

As additional information is obtained about the assets and liabilities of these acquisitions during the measurement period (not to exceed one year from the date of acquisition), including the completion or finalization of asset appraisals, the Company will refine its estimates of fair value to allocate the purchase price including finalizing the impact on taxes.

~~Note 4 – Goodwill and Other Intangible Assets~~

~~The following is a summary of goodwill as of September 30, 2021 (in thousands):~~


	~~Total~~
~~Balance as of December 31, 2019~~	$	~~314,037~~
~~Changes due to exchange rates~~	~~4,114~~
~~Balance as of December 31, 2020~~	~~318,151~~
~~Additions due to acquisitions~~	~~32,615~~
~~Changes due to exchange rates~~	~~(3,935)~~
~~Balance as of September 30, 2021~~	$	~~346,831~~

~~The following is a summary of other intangible assets as of (in thousands):~~

September 30, 2021 December 31, 2020
Customer relationships $ 177,100 $ 166,000
Less accumulated amortization 43,177 34,122
Customer relationships 133,923 131,878
Trademark 273,000 273,000
Total intangible assets, after amortization 406,923 404,878
Changes due to exchange rates (5,103) (2,823)
Intangible assets, net $ 401,820 $ 402,055

Other than indefinite-lived trademarks, the Company’s intangible assets have finite lives and, as such, are subject to amortization. Amortization expense related to these intangible assets was $3.1 million and $9.1 million for the three and nine months ended September 30, 2021 and $2.7 million and $7.9 million for the three and nine months ended September 30, 2020, respectively.

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

~~As of September 30, 2021, estimated amortization expense for the next five years and thereafter is as follows (in thousands):~~

Year Ending December 31, Total
2021 (excluding nine months ended September 30, 2021) $ 3,075
2022 12,300
2023 12,300
2024 12,300
2025 12,300
Thereafter 81,648
$ 133,923

~~The weighted average remaining useful life of the Company’s finite-lived intangible assets was 10.8 years as of September 30, 2021 and 11.9 years as of December 31, 2020.~~

~~Impairment analysis~~

Goodwill and indefinite lived intangible assets are tested for impairment at the reporting unit level on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We perform our annual goodwill impairment tests as of October 1.

Finite-lived intangible assets primarily consist of customer relationships. These assets are recorded at fair value at the acquisition date and amortized on a straight-line basis over the estimated useful lives of the assets.

The Company tests intangible assets with finite useful lives for impairment when a triggering event occurs, or circumstances change indicating that the fair value of the entity may be below its carrying amount. If no triggering event occurs, further impairment testing is not necessary.

Long-lived assets, such as property and equipment, are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group.

~~For the nine months ended September 30, 2021, there were no events or changes in circumstances to indicate that goodwill, intangible assets, or long-lived assets are impaired.~~

~~Note 5 – Income Taxes~~

~~Historically,~~IPO, the Company calculated the provision for income taxes during interim reporting periods by applying an estimate of the effective tax rate for the full year to the pre-tax income or loss for the interim period, adjusting the provision for discrete tax items recorded in the period. Upon the IPO, due to the magnitude of transaction related stock-based compensation costs, the Company's forecasted pre-tax income for the year is causing the tax rate to be highly sensitive, whereby minor changes in forecasted pre-tax income generate significant variability in the estimated annual effective tax rate. This is impacting the customary relationship between income tax expense and pre-tax income in interim periods. InBeginning in the third quarter of 2021, the Company concluded that it could not calculate a reliable estimate of the annual effective tax rate due to the range of potential impacts for the aforementioned forecast changes. Accordingly,

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the Company computed the effective tax rate for the ~~nine~~three month period ended ~~September 30, 2021~~March 31, 2022 using actual results, as allowed by ASC 740-270-30-18, Income Taxes-Interim ~~Reporting~~.

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

Reporting.

The Company’s effective tax rate for the three months ended ~~September 30,~~March 31, 2022 and March 31, 2021 ~~and September 30, 2020~~ was ~~(2.6)~~(0.5)% and ~~27.6%~~19.9%, ~~respectively, and 57.6% and 21.4% during the nine months ended September 30, 2021 and September 30, 2020,~~ respectively. The effective tax rate in each period differed from the U.S. statutory rate of 21% for ~~the three months ended September 30, 2021 and nine months ended September 30, 2021~~such period primarily due to U.S. corporate state income taxation and the effect of foreign operations which reflects the impact of higher income tax rates in locations outside the United ~~States.~~States, offset by excess tax benefits on stock-based compensation. The decrease ~~and increase~~ in the effective tax rate for the three months ~~and nine months~~ ended ~~September 30, 2021, respectively,~~March 31, 2022, as compared to the prior ~~periods~~period, was primarily due to the non-deductibility of China SAFE restricted stock units ("RSUs"), the unfavorable impact of ~~establishing~~ valuation allowances on deferred tax assets of select foreign operations, and the non-deductibility of executive compensation expense in compliance with §162(m) of the Internal Revenue ~~Code, offset by excess tax benefits on stock-based compensation.~~Code. The negative effective tax rate for the three months ended ~~September 30, 2021~~March 31, 2022 is a result of the aforementioned unique net unfavorable items when compared to the pre-tax loss recorded for the quarter.

Note ~~6 – Redeemable, Convertible Preferred Stock~~

In addition to common stock, prior to the IPO, securities of the Company were represented by shares of Series A Redeemable Convertible Preferred Stock, of which 2,500,000 shares of the authorized preferred stock were designated as Voting Series A Preferred Stock and 2,500,000 shares of the authorized and unissued preferred stock were designated as Non-Voting Series A Preferred Stock; shares of Series B Redeemable Convertible Preferred Stock of which 500,000 shares of the authorized preferred stock were designated as Voting Series B Preferred Stock and 500,000 shares of the authorized and unissued preferred stock were designated as Non-Voting Series B Preferred Stock (collectively referred to as “Preferred Stock”).

The Company recorded all shares of Preferred Stock net of offering costs at their respective fair values on the dates of issuance. The Preferred Stock was classified outside of stockholders’ equity in the condensed consolidated financial statements, as the Preferred Stock was redeemable under circumstances that qualified as a deemed liquidation event, which would have been outside the control of the Company. In the event of certain deemed liquidation events, such as a merger, acquisition or sale of all or substantially all of the Company’s assets, the holders of Preferred Stock, then outstanding, would have been paid out an amount equal to the greater of (i) such amount payable had all the Preferred Stock converted to common stock and (ii) the original Preferred Stock issuance price subject to appropriate equitable adjustment subject to any stock dividend, stock split or other recapitalization, or if the deemed liquidation event is consummated within two years following the original issuance date the amount that would result in a preferred internal rate of return of 10% per annum.

Upon the occurrence of a liquidation event, such as a voluntary or involuntary liquidation, dissolution or winding up of the Company; or a merger, consolidation or change in control, the holders of Preferred Stock, then outstanding, would have been paid out of the assets of the Company available for distribution to its shareholders before any payment is made to the holders of common stock.

The holders of outstanding shares of Voting Preferred Stock would have been entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Voting Preferred Stock were convertible. The holders of shares of Non-Voting Preferred Stock would not have had any voting rights. Holders of Voting Preferred Stock would have voted together with the holders of Common Stock as a single class and on an as-converted to Common Stock basis.

Shares of Preferred Stock were convertible at the holder’s option into shares of common stock, on a share-for-share basis, using a conversion rate determined by dividing the original issue price by the conversion price.

The holders of Preferred Stock were entitled to receive dividends on an as-converted to common stock basis as if all outstanding shares of Preferred Stock had been converted into Class A Common Stock or Class B Common Stock (with conversion to Class B applicable only as long as any shares of Non-Voting Preferred Stock are outstanding) on the date of such event. Dividends were discretionary and were not cumulative. On April 6, 2021, the Board of Directors, through unanimous written consent, approved the Company’s declaration of a $325.0 million dividend, including $10.0 million held for withholding tax, or $50.71 per share dividend, of which $59.6 million was

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

~~to preferred shareholders. The record date was April 1, 2021, with payment dates to common shareholders on or about April 6, 2021, and on April 16, 2021 to preferred shareholders, respectively.~~

~~On December 23, 2020, the Company entered into a securities purchase agreement and issued 539,084 shares of Voting Series A Preferred Stock for $322.8 million, net of $7.2 million of issuance costs.~~

In January 2021, the Company closed on security purchase agreements issuing a total of 637,098 shares of Voting Series A Preferred Stock for an aggregate amount of $381.0 million, net of $9.0 million of issuance costs.

In June 2021, the Company closed on security purchase agreements issuing a total of 188,876 shares of Voting Series B Preferred Stock for an aggregate amount of $125.0 million, net of $2.8 million of issuance costs.

The proceeds from the issuances on December 23, 2020 and in January 2021 were used to repurchase equity from existing shareholders. The proceeds from the issuance in June 2021 were used for general and corporate purposes.

~~Shares presented above have not been adjusted for an approximate 43.6-for-1 stock split.~~

Upon the completion of the IPO, all 59,489,958 shares of the Company’s outstanding redeemable convertible preferred stock, adjusted for an approximate 43.6-for-1 stock split, converted into an equivalent number of shares of common stock on a 1-for-1 basis and their carrying value of $826.0 million was reclassified into stockholders’ equity. Further, in connection with the IPO, the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 100,000,000 shares of undesignated preferred stock with a par value of $0.001 per share with rights and preferences, including voting rights, designated from time to time by the Board of Directors. As of September 30, 2021, there were no shares of redeemable convertible preferred stock issued and outstanding.

~~Note 7 – Tender Offer~~

During the quarter ended March 31, 2021, the Board of Directors approved, and the Company completed a tender offer of common shares which was funded from the proceeds of the redeemable, convertible preferred stock offering (Note 6, ~~Redeemable, Convertible Preferred Stock~~). As a result, the Company acquired 1,156,775 shares of its common stock (1,138,537, 12,979, and 5,259 shares of the Company's former Class A, B, and C common shares, respectively). The Company also purchased and cancelled vested options from employees and directors through the tender offer. In this Note, the shares presented have not been adjusted for an approximate 43.6-for-1 stock split.

Total purchases of shares and vested employee options under the tender offer approximated $720.0 million, including $19.3 million held for withholding tax. Because the price paid per share exceeded the share’s respective fair value, the Company recognized $2.7 million of additional compensation expense associated with shares and options repurchased from employees and directors, and $79.2 million as a distribution of retained earnings for the excess of price paid over fair value for those shares repurchased from non-employee securityholders.

~~Note 8~~4 – (Loss) Earnings Per Common Share

Basic (loss) earnings per common share is computed by dividing the net (loss) income allocated to common shareholders by the weighted average of common shares outstanding for the period. The Company reported net income for the nine months ended September 30, 2021; however, after the adjustment for dividends paid to preferred shareholders, which is a reduction to net income available to common shareholders, the Company has a net loss allocated to common shareholders.

Diluted loss per common share is computed by giving effect to all potential shares of common stock of the Company, including outstanding stock options and unvested equity-settled RSUs, to the extent dilutive. Basic and diluted loss per common share is the same for the current period ended, as the inclusion of all potential shares of common stock of the Company outstanding would have been anti-dilutive. The dilutive effect of potentially dilutive

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

securities is reflected in diluted earnings per common share by application of the treasury stock method. For comparability purposes, all prior period share amounts presented have been retroactively adjusted to give effect to ~~an approximate 43.6-for-1 stock split,~~the Stock Split, and share counts below also reflect the conversion of preferred stock to common stock on a 1-for-1 basis upon the occurrence of the IPO.

The components of basic and diluted (loss) earnings per common share are as follows (in thousands, except share and per share data):

Three Months Ended September 30,
2021 2020
Basic (loss) earnings per common share:
Net (loss) income $ (25,235) $ 21,882
Preferred stock dividends — —
Net (loss) income allocated to common shareholders – Basic $ (25,235) $ 21,882
Weighted average common shares outstanding – Basic 241,351,052 278,218,732
Basic (loss) earnings per common share $ (0.10) $ 0.08
Diluted (loss) earnings per common share:
Net (loss) income allocated to common shareholders – Basic (25,235) 21,882
Weighted average shares outstanding – Basic 241,351,052 278,218,732
Dilutive effect of:
Employee stock options and restricted common shares (1) — 6,855,016
Weighted average common shares outstanding – Diluted 241,351,052 285,073,748
Diluted (loss) earnings per common share $ (0.10) $ 0.08


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Basic (loss) earnings per common share:	Basic (loss) earnings per common share:					Basic (loss) earnings per common share:
Net income		$	11,502	$	59,679
Preferred stock dividends		(59,642)		—
Net (loss) income						Net (loss) income	$	(59,904)	$	18,585

Earnings allocated to Preferred Stock						Earnings allocated to Preferred Stock	—		(3,411)
Net (loss) income allocated to common shareholders – Basic	Net (loss) income allocated to common shareholders – Basic	$	(48,140)	$	59,679	Net (loss) income allocated to common shareholders – Basic	$	(59,904)	$	15,174

Weighted average common shares outstanding – Basic	Weighted average common shares outstanding – Basic	237,121,811		278,202,291		Weighted average common shares outstanding – Basic	306,189,816		242,471,720
Basic (loss) earnings per common share	Basic (loss) earnings per common share	$	(0.20)	$	0.21	Basic (loss) earnings per common share	$	(0.20)	$	0.06

Diluted (loss) earnings per common share:	Diluted (loss) earnings per common share:					Diluted (loss) earnings per common share:
Net (loss) income allocated to common shareholders – Basic	Net (loss) income allocated to common shareholders – Basic	(48,140)		59,679		Net (loss) income allocated to common shareholders – Basic	(59,904)		15,174
Weighted average shares outstanding – Basic	Weighted average shares outstanding – Basic	237,121,811		278,202,291		Weighted average shares outstanding – Basic	306,189,816		242,471,720
Dilutive effect of:	Dilutive effect of:					Dilutive effect of:
Employee stock options and common shares (1)	Employee stock options and common shares (1)	—		5,962,757		Employee stock options and common shares (1)	—		6,653,308
Weighted average common shares outstanding – Diluted	Weighted average common shares outstanding – Diluted	237,121,811		284,165,048		Weighted average common shares outstanding – Diluted	306,189,816		249,125,028
Diluted (loss) earnings per common share	Diluted (loss) earnings per common share	$	(0.20)	$	0.21	Diluted (loss) earnings per common share	$	(0.20)	$	0.06

(1) Reflects the dilutive effects of applying the treasury stock method to the employee stock options, after effects of an approximate 43.6-for-1 stock split noted above. Dilutive options include time and performance vesting options. Performance vesting options represent the accelerated vesting of all performance vesting

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options upon the occurrence of the IPO, and are only reflected in the denominator of ~~pro forma~~ earnings per share, diluted, as the performance vesting options are fully vested at the date of the IPO, and are not assumed to be exercised. For periods

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

where the Company was in a net loss, dilutive options were excluded but would have been dilutive if the Company was not in a net loss.

The following potentially dilutive securities were excluded from the computation of diluted (loss) earnings per common share calculations ~~for the three and nine months ended September 30, 2021~~ because the impact of including them would have been anti-dilutive:

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Employee stock options and common shares 20,968,124 — 20,839,475 —
RSUs 2,683,513 — 897,793 —

~~Refer to the calculations included in the tables above for the computation of diluted (loss) earnings per common share for the three and nine months ended September 30, 2020.~~


	Three Months Ended March 31,
	2022	2021
Employee stock options and RSUs	27,693,628	110,468

Note 95 – ~~Commitments and Contingencies~~Leases

From time to time, the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of business. The Company evaluates the development of legal matters on a regular basis and accrues a liability when they believe a loss is probable and the amount can be reasonably estimated. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of any currently pending legal proceedings to which we are a party will not have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

~~Commitment and contingencies primarily includes operating leases.~~ The Company leases ~~certain~~ facilities (office space and corporate apartments) and equipment (IT equipment) under various non-cancelable operating leases that expire through ~~July 2031.~~ December 2031, some of which include one or more options to extend the leases, generally at rates to be determined in accordance with the agreements. The Company's facility leases generally provide for periodic rent increases and may contain escalation clauses and renewal options. The Company's lease terms include options to extend the lease if they are reasonably certain of being exercised.

The Company recognizes operating lease expense on a straight-line basis over the lease term and variable lease payments are expensed as incurred. Operating lease expense and the related variable lease expense is recorded within SG&A expenses in the Company's condensed consolidated statements of (loss) income and comprehensive (loss) income. The Company does not have finance leases.

The Company determines if a contract contains a lease at lease inception. If the borrowing rate implicit in the lease is not determinable, the Company uses its incremental borrowing rate ("IBR") based on information available at lease commencement including prevailing financial market conditions to determine the present value of future lease payments. The Company has elected the option to combine lease and non-lease components as a single component for the Company's entire population of lease assets.

Operating lease assets and lease liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent the right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, and lease incentives. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leased assets are presented net of accumulated amortization. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities; instead, these are expensed as incurred and recorded as variable lease expense.

Adoption of Topic 842 resulted in the initial recognition of ROU assets of $40.9 million and lease liabilities of $43.7 million.

As of ~~September 30, 2021,~~March 31, 2022, the Company does not have any leases that create significant rights and obligations that have not yet commenced. For the three months ended March 31, 2022, operating lease cost was $4.7 million. The Company's short-term lease cost and variable lease cost were immaterial.

The following table presents supplemental cash flow information (in thousands):


	March 31, 2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,758
ROU assets obtained in exchange for new operating lease liabilities	4,114

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The following table presents average lease terms and discount rates (in thousands):


	March 31, 2022
Weighted-average remaining lease term (years)	4.2
Weighted average discount rate	5.3	%

As of March 31, 2022, the aggregate future lease payments under all operating leases are as follows (in thousands):


	Operating
Remainder of 2022	$	12,467
2023	12,832
2024	7,768
2025	4,572
2026	3,440
Thereafter	6,162
Total lease payments	47,241
Less: imputed interest	5,120
Present value of lease liabilities	$	42,121

ASC 840 Disclosures

Prior to the adoption of Topic 842, aggregate future minimum lease payments, net of sublease income, under all operating leases ~~are~~were as follows as of December 31, 2021 (in thousands):


Year ending December 31,		Total
2021 (excluding nine months ended September 30, 2021)		$	3,522

2022	2022	17,783		2022	$	17,557
2023	2023	15,061		2023	11,690
2024	2024	13,123		2024	6,849
2025	2025	11,699		2025	3,955
2026				2026	3,027
Thereafter	Thereafter	10,069		Thereafter	6,088
Total future minimum lease payments	Total future minimum lease payments	$	71,257	Total future minimum lease payments	$	49,166

Total rent expense for all operating leases for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 ~~were $4.9 million and $14.5 million, and for the three and nine months ended September 30, 2020 were $4.7 million and $14.0 million, respectively.~~

was $4.8 million.

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

~~Note 10 – Stockholders' Equity~~

~~Redeemable Convertible Preferred Stock~~

In September 2021, upon the closing of the Company's IPO, all outstanding shares of redeemable convertible preferred stock were converted into an aggregate of 1,365,058 shares of common stock. Shares presented above have not been adjusted for an approximate 43.6-for-1 stock split.

Further, in connection with the IPO, the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 100,000,000 shares of undesignated preferred stock with a par value of $0.001 per share with rights and preferences, including voting rights, designated from time to time by the Board of Directors.

~~Common Stock~~

~~In connection with the IPO, all classes of shares of the Company's common stock then outstanding were converted into~~ ~~5,259,163~~ shares of common stock on a 1-to-one basis. As a result, the securities of the Company are represented by shares of common stock with a par value of $0.001 per share. Each share of common stock is entitled to one vote. With respect to payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, all shares of common stock will participate pro rata in such payment whenever funds are legally available and when declared by the Board of Directors, subject to the prior rights of holders of all classes of stock outstanding. Shares presented above have not been adjusted for an approximate 43.6-for-1 stock split.

~~As of September 30, 2021, there were 1,000,000,000 shares of common stock authorized and 305,117,043 shares of common stock outstanding.~~

Note 116 – Stock-Based Compensation

~~Equity Incentive Plans~~

~~On October 12, 2017,~~The following is a summary of the ~~Company approved the 2017 Stock Option Plan (the “2017 Plan”)~~components of stock-based compensation expense for the purpose of providing an incentive compensation structure to participants. Under the 2017 Plan, the Company may make awards to such present and future officers, directors, employees, consultants and advisors of the Company as may be selected at the sole discretion of the Board of Directors. The option awards gave the participant the right to purchase the Company's former Class C common stock for a prespecified exercise price. As a result of the IPO, the Company no longer grants awards under the 2017 Plan, and all previously awarded options can now be exercised for, when vested and exercisable, only the Company's current common stock.periods indicated (in thousands):

~~In September 2021, the Board of Directors approved the 2021 Omnibus Incentive Plan (the~~ ~~“Omnibus Plan”~~) to assist the Company in attracting, retaining, motivating, and rewarding certain employees, officers, directors, and consultants of the Company and its Affiliates and promoting the creation of long-term value for stockholders, which became effective in connection with the IPO. A total of ~~62,048,123~~ ~~shares of the Company’s common stock have been reserved for issuance under the 2021 Omnibus Incentive Plan.~~

~~Time and Performance Vesting Options~~

Under the 2017 Plan, eligible employees received non-qualified stock options as a portion of their total compensation. The options vest on a graded time vesting schedule (“Time Vesting Options”) over a contractual term of four years, with 37.5% vesting on the 18-month anniversary and 6.25% vesting every three months for the remainder of the 48-month period. 100% of the time-vesting options vest immediately upon a change of control. Any unvested options will be forfeited upon termination of employment.


	Three Months Ended March 31,
	2022		2021
Cost of revenues	$	83,493	$	782
Selling, general and administrative expenses	37,243		1,092
Total stock-based compensation expense	$	120,736	$	1,874

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

The Company's 2017 Plan permits imposing lock-up restrictions on participants in connection with the IPO. Pursuant to the 2017 Plan, the Company imposed a lock-up restriction, subject to limited exceptions, on selling, transferring or otherwise disposing of options and shares of common stock issuable pursuant to the exercise of options, for a period of one year following the consummation of the IPO, provided that such restriction will lapse as to 50% of such options and shares after six months following the consummation of the offering.Stock Options

The following is a summary of performance and time vesting stock option activity for the ~~period~~three months ended ~~September 30, 2021~~March 31, 2022 (in thousands, except share and per share data):

Time Vesting (1) Weighted Average Exercise Price (1) Aggregate
Intrinsic Value Weighted-
Average
Remaining
Contractual
Term (years)
Balance at December 31, 2020 10,462,531 $ 2.76 $ 12,149 1.36
Granted 1,068,283 14.05
Forfeited (134,135) 5.32
Exercised (966,005) 2.36
Cancelled (1,752,878) 2.88
Expired — —
Balance at September 30, 2021 8,677,796 $ 4.13 $ 20,033 1.04
Exercisable at September 30, 2021 5,585,354 $ 2.46 $ 3,729 0.34
Nonvested at September 30, 2021 3,092,442 $ 7.14 $ 16,304 2.29

~~(1) Options presented have been retroactively adjusted to give effect to an approximate 43.6-for-1 stock split.~~


	Number of Stock Options	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Term (years)
Balance at December 31, 2021	24,097,082	$	3.79
Granted	—	—
Forfeited	(27,141)	4.98
Exercised	(386,571)	3.46
Cancelled	—	—
Expired	—	—
Balance at March 31, 2022	23,683,370	$	3.80	$	402,944	6.3

Exercisable at March 31, 2022	21,713,162	$	3.30	$	380,231	6.1

As of ~~September 30, 2021,~~March 31, 2022, total compensation cost related to time vesting options not yet recognized was ~~$10.3~~$6.7 million, which will be recognized over a weighted-average period of ~~1.04~~1.6 years.

~~The following is a summary of performance~~ Unless otherwise prohibited by law in local jurisdictions, time vesting ~~option activity for the period ended September 30, 2021 (in thousands, except share and per share data):~~

Performance Vesting (1) Weighted Average Exercise Price (1) Aggregate
Intrinsic Value
Balance at December 31, 2020 15,440,716 $ 2.66 $ 12,498
Granted 1,397,260 14.05
Forfeited (193,681) 4.92
Exercised (187,943) 2.38
Cancelled (1,009,831) 3.60
Expired —
Balance at September 30, 2021 15,446,521 $ 3.60 $ 24,776
Exercisable at September 30, 2021 15,446,521 $ 3.60 $ 24,776
Nonvested at September 30, 2021 — $ — $ —

~~Table of Contents~~

~~THOUGHTWORKS HOLDING, INC.~~

~~Notes~~options will continue to vest according to the ~~Condensed Consolidated Financial Statements (Unaudited)~~

~~(1) Options presented have been retroactively adjusted to give effect to an approximate 43.6-for-1 stock split.~~

Under the 2017 Plan, prior to the IPO the Company granted performance vesting options subject to performance vesting conditions. In accordance with the 2017 Plan, 50% of the performance vesting options vested upon a sponsor return of at least two times the sponsor investment. An aggregate of 75% of the performance vesting options vested upon a sponsor return of at least two and a half times the sponsor investment. An aggregate of 100% of Performance Vesting Options vested upon a sponsor return of at least three times the sponsor investment. Vesting was prorated if a sponsor return was between these targets. In addition to the sponsor return targets above, participants must have had at least 18 months of continuous service following the grant date in order to vest. In order for vesting to be considered probable, the sponsor return must have been met as of the reporting date. Sponsor return, as defined in the Company’s 2017 Stock Option Plan, was determined based on the aggregate amount of all cash, fair market value of marketable securities, including proceeds from the sale of securities of the Company, provided and to the extent such proceeds result in cash dividends and/or cash distributions by the Company to the sponsor.Plan.

On September 9, 2021, the Board of Directors, through unanimous written consent, approved a modification to the Company's 2017 Stock Option Plan which, upon completion of the IPO, a sponsor return of 2.8x times sponsor investment was certified as having been achieved, and the service condition under the Plan that participants must provide at least 18 months of continuous service following the grant date in order for performance vesting options to vest was waived. Additionally, the Board of Directors also approved accelerated vesting of all remaining, unvested former Class C performance vesting options, after the achievement of such sponsor return, which resulted in all performance vesting options becoming fully vested upon completion of the IPO.

The acceleration of vesting was accounted for as a modification of the terms of the original award. The incremental stock-based compensation expense of $54.0 million related to the accelerated vesting of all outstanding, unvested performance vesting options, consisting of (a) $15.9 million related to the achievement of sponsor return hurdles that were met upon completion of the IPO (calculated using the grant date fair value of such awards) and (b) $38.1 million related to the remaining unvested performance vesting options upon completion of the IPO (calculated using a fair value of the IPO price of $21.00 per share).

The following table summarizes the weighted-average assumptions used in estimating the fair value of stock options granted to employees ~~for~~during the three ~~and nine~~ months ended ~~September~~March 31, 2021 ~~and 2020:~~

Three Months Ended September 30, Nine Months Ended September 30,
2021 (1) 2020 (2) 2021 (2) 2020 (2)
Risk-free interest rate — % 0.1 % 0.1 % 0.1 %
Dividend yield — % — % — % — %
Expected volatility — % 55.0 % 55.0 % 55.0 %
Expected term (years) 0 2 1 2

~~(1)~~ . No options were granted during the three months ended ~~September 30, 2021.~~March 31, 2022.

~~(2) In 2021 and 2020, the~~


	Three Months Ended March 31,
		2021 (1)
Risk-free interest rate		0.1	%
Dividend yield		—	%
Expected volatility		55.0	%
Expected term (years)		1

(1) The risk-free interest rate is based on the rates of U.S. Treasury securities with a maturity similar to the term to liquidity, continuously compounded. The expected equity volatility is estimated based on an analysis of guideline public companies’ historical volatility. As these stock options were awarded prior to the IPO, the expected term was estimated based on management’s assumptions of time to a liquidity event.

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~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

Restricted Stock ~~Appreciation Rights (“SARs”)~~

In December 2017, the Board of Directors approved a plan (the “SARs Plan”) to enable all permanent employees, current and future, to participate in the growth in the equity value of the Company in the event of a future liquidity event. A liquidity event is triggered when the sponsor sells at least 75% of its ownership.

~~During the nine months ended~~ ~~September 30, 2021, the Company granted SARs to employees. Each stock appreciation right represents the right to receive, in cash, the excess of the fair market value over the grant price on the exercise date.~~

On September 9, 2021, the Board of Directors, through unanimous written consent, approved a modification to the Company's SARs Plan which, upon completion of the IPO, was discontinued and all outstanding SARs were converted to restricted stock units (“RSUs”). RSUs granted in connection with the SARs conversion will vest after six months and twelve months as to 50% on each vesting date, such that 100% of RSUs related to the SARs conversion will be fully vested twelve months after the closing of the IPO. A total of 6,701,133 shares of common stock underlying RSUs were issued in connection with the conversion of SARs upon completion of the IPO.

The completion of the IPO of the Company’s common stock did not meet the definition of a liquidity event, as defined in the SARs Plan. As a liquidity event was not triggered, the conditions associated with SARs were not considered probable of occurring, and no expense related to this modification was recognized for the nine months ended ~~September 30, 2021~~.Units

The following is a summary of ~~SARs activity, representing the conversion of SARs to RSUs, for the period ended September 30, 2021:~~

Number of Stock Appreciation Rights (1) Weighted Average Grant Date Fair Value (1)
Balance at December 31, 2020 9,032,006 $ 3.47
Granted 3,096,082 14.05
Forfeited (1,681,980) 5.77
Intrinsic Value Adjustment (2) (3,744,975) 12.19
SARs Conversion (6,701,133) 21.00
Balance at September 30, 2021 — $ —

~~(1) Shares presented have been retroactively adjusted to give effect to an approximate 43.6-for-1 stock split.~~

~~(2) The intrinsic value adjustment is the IPO price of $21.00 per SAR, less the original grant date fair value, plus an incremental value of $100.00 per SAR.~~

~~Restricted Stock Units (“RSUs”)~~

Under the Omnibus Plan, RSUs are awarded to eligible employees and entitle the grantee to receive shares of common stock at the end of a vesting period. Certain RSUs granted during the period ended September 30, 2021, have varying vesting schedules:

~~(1) a~~ 28 ~~month cliff vest subsequent to the IPO Closing Date;~~

~~(2) a 12 month cliff vest subsequent to the IPO Closing Date;~~

~~(3) a 6 and 12 month period vest subsequent to the IPO Closing Date (with 50% vesting after 6 months and~~ ~~50%~~ ~~vesting at the end of the 12 month term);~~

~~Table of Contents~~

~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

~~(4) immediate vesting upon the successful and active registration with the State Administration of Foreign Exchange of the People's Republic of China (“China SAFE”); and~~

~~(5) a~~ 3 ~~year ratable vesting period subsequent to IPO Closing Date (with 34% vesting during the first year, and 33% vesting during the second and third year).~~

~~Throughout the vesting period, shareholders are subject to the market risk on the value of their shares.~~

~~The following is a summary of all RSUs~~RSU activity for the ~~period~~three months ended ~~September 30, 2021:~~March 31, 2022:

Number of Restricted Stock Units Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2020 — $ —
Granted (1) 5,017,572 21.00
Granted - SARs conversion (1) 6,701,133 21.00
Forfeited (90,148) 21.00
Vested — —
Unvested balance at September 30, 2021 11,628,557 $ 21.00


	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2021	14,128,722	$	23.39
Granted (1)	5,203,508	22.42
Forfeited	(496,758)	23.11
Vested (2)	(5,840,524)	21.00
Unvested balance at March 31, 2022	12,994,948	$	24.09

(1) ~~The amount of granted restricted stock units does not include those awards~~Includes 4.4 million RSUs that were contingent upon the successful and active registration with the State Administration of Foreign Exchange of the People's Republic of China (“China SAFE”)~~. RSUs contingent~~, which occurred on ~~China SAFE totaled 3,878,909 RSUs as of September 30, 2021.~~February 25, 2022.

(2)Includes 1.3 million shares that were net settled when released and returned to the share pool for future grants.

As of ~~September 30, 2021,~~March 31, 2022, total compensation ~~cost~~cost related to all RSUs not yet recognized was ~~$227.5~~$226.3 million, of which ~~will~~$145.2 million is IPO related and considered nonrecurring. The remainder of $81.1 million is expected to be recurring in relation to the annual grant. The unamortized expense is anticipated to be recognized over a weighted-average period of ~~1.4~~1.6 years.

Note 127 – Credit Agreements

The Company entered into a Senior Secured Credit Facilities (the “Term Loan”), dated October 12, 2017, subsequently amended most recently as of March 26, 2021, among the Company, the syndicate lenders thereto and Credit Suisse, AG, Cayman Islands Branch, as administrative agent, to finance, in part, the acquisition of all of the outstanding common stock of the Company. The Senior Secured Credit Facility provided senior secured financing of $200.0 million, as well as a revolving credit facility (the “Revolver”) which provided for additional senior secured financing of up to $35.0 million. The Term Loan and the Revolver, together with any subsequent amendments, are collectively referred to as the Credit Agreement.

On March 26, 2021, the Company amended and restated its credit agreement (the “Amendment and Restatement”) to increase the term loan facility to a total of $715.0 million. Also, as part of the facility, the aggregate revolving credit facility was increased to $165.0 million from $85.0 million.

~~Borrowings under the Term Loan bear interest at a rate per annum equal to an applicable margin based on the Company’s leverage ratio, plus either (a) a base rate or (b) a LIBOR rate, at~~following table presents the Company's ~~option, subject~~outstanding debt and borrowing capacity (in thousands):


	March 31, 2022			December 31, 2021
Availability under revolving credit facility (due March 26, 2026)	$	165,000		$	165,000
Borrowings under revolving credit facility	$	—		$	—
Long-term debt (due March 24, 2028), including current portion (1)	$	502,935		$	504,530
Interest rate	3.25		%	3.50		%

(1)The balance includes deferred financing fees. A reconciliation of gross to ~~interest rate floors. For the first full quarter after the Amendment Restatement date, the interest rate per annum~~net amounts is ~~equal to (a) 3.25% for LIBOR based borrowings and (b) 2.25% for base rate borrowings, subject to interest rate floors.~~

Borrowings under the Revolver bear interest at a rate per annum equal to an applicable margin based on the Company’s leverage ratio, plus either (a) a base rate or (b) a LIBOR rate at the Company's option. In addition to paying interest on outstanding borrowings under the Revolver, the Company is required to pay a commitment fee to the lenders under the Revolver in respect of unutilized commitments thereunder and customary letter of credit fees.

~~Table of Contents~~presented below.

~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to the Condensed Consolidated Financial Statements (Unaudited)~~

~~The interest rates on borrowings at September 30, 2021 and at September 30, 2020 were approximately 3.5% and~~ ~~4.8%, respectively. Interest expense for the three and nine months ended September 30, 2021 was~~ ~~$6.3 million~~ ~~and~~ ~~$18.7 million, respectively, and for the three and nine months ended September 30, 2020 was $5.6 million and $18.4 million, respectively.~~

All obligations of the Company under the Senior Secured Credit Facilities provided by any lender party to the Senior Secured Credit Facilities or any of its affiliates and certain other persons are unconditionally guaranteed by a wholly owned subsidiary of Thoughtworks Holding, Inc., and each existing and subsequently acquired or organized direct or indirect wholly owned domestic restricted subsidiary of the Company, with customary exceptions including, among other things, where providing such guarantees is not permitted by law, regulation or contract or would result in material adverse tax consequences. All obligations under the Senior Secured Credit Facilities provided by any lender party to the Senior Secured Credit Facilities or any of its affiliates and certain other persons, and the guarantees of such obligations, are secured, subject to permitted liens and other exceptions, as outlined in the Senior Secured Credit Facilities.

The ~~Term Loans and borrowings under our Revolver contain a number of financial and non-financial covenants that, among other things, restrict, subject to certain exceptions,~~following table presents the Company’s ability and the ability of the Company’s restricted subsidiaries to engage in certain activities, such as incur indebtedness or permit to exist any lien on any property or asset now owned or hereafter acquired, as specified in the debt facility. The Company had no outstanding draws under the $165.0 million Revolver at September 30, 2021. The Company had no outstanding draws under our previous $85.0 million Revolver at December 31, 2020. As of September 30, 2021, the Company was in compliance with its debt covenants.

The Credit Agreement requires compliance with various covenants customary for agreements of this type, including a springing financial covenant (solely for the benefit of the Revolver), a passive holdings covenant with respect to Holdings and negative covenants that limit, among other things, the Borrowers’ and their restricted subsidiaries’ ability to incur additional debt, create or incur liens, engage in mergers or consolidations, sell, transfer or otherwise dispose of assets, make voluntary prepayments to subordinated debt, pay dividends or distributions, make investments, and enter into certain transactions with affiliates. We are currently in compliance with all covenants contained in our Credit Agreement. The Credit Agreement also includes events of default customary for agreements of this type. Further, as it relates to restricted subsidiaries, as of September 30, 2021, none of our consolidated net assets were subject to dividend restrictions under the Credit Agreement.

The Company incurred and capitalized deferred financing fees, or third-party debt issuance costs, of $7.1 million related to the restated credit agreement during the nine months ended September 30, 2021. The debt issuance costs are recorded as reductions of the outstanding long-term indebtedness. The Term Loan is paid in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount of the Term Loan matures on March 24, 2028. The principal amount outstanding under the Revolver under the Amendment and Restatement is due and payable in full at maturity on March 26, 2026.

~~On August 10, 2021, the Company made a voluntary prepayment of $100.0 million on outstanding amounts owed on the Term Loan.~~

~~The~~ carrying value of the Company’s credit facilities (including current maturities) ~~was as follows~~ (in thousands):


		As of		As of
		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Long-term debt, less current portion	Long-term debt, less current portion	$	604,275	$	440,497	Long-term debt, less current portion	$	500,700	$	502,488
Capitalized deferred financing fees	Capitalized deferred financing fees	(7,271)		(5,305)		Capitalized deferred financing fees	(4,915)		(5,108)
Long-term debt	Long-term debt	597,004		435,192		Long-term debt	495,785		497,380
Current portion of long-term debt	Current portion of long-term debt	7,150		4,565		Current portion of long-term debt	7,150		7,150
Total debt carrying value	Total debt carrying value	$	604,154	$	439,757	Total debt carrying value	$	502,935	$	504,530

~~Table~~The Company estimates the fair value of ~~Contents~~

~~THOUGHTWORKS HOLDING, INC.~~

~~Notes to~~ the ~~Condensed Consolidated Financial Statements (Unaudited)~~

Term Loan using current market yields. These current market yields are considered Level 2 inputs. The book value of the Company’s credit facilities is considered to approximate its fair value as of ~~September 30, 2021 and December~~March 31, ~~2020,~~2022 as the interest rates are considered in line with current market rates. The fair value of the Term Loan was $485.0 million as of December 31, 2021.

Note 138 – Accrued Expenses

The following is a summary of the Company’s accrued expenses (in thousands):

Note 149 – Subsequent Events

~~Credit Agreement Repayment~~

On ~~October 20, 2021,~~April 26, 2022, the Company ~~made~~completed the acquisition of Connected, an end-to-end product development service firm that partners with their clients to discover and deliver products, in an all-cash transaction for a ~~voluntary prepayment~~gross purchase price of ~~$100.0~~approximately $64.6 million, ~~on outstanding amounts owed on~~or $60.3 million net of cash acquired of $4.3 million. Connected is now wholly-owned by the ~~Term Loan disclosed~~Company. The acquisition will advance the Company's capabilities in ~~Note 12,~~ ~~Credit Agreements~~.solving business problems through product-led design processes, from defining the strategy to discovery and delivery and enhance the Thoughtworks customer experience, product and design service line in North America. The Company is still in the process of finalizing the purchase price allocation including preliminary allocation of the purchase consideration.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our ~~prospectus for~~audited consolidated financial statements and the related notes included in our ~~initial public offering (the~~ “~~IPO~~”~~), dated September 14,~~ 2021 ~~and filed with the Securities and Exchange Commission (the~~ “~~SEC~~”~~), pursuant to Rule 424(b)(4) on September 16, 2021 (the~~ ~~“IPO Prospectus”~~).Annual Report. Some of the information contained in this discussion and analysis, ~~or set forth elsewhere in the IPO prospectus,~~ including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read the sections titled “Risk Factors” in our ~~IPO Prospectus~~2021 Annual Report and “Forward-Looking Statements” herein for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. ~~Our fiscal year ends on December 31, and our fiscal quarters end on March 31, June 30, September 30, and December 31.~~ Quarterly results reflected herein are not necessarily indicative of our operating results for a full year or any future period.

We are a global technology consultancy that integrates strategy, design and engineering to drive digital innovation. We are ~~10,000+~~11,000+ Thoughtworkers strong across 4849 offices in 17 countries. Over the last 25+ years, ~~we’ve~~we have delivered extraordinary impact together with our clients by helping them solve complex business problems with technology as the differentiator.

Our revenues are generated from providing professional services based on the mix and locations of delivery professionals involved, the pricing structure, which is predominantly time-and-materials, and the type of services, including: enterprise modernization, platforms & cloud; customer experience, product & design; data & artificial intelligence; and digital transformation & operations.

~~Initial Public Offering~~

On September 17, 2021, we successfully completed and closed our IPO, in which 42,368,421 shares of our common stock were sold at $21.00 per share, including 5,526,315 shares sold upon the exercise of the underwriters’ option to purchase additional shares from certain of the selling stockholders. The Company received net proceeds of $~~314.7~~ million, net of the underwriting discounts and commissions and other offering expenses of approximately $30.3 million. Prior to the completion of the IPO, all shares of the Company's common stock then outstanding were converted into ~~5,259,163~~ shares (pre-stock split) of common stock on a 1-for-1 basis, and upon the completion of the IPO, all 1,365,058 shares (pre-stock split) of the Company’s outstanding redeemable convertible preferred stock converted into an equivalent number of shares of common stock on a 1-for-1 basis.

Additionally, prior to the completion of the IPO, the Company effected an approximate 43.6-for-1 split of each outstanding share of common stock (the “Stock Split”). All share and per share information has been retroactively adjusted to effect the Stock Split for all periods presented, except as otherwise noted.

Key Operational and Business Metrics

In addition to the measures presented in our condensed consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions (in thousands, except percentages):

(1)Certain of our subsidiaries use functional currencies other than the U.S. dollar and the translation of these foreign currency amounts into the U.S. dollar can impact the comparability of our revenues between periods. Accordingly, we use Revenue Growth Rate at constant currency as an important indicator of our underlying performance. Revenue Growth Rate at constant currency is calculated by applying the average exchange rates in effect during the earlier comparative fiscal period to the later fiscal period.

(2)We use Adjusted Net Income as an important indicator of our performance. See “—Non-GAAP Financial Measures” below for a definition of and reconciliation of Adjusted Net Income to net (loss) income, the most directly comparable GAAP measure, how we use this measure and an explanation of why we consider this non-GAAP measure to be helpful for investors.

(3)We also use Adjusted EBITDA and Adjusted EBITDA Margin as important indicators of our performance. See “—Non-GAAP Financial Measures” below for a definition of and a reconciliation of Adjusted EBITDA

to net (loss) income, the most directly comparable GAAP measure, how we use Adjusted EBITDA and Adjusted EBITDA Margin and an explanation of why we consider these non-GAAP measures to be helpful for investors.

Revenue Growth Rate and Revenue Growth Rate at constant currency

~~We returned to pre-COVID revenue growth by the fourth quarter of 2020 and have continued to have positive revenue growth trends in 2021, as reflected in our revenue growth in~~For the three ~~and nine~~ months ended ~~September 30, 2021, with~~March 31, 2022, revenues ~~increasing 45.0% and 31.2%, respectively,~~ ~~which includes the impact of decreased reimbursable travel costs.~~ increased 35.0%. Had our consolidated revenues been expressed in constant currency terms using the exchange rates in effect ~~during~~for the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, we would have reported revenue growth of ~~42.1%~~ ~~and~~ ~~26.0%, respectively.~~38.2%. The ~~positive~~negative impact to revenues, from foreign currencies, was as a result of the ~~depreciation~~appreciation of the U.S. dollar relative to certain principal functional currencies of our subsidiaries.

For more detail regarding our exposure to foreign currency rate fluctuations, see Note 2, Revenue Recognition, to our condensed consolidated financial statements ~~included elsewhere in this Quarterly Report~~ and “—“Item 3. Quantitative and Qualitative ~~Disclosure about~~Disclosures About Market Risk.”

Net (Loss) Income, Net (Loss) Income Margin and Adjusted Net Income

~~During~~For the three months ended ~~September 30, 2021,~~March 31, 2022, we reported a net loss of ~~$25.2~~ $59.9 million, a decrease o~~f $47.1~~of $78.5 million, or 422.3%, compared to net income of $~~21.9~~18.6 million ~~during~~for the three months ended ~~September 30, 2020. For the nine months ended September 30, 2021, we~~March 31, 2021. We reported ~~net income of $11.5 million, a~~ ~~decrease o~~f ~~$48.2~~ ~~million, or approximately 81%, compared to$59.7~~ ~~million during the nine months ended September 30, 2020.~~

~~Net income decreased in both the three and nine months ended primarily due to increased stock-based compensation expense of~~ ~~$72.9~~ ~~million and~~ ~~$82.4~~ ~~million, primarily related to the accelerated vesting of certain employee stock options of~~ ~~$56.2~~ ~~million and~~ ~~$65.7~~ ~~million. This also included~~ ~~$16.7~~ million for the issuance of new grants in connection with the IPO for both the three and nine months ended September 30, 2021. This was partially offset by decreased income taxes and continued strong demand for our services as reflected in our revenue growth discussed above.

~~Our~~ net loss margin for the three months ended ~~September 30, 2021 was 8.9%~~March 31, 2022 of 18.7%, a decrease of approximately ~~20.0%~~26.5%, compared to a net income margin of ~~11.1%~~7.8% for the ~~period ended September 30, 2020. For the nine~~three months ended ~~September 30, 2021, we reported a~~March 31, 2021. The decreases in net income and net income margin of 1.5%, a decrease of approximately 8.5%, compared to a net income margin of 10.0% for the period ended September 30, 2020. Net income margin decreased in both the three and nine months ended September 30, 2021 primarily due towere driven by increased stock-based compensation expense of ~~$72.9~~$118.9 million, $82.7 million included in cost of revenues and ~~$82.4~~$36.2 million ~~respectively, primarily~~included in SG&A expenses, which includes (a) $47.7 million related to the ~~accelerated vesting~~approval of ~~certain employee stock~~China SAFE RSUs; (b) $56.2 million related to the RSU grants issued in connection with the IPO; (c) $15.2 million related to RSU grants awarded post-IPO; and (d) $(0.2) million related to options granted in 2021. The decrease was also driven by increased payroll expenses (excluding stock-based compensation) of ~~$56.2~~$50.3 million, $42.3 million included in cost of revenues and ~~$65.7~~$8.0 million ~~respectively,~~included in SG&A expenses, due to our investment in additional headcount to support revenue growth. The aforementioned increases in stock-based compensation expense and ~~certain~~payroll expenses were partially offset by revenue growth of 35.0% reflecting strong demand for our services and our continued focus on obtaining new clients and growing our existing client relationships, a $6.4 million decrease in acquisition related ~~expenses.~~expenses and a $4.3 million decrease in income tax expense. For more information, see “—Results of Operations.” We consider net income margin as the most directly comparable GAAP measure to Adjusted EBITDA Margin.

~~During~~For the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, we reported Adjusted Net Income of ~~$37.2~~$44.0 million, ~~and $96.6~~ ~~million~~, compared to ~~$24.2~~$35.1 million ~~and~~ ~~$67.9 million, respectively, for the~~ ~~three and nine months ended~~ ~~September 30, 2020. This resulted in an~~ ~~increase of $13.0 million, or approximately 53.7%,~~ for the three months ended ~~and~~ ~~$28.7~~March 31, 2021, an increase of $8.9 million, or ~~approximately 42.3%, for the nine months ended,~~ ~~compared to the period~~ ~~ended September 30, 2020~~25.4%. ~~Adjusted Net Income increased~~The increase was primarily due to higher revenues as a result of strong demand for our services, improved staffing leverage alongside our differentiated value proposition and ~~lower travel expenses~~premium services driving a higher bill rate, improved efficiencies in the cost of ~~$9.7 million for~~delivering the ~~nine months ended due to COVID-19 restrictions~~general and ~~remote working.~~administrative activities of our business, and a decrease in income tax expense. This was partially offset by increased payroll expenses (excluding stock-based compensation) ~~of $50.3 million and $130.7 million for the three and nine months ended as we invested in additional employees~~ to support revenue growth.

Adjusted EBITDA and Adjusted EBITDA Margin

~~During~~For the three months ended ~~September 30, 2021,~~March 31, 2022, we reported Adjusted EBITDA of ~~$66.5~~$72.9 million, compared to ~~$43.6~~$53.8 million ~~for the~~ ~~three months ended~~ ~~September 30, 2020. This resulted in an increase of $22.9 million, or approximately 52.5%,~~ for the three months ended March 31, 2021, an increase of $19.0 million, or 35.4%, and we reported an Adjusted EBITDA Margin of 22.7% compared to 22.7% for the ~~period~~ three months ended ~~September 30, 2020~~. March 31, 2021. The increase in Adjusted EBITDA ~~increased~~was due to higher revenues as demand for our services increased, improved staffing leverage and efficiencies in our general and administrative expenses, partially offset by ~~higher~~ operating expenses ~~as certain costs,~~ such as increased payroll expenses (excluding stock-based compensation) ~~of $50.3 million, increased due to investment in additional headcount~~ to support ~~growth and IPO related expenses.~~

~~During the nine months ended September 30, 2021, we reported Adjusted EBITDA of $171.5~~ ~~million, compared to~~ ~~$117.6 million~~ ~~for the~~ ~~nine months ended~~ ~~September 30, 2020. This resulted in an increase of~~ ~~$53.9 million, or approximately 45.8%, for the nine months ended, compared to the period~~ ~~ended September 30, 2020~~. Adjusted EBITDA increased due to higher revenues as demand for our services increased, partially offset by higher operating expenses as certain costs, such as payroll (excluding stock-based compensation) of $130.7 million, increased due to investment in additional headcount to support growth and IPO related expenses.

~~During the three and nine months ended September 30, 2021, we reported an Adjusted EBITDA Margin of~~ ~~23.3%~~ ~~and~~ ~~21.9%, an increase of approximately 1.1% and~~ ~~2.2%, compared~~ ~~to 22.2% and 19.7%,~~ ~~respectively, for the~~ ~~three and nine months ended~~ ~~September 30, 2020. Adjusted EBITDA Margin increased primarily due to~~ ~~higher revenues as demand for our services increased, lower travel costs as a percentage of revenues which was partially~~

~~offset by higher operating expenses incurred in connection with the IPO and increased payroll costs to support the growth in headcount.~~revenue growth.

Business Update Regarding COVID-19

Since early 2020, the COVID-19 pandemic has caused general business disruption worldwide. As a result of the COVID-19 pandemic, we took precautionary measures to minimize the risk of the virus to our personnel, our clients and the communities in which we operate, including the temporary suspension of all non-essential

business travel of personnel and the temporary closure of all of our major offices. Although a significant portion of our workforce has worked remotely through the COVID-19 pandemic, there has been minimal disruption in our ability to effectively provide our service offerings, as our employees are accustomed to operating in remote and distributed environments. Going forward, we will continue to monitor working conditions and adapt as needed.

Starting in the second quarter of 2020, we experienced a slowdown in new business generation, pauses in ongoing engagements and select project cancellations as certain of our clients focused on the immediate challenges linked to the COVID-19 pandemic. This impact was concentrated in affected verticals, such as automotive, travel and transportation and retail and consumer. We also pivoted offerings to leverage market tailwinds as some companies increased their focus on digital transformation in response to the COVID-19 pandemic. During this period, sector diversification enabled us to re-balance sales exposure to verticals that were spending incrementally through the pandemic, such as technology and business services and energy, public and health services. We returned to pre-COVID activity levels by the fourth quarter of 2020 and have seen robust growth as evidenced in our revenue growth trends in 2021.

We may continue to experience a modest adverse impact on certain parts of our business, including a lengthening of the sales cycle for some prospective clients and delays in the delivery of professional services and trainings to our clients. In addition, the continuing pandemic or potential recovery may impact our ability to retain our workforce, integrate new employees, preserve our culture and attract skilled talent. We also experienced, and we may continue to experience, a modest positive impact on other aspects of our business, such as slower growth in certain operating expenses due to reduced business travel and the virtualization or cancellation of in-person client and workforce events. The COVID-19 pandemic has caused substantial global public health and economic challenges. Our employees, communities and business operations ~~particularly in India and Brazil,~~ and the global economy and financial markets continue to be affected. We cannot accurately predict the extent to which the COVID-19 pandemic will continue to directly and indirectly impact our business, results of operations and financial condition. Future developments and actions to contain the public health and economic impact of the COVID-19 pandemic in the markets we serve are rapidly evolving and highly uncertain.

Key Factors Affecting Our Performance

Our long-term financial trend is characterized by strong organic growth, strong client retention, a significant amount of revenues from recurring clients and substantial margin optimization with the support of onshore, nearshore and offshore delivery centers. Our performance for historical periods and future periods is driven by numerous factors discussed, including the following key factors.

Ability to retain and expand existing client relationships

~~We currently serve~~For the trailing twelve months ended March 31, 2022, we served over ~~300~~380 clients, which we define as clients with annual spend in excess of $25,000 within the preceding twelve months, many of whom we work with across multiple geographies. We actively manage our client portfolio and target clients where we believe there is opportunity to develop long-term relationships and drive significant growth. Accordingly, for both the three months ended ~~September 30,~~March 31, 2022 and 2021, 95.4% of our revenues were derived from recurring clients, which we define as clients for whom we have done work and ~~September 30, 2020, 85.1%~~generated revenues in excess of $25,000 within the preceding fiscal year. For the trailing twelve month periods through March 31, 2022 and ~~89.8%~~2021, 88.3% and 89.9% of our revenues were derived from recurring clients, respectively, which we define as clients for whom we have done work and generated revenues in excess of $25,000 within the preceding ~~fiscal year. For the nine months ended September 30, 2021~~twelve months. This represents increases of 62.4% and ~~September 30, 2020, 89.9%~~37.0% in revenues from new and ~~94.2% of our revenues were derived from recurring~~existing clients, respectively. For the trailing twelve month ~~period~~periods through ~~September 30,~~March 31, 2022 and 2021, 31 and ~~September 30, 2020, 29 and 21~~23 clients, respectively, generated greater than $10 million in ~~revenues. This represents~~revenues, a ~~38.1%~~34.8% increase ~~for clients greater than $10 million~~ in ~~revenues as compared to~~ the ~~prior year's period.~~number of clients.

~~Despite our expansion~~While we continue to derive a substantial part of our ~~existing client relationships,~~overall revenues from recurring clients, we maintain relatively low client ~~concentration. Our~~concentration among our largest clients. For the three months ended March 31, 2022, revenues from our top five, ten and ten clients for the three months ended September 30, 2021, as a percentage of total revenues were 16.2% and 27.1%, respectively. Whereas, our revenues from our top five and ten clients for the three months ended September 30, 2020, as a percentage of total revenues were 21.0% and 33.0%, respectively. For the nine months ended September 30, 2021, revenues from our top five and tenfifty clients as a percentage of total revenues were ~~17.4%~~15.0%, 25.9% and ~~27.6%~~66.1%, ~~respectively. Whereas,~~respectively, compared to 19.4%, 30.9% and 75.1%, respectively, for the ~~nine~~three months ended ~~September 30, 2020, revenues from our top five and ten clients as~~March 31, 2021. The overall decrease of a percentage of total revenues ~~were 20.2%~~for our top five and ~~32.7%, respectively. The overall decrease reflected above~~top ten clients is a result of a higher contribution of revenues from our ~~change~~top fifty clients growing at a faster pace than our top five and top ten clients in ~~strategy to look for new opportunities to diversify our portfolio to re-balance sales exposure as some companies increased their focus on digital transformation in response~~the first quarter of 2022 compared to the ~~COVID-19 pandemic.~~first quarter of 2021.

Net Dollar Retention Rate

We also utilize the net dollar retention ratio to measure revenue growth from our clients. Net dollar retention rate provides visibility into the risks associated with our revenues and expected ~~growth.~~growth, and it measures our ability to continually offer and deliver innovative services to our clients. We use this metric to appropriately manage resources and client retention and growth, such as account management and capability development of our account leadership teams. The net dollar retention ratio is calculated by dividing (a) the ~~current~~trailing twelve month period revenue from recurring clients by (b) the prior comparative period revenue from recurring clients.

The net dollar retention ratio ~~was approximately 143% f~~orincreased to approximately 132% for the ~~three~~trailing twelve months ended ~~September 30, 2021 and approximately 103% fo~~rMarch 31, 2022 from 101% for the ~~three~~trailing twelve months ended ~~September 30, 2020.~~March 31, 2021. The net dollar retention ratio ~~was approximately 130% and 108%~~ for the ~~nine~~trailing twelve months ended ~~September 30,~~March 31, 2021 was largely driven by the impact of COVID-19. Starting in the second quarter of 2020, we experienced pauses in ongoing engagements and ~~September 30, 2020, respectively.~~select project cancellations as certain of our clients focused on the immediate challenges linked to the COVID-19 pandemic. We believe that the financial challenges caused by COVID-19 contributed to lower technology spending by our existing customers concentrated in certain verticals, such as automotive, travel and transportation and retail and consumer. To partially offset the impact on revenue from the affected verticals, we pivoted our focus to companies that were increasing their spending on digital transformation in response to the COVID-19 pandemic. During the trailing twelve months ended March 31, 2022, sector diversification enabled us to re-balance sales exposure to verticals that were spending incrementally through the pandemic, such as technology and business services and energy, public and health services. As a result of ~~the return to pre-COVID activity levels by the fourth quarter of 2020 and~~ our continued ~~experience of positive~~ growth ~~trends in 2021,~~trend, the net dollar retention rate ~~has~~ increased for ~~both~~ the ~~three and nine~~trailing twelve months ended ~~September 30, 2021.~~March 31, 2022.

Ability to acquire new clients

We intend to continue to acquire new clients through programs designed to generate new business demand and position us as a trusted partner. Winning new business in existing and new geographies and industry verticals is a critical component of our growth strategy. Dedicated new business teams work with marketing using data-driven approaches to focus on client acquisition efforts. Commensurately, our total number of clients ~~which we define as clients with annual spend in excess of $25,000 in the relevant year,~~ increased to ~~257~~384 as of ~~September 30, 2021~~March 31, 2022 from ~~206~~353 as of ~~September 30, 2020,~~March 31, 2021, as we saw increased demand for our global services, including in North America, Europe, Asia-Pacific ~~(“APAC”~~region ("APAC") and Latin America ~~(“LATAM”~~("LATAM"). Going forward, we may also add new clients, including in new geographies and industry verticals, through selective strategic acquisitions.

Expanding our technical capabilities and client solutions

We combine strategy, design and software engineering expertise to offer premium, end-to-end solutions to our clients. Our value proposition is based on our thought leadership and expertise across innovative new technologies, differentiated client solutions across our service lines and local and nearshore capabilities (i.e., those delivered from nearby countries in similar time zones) and offshore capabilities (i.e., those delivered from distant countries in different time zones). Our premium position enabled us to drive average revenue per employee of approximately ~~$88,000,~~$29,000, or ~~$118,000~~$116,000 annualized, for the ~~nine~~three months ended ~~September 30, 2021, compared to approximately $81,000, or $108,000 annualized, for~~March 31, 2022, which is consistent with the ~~nine months ended September 30, 2020. Our~~comparative period in 2021. We believe our average revenue per employee ~~was approximately $108,000 for the full year 2020, which we believe~~ is meaningfully higher than all our pure-play competitors. We define average revenue per employee as total revenues for the period divided by the average number of employees in such period. The year-over-year increase reflected the increase in demand for our services driven by economic recovery from the pandemic where we have seen continued revenue growth and the overall ramp up in hiring to meet the anticipated increase in demand for our services. Our ability to continue delivering premium and innovative services to our clients depends on evolving our technical and engineering capabilities.

Ability to recruit and retain talent

To provide services to our clients, we must efficiently hire, train and retain skilled professionals without compromising on the high standards we set for our people. We believe our ability to attract and retain top talent drives high client satisfaction and enables us to deliver on strong client demand to generate growth. Apart from driving high client satisfaction, lower attrition leads to lower hiring and training costs and increased productivity. For the trailing twelve month period through March 31, 2022, our voluntary attrition rate was 14.1%, up from 12.3% for the trailing twelve month period through March 31, 2021 driven by strong market demand for digital talent. We increased our total number of employees to ~~10,076~~over 11,000 as of ~~September 30, 2021 from 7,976 as of December~~March 31, ~~2020, a 26.3% increase as we continued to invest in additional headcount to meet demand.~~2022.

Ability to optimize our global delivery

We have a global footprint with the ability to deliver services from multiple geographic regions. As of ~~September 30, 2021 all~~March 31, 2022, 9 out of our top ~~ten~~10 clients relied on Thoughtworks’ delivery from more than one region. We utilize a blended delivery model, which means we are able to offer a combination of local talent with nearshore/offshore talent, allowing us to maintain close proximity to our clients for context and local market knowledge, while driving rapid and high-quality delivery at scale.

Components of Our Operating Results

We operate and manage our business asone reportable segment. While the Company has offerings in multiple market segments and operates in multiple countries, the Company’s business operates as one operating segment. Almost all of the Company’s service offerings are delivered and supported on a global basis. Additionally, most of the Company’s service offerings are deployed in a nearly identical way and the Company’s chief operating decision maker, who is the Company's Chief Executive Officer, evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis.

Time-and-Materials Revenues. We generate the majority of our revenues under time-and-materials contracts, which are billed using hourly, daily or monthly rates to determine the amounts to be charged to the client. Revenue from time-and-material contracts is based on the number of hours worked and at contractually agreed-upon hourly rates and is recognized as those services are rendered as control of the services passes to the customer over time.

Fixed-Price Revenues. Fixed-price contracts include application development arrangements, where progress towards satisfaction of the performance obligation is measured using input methods as there is a direct correlation between hours incurred and the end product delivered to the client. Assumptions, risks and uncertainties inherent in the estimates used to measure progress could affect the amount of revenues, receivables and deferred revenues at each reporting period. Revenues under these contracts are recognized using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying performance obligations.

For a detailed discussion of our revenue recognition policy, refer to the notes to our ~~condensed~~ consolidated financial statements included ~~herein and~~in the ~~related notes appearing in our IPO Prospectus.~~Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Cost of revenues consists primarily of personnel and related costs directly associated with the professional services, including salaries, bonuses, ~~stock-based compensation,~~ fringe benefits, share-based compensation, project related travel costs and costs of contracted third-party vendors. Also included in cost of revenues is depreciation attributable to the portion of our property and equipment utilized in the delivery of services to our clients.

Gross Profit and Gross Margin

Gross profit represents revenues less cost of revenues. Gross margin represents gross profit as a percentage of revenues.

Selling, General and Administrative Expenses

~~Selling, general and administrative~~SG&A expenses represent expenses associated with promoting and selling our services and general and administrative functions of our business. These expenses include the costs of salaries,

bonuses, fringe benefits, stock-based compensation, severance, bad debt, travel, legal and accounting services, insurance, facilities (including operating leases), advertising and other promotional activities.

Depreciation and Amortization

Depreciation and amortization consist primarily of depreciation of fixed assets, amortization of capitalized software development costs (internal-use software) and amortization of acquisition-related intangible assets.

Other (Expense) Income ~~(Expense), net~~

Other (expense) income ~~(expense), net~~ consists of interest expense, impacts from foreign exchange transactions, ~~and~~ gains (losses) on the sale of ~~assets.~~assets and the write-off of deferred financing fees.

Determining the consolidated income tax expense, deferred income tax assets and liabilities and any potential related valuation allowances involves judgment. We consider factors that may contribute, favorably or unfavorably, to the overall annual effective tax rate in the current year as well as the future. These factors include statutory tax rates and tax law changes in the countries where we operate as well as consideration of any significant or unusual items. Our income tax expense includes the impact of provisions established for uncertain income tax positions, as well as any related interest and penalties. These reserves are adjusted given changing facts and circumstances, such as the closing of a tax audit, statute of limitation lapse or the refinement of an estimate. To the extent the final outcome of an uncertain income tax position differs from the amounts recorded, such differences will impact our income tax expense in the period in which such determination is made.

Results of Operations

The following table sets forth a summary of our condensed consolidated results of operations for the periods indicated (in thousands, except percentages):

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Revenues $ 285,051 $ 196,549 $ 783,145 $ 597,082
Operating expenses:
Cost of revenues (1) 183,945 114,849 471,047 351,750
Selling, general and administrative expenses (1) 113,019 42,073 248,366 139,498
Depreciation and amortization 4,173 4,343 13,007 12,587
(Loss) income from operations (16,086) 35,284 50,725 93,247
Other (expense) income:
Interest expense (6,734) (6,016) (20,316) (19,833)
Net realized and unrealized foreign currency (loss) gain (1,934) 938 (3,608) 2,369
Other income (expense), net 162 12 306 139
Total other expense (8,506) (5,066) (23,618) (17,325)
(Loss) income before income taxes (24,592) 30,218 27,107 75,922
Income tax expense 643 8,336 15,605 16,243
Net (loss) income $ (25,235) $ 21,882 $ 11,502 $ 59,679
Effective tax rate (2.6) % 27.6 % 57.6 % 21.4 %

~~Table of Contents~~


	Three Months Ended March 31,
	2022			2021
Revenues	$	320,940		$	237,662
Operating expenses:
Cost of revenues (1)	263,349			134,791
Selling, general and administrative expenses (1)	111,734			66,516
Depreciation and amortization	5,846			4,346
(Loss) income from operations	(59,989)			32,009
Other income (expense):
Interest expense	(4,647)			(6,194)
Net realized and unrealized foreign currency gain (loss)	4,945			(2,668)
Other income, net	88			61
Total other income (expense)	386			(8,801)
(Loss) income before income taxes	(59,603)			23,208
Income tax expense	301			4,623
Net (loss) income	$	(59,904)		$	18,585
Effective tax rate	(0.5)		%	19.9		%

(1) Includes stock-based compensation as follows (in thousands):

Summary Comparison of Three Months Ended ~~September 30, 2021~~March 31, 2022 with the Three Months Ended ~~September 30, 2020~~March 31, 2021

Revenues for the three months ended ~~September 30, 2021~~March 31, 2022 increased ~~$88.5~~$83.3 million, or ~~45.0%~~35.0%, to ~~$285.1~~$320.9 million, ~~comp~~aredcompared to ~~$196.5~~$237.7 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The increase in revenues was driven by higher demand for services as certain clients accelerated their digital transformation projects. The majority of our revenues are generated from recurring clients or those expanding their usage of our services. Revenue recognized from our recurring client base was approximately 95.4% for the three months ended March 31,

2022 and~~85.1%~~95.4% for the three months ended ~~September 30,~~March 31, 2021, ~~and~~ ~~89.8% for the three months ended September 30, 2020,~~ with the remainder of our revenue attributable to new clients.

Our revenue growth primarily depends on our ability to retain and drive growth from existing clients. The net dollar retention ratio was ~~approximately 143% f~~orapproximately 132% and 101% for the ~~three~~trailing twelve months ended ~~September 30,~~March 31, 2022 and 2021, ~~and approximately 103% for the three months ended September 30, 2020.~~respectively. For a discussion of the factors impacting our net dollar retention ratio, see "—Key Factors Affecting ~~our Performance about Market Risk —~~ Our Performance—Net Dollar Retention Rate."

Income from operations for the three months ended ~~September 30, 2021 decreased $51.4~~March 31, 2022 decreased $92.0 million, or approximately ~~145.6%~~287.4%, to a loss from operations of ~~$16.1~~$60.0 million compared to income from operations of ~~$35.3~~$32.0 million for the three months ended ~~September 30, 2020. The decrease in income~~March 31, 2021. Loss from operations ~~was driven by~~ ~~costs incurred in conjunction with the IPO, specifically additional stock-based compensation~~as a percentage of ~~$72.9 million (primarily related to the accelerated vesting of certain employee stock options of~~ ~~$56.2~~ ~~million and~~ ~~$16.7~~ ~~million for the issuance of new grants in connection with the IPO) and incremental professional fees of~~ ~~$8.7~~ ~~million reported in cost of~~ revenues ~~and selling, general and administrative expenses in the period ended September 30, 2021 compared to the three months ended~~ ~~September 30, 2020~~.

~~Our effective tax rate~~ for the three months ended ~~September 30,~~March 31, 2022 was (18.7)%, compared to income from operations of 13.5% for the three months ended March 31, 2021. The decrease was primarily driven by stock-based compensation of $118.9 million, as previously discussed.

Our effective tax rates for the three months ended March 31, 2022 and ~~September 30, 2020~~2021 was ~~(2.6)~~(0.5)% and ~~27.6%~~19.9%, respectively. The effective tax rate in each period differed from the U.S. statutory tax rate of 21% principally due to U.S. corporate state income taxation and the effect of foreign operations which reflects the impact of different income tax rates in locations outside the United ~~States.~~States, offset by excess tax benefits on stock-based compensation. The decrease in the effective tax rate for the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the prior year was primarily due to the non-deductibility of China SAFE RSUs, the unfavorable impact of ~~establishing~~ valuation allowances on deferred tax assets of select foreign operations, and the non-deductibility of executive compensation expense in compliance with §162(m) of the Internal Revenue ~~Code, partially offset by excess~~Code. The negative effective tax ~~benefits on stock-based compensation. The resulting tax expense~~rate for the three months ended March 31, 2022 is a result of the aforementioned unique net unfavorable items when compared to the pre-tax loss recorded for the ~~quarter yields the aforementioned negative effective tax rate of (2.6)% as of~~ ~~September 30, 2021~~.quarter.

Net income for the three months ended ~~September 30, 2021~~ March 31, 2022 decreased ~~by approximately $47.1~~$78.5 million to a loss position ~~$25.2~~of $59.9 million compared to net income of ~~$21.9~~$18.6 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The decrease ~~in net income was driven by~~ ~~costs incurred in conjunction with the IPO, specifically additional stock-based compensation and incremental professional fees discussed above.~~

~~Summary Comparison of Nine Months Ended September 30, 2021 with the Nine Months Ended September 30, 2020~~

~~Revenues for the nine months ended September 30, 2021 increased $186.1 million, or 31.2%, to~~ ~~$783.1 million, compared to~~ ~~$597.1 million~~ ~~for the nine months ended September 30, 2020. The increase in revenues~~ was driven by higher demand for services as certain clients accelerated their digital transformation projects, partially offset by the impact of decreased reimbursable travel costs. The majority of our revenues are generated from recurring clients or those expanding their usage of our services. Revenue recognized from our recurring client base was approximately 89.9% for the nine months ended September 30, 2021 and approximately 94.2% for the nine months ended September 30, 2020, with the remainder of our revenue attributable to new clients.

Our revenue growth depends on our ability to retain and drive growth from existing clients. Our net dollar retention ratio was approximately 130% for the nine months ended September 30, 2021 and approximately ~~108%~~ for the nine months ended September 30, 2020. For a discussion of the factors impacting our net dollar retention ratio, see "— Key Factors Affecting our Performance about Market Risk — Net Dollar Retention Rate."

~~Income from operations for the nine months ended September 30, 2021 decreased $42.5 million,~~ ~~or approximately 45.6%, to $50.7 million~~ ~~compared to~~ ~~$93.2~~ ~~million for the nine months ended September 30, 2020.~~ ~~The decrease in income from operations was driven by~~ ~~costs incurred in conjunction with the IPO, specifically additional stock-based compensation of~~ ~~$82.4~~ ~~million (primarily related to the accelerated vesting of certain employee stock options of~~ ~~$65.7~~ ~~million and~~ ~~$16.7~~ ~~million for the issuance of new grants in connection with the IPO) and incremental professional fees of~~ ~~$17.9~~ ~~million reported in cost of revenues and selling, general and administrative expenses in the period ended September 30, 2021 compared to the nine months ended~~ ~~September 30, 2020. The additional expenses incurred above were partially offset by the benefits received from a reduction in travel related expenses of~~ ~~$9.7~~ ~~million reported in cost of revenues combined with a reduction in bad debt of $7.3 million reported in selling, general and administrative expenses compared to the nine months ended~~ ~~September 30, 2020~~.

Our effective tax rate for the nine months ended September 30, 2021 and September 30, 2020 was 57.6% and 21.4%, respectively. The effective tax rate in each period differed from the U.S. statutory tax rate of 21% principally due to U.S. corporate state income taxation and the effect of foreign operations which reflects the impact of different income tax rates in locations outside the United States. The increase in the effective tax rate for the nine months ended September 30, 2021 over the prior year was primarily due to the unfavorable impact of establishing valuation allowances on deferred tax assets of select foreign operations and the non-deductibility of executive compensation expense in compliance with §162(m) of the Internal Revenue Code, offset by excess tax benefits on stock-based compensation.

~~Net income for the nine months ended September 30, 2021~~ ~~decreased $48.2 million to $11.5 million~~ ~~compared to net income of~~ ~~$59.7 million~~ ~~for the nine months ended September 30, 2020.~~ ~~The decrease in net income was driven by~~ ~~costs incurred in conjunction with the IPO, specifically additional stock-based compensation and incremental professional fees discussed in detail above.~~

We continue to expand our international presence and nearshore capabilities in different geographies. ~~During~~For the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, total revenues grew ~~45.0% and 31.2%, respectively,~~ 35.0% to ~~$285.1~~$320.9 million ~~and $783.1 million, respectively,~~ compared to ~~$196.5~~$237.7 million ~~and~~ ~~$597.1~~ ~~million, respectively, over~~for the ~~same periods in the prior year.~~first quarter of 2021. The increase ~~in revenues~~ was attributable to strong demand for our services, including ~~the impact of accelerated digital transformation projects by certain~~strong growth across geographies and verticals, and expansion in our top fifty clients.

Revenues by Industry Vertical

The following table presents our revenues by industry vertical and revenues as a percentage of total revenues by industry vertical for the periods indicated (in thousands, except percentages):

During the three months ended ~~September 30, 2021,~~March 31, 2022, we continued to see a strong demand environment ~~along with robust~~and sustained revenue growth ~~across all industry verticals compared to~~in the ~~three months ended September 30, 2020. The~~ financial services and insurance industry vertical grew by 61.3%, along with a good rebound in the retail and consumer and energy, public and health services industry verticals, also growing by 61.1% and 47.8%, respectively, as we continued to leverage market tailwinds.

~~During the nine months ended September 30, 2021, we continued to sustain revenue growth across energy, public and health services~~ and retail and consumerindustry verticals which grew by ~~42.3%~~70.7% and ~~39.8%~~51.8%, respectively. We also experienced a recovery in the technology and business services, financial services and insurance, and automotive, travel and transportation verticals compared to the nine months ended September 30, 2020 for the same reasons as described above.

Revenues by Customer Location

Our revenues are sourced from four geographic markets: North America, APAC, Europe and LATAM. We present and discuss our revenues by the geographic location where the revenues are under client contract; however, the delivery of those client contracts could be supported by offshore delivery locations.

The following table presents our revenues by customer location and revenues as a percentage of total revenues by customer location for the periods indicated (in thousands, except percentages):


	Three Months Ended March 31,
	2022		2021

North America	$121,949	38.0%	$89,795	37.8%
APAC	102,206	31.9%	72,590	30.5%
Europe	82,926	25.8%	64,114	27.0%
LATAM	13,859	4.3%	11,163	4.7%
Total revenues	$320,940	100.0%	$237,662	100.0%

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Customer Location:
North America $103,769 36.4% $76,649 39.0% $290,954 37.2% $243,797 40.8%
APAC 98,756 34.6% 64,457 32.8% 260,928 33.3% 181,738 30.4%
Europe 69,522 24.4% 46,623 23.7% 196,476 25.1% 143,673 24.1%
LATAM 13,004 4.6% 8,820 4.5% 34,787 4.4% 27,874 4.7%
Total revenues $285,051 100.0% $196,549 100.0% $783,145 100.0% $597,082 100.0%

~~During~~For the three months ended ~~September 30, 2021,~~March 31, 2022, we had ~~positive~~ revenue growth of ~~35.4%~~35.8% in North America, with the United States ~~contributing $96.5~~generating revenues of $115.1 million, ~~of our North America revenues,~~ compared to ~~$73.4~~$85.9 million for the same period in ~~2020.~~2021. The largest client demand came from the ~~technology~~energy, public and ~~business~~health services ~~industry~~ vertical which was primarily driven by our clients' increased focus on digital ~~transformation where we pivoted our offerings to leverage market tailwinds.~~transformation. Further, our ability to retain existing clients and increase the level of services we provide resulted in incremental revenue ~~expansion from 2020 to 2021.~~expansion.

~~During~~For the three months ended ~~September 30, 2021,~~March 31, 2022, we had ~~positive~~ revenue growth of ~~53.2%~~40.8% in APAC where the top revenue contributing customer location country was Australia, generating revenues of $36.3 million, compared to $26.5 million for the same period in 2021. The largest client demand came from the technology and business services industry vertical driven by increased client demand on digital transformation projects.

For the three months ended March 31, 2022, we had revenue growth of 29.3% in Europe where the top revenue contributing customer location countries ~~in APAC~~ were ~~Australia, China~~the United Kingdom and ~~Singapore~~Germany generating revenues of ~~$31.0 million, $24.8~~$37.7 million and ~~$18.4~~$31.8 million, respectively, compared to ~~$19.7 million, $23.4~~$28.6 million and ~~$4.9~~$26.0 million, respectively, for the same period in ~~2020. The increase in revenues for APAC during this period was driven by increased client demand in the technology and business services industry vertical for the same reasons as described above.~~

During the three months ended September 30, 2021, we had positive revenue growth of 49.1% in Europe where the top two revenue contributing customer location countries in Europe were Germany and the United Kingdom generating revenues of $30.0 million and $30.0 million, respectively, compared to $19.8 million and $20.8 million, respectively, for the same period in 2020.2021. The largest driver of client demand came from our automotive, travel and transportation industry vertical where certain automotive manufacturers and service providers continued to focus on digital transformation.

~~During~~For the three months ended ~~September 30, 2021,~~March 31, 2022, we had ~~positive~~ revenue growth of ~~47.4%~~24.2% in LATAM, with Brazil being our largest customer location ~~in LATAM contributing~~generating revenues of ~~$8.2~~$7.8 million compared to ~~$4.9~~$6.4 million for the same period in ~~2020.~~2021. The largest driver of client demand came from our ~~technology~~retail and ~~business services industry vertical which was driven by our increased focus on digital transformation where we pivoted our offerings to leverage market tailwinds.~~

During the nine months ended September 30, 2021, we had positive revenue growth of 19.3% in North America, with the United States contributing $275.0 million of our North America revenues, compared to $233.5 million for the same period in 2020. The largest client demand came from the technology and business services industry vertical which was driven by our increased focus on digital transformation where we pivoted our offerings to leverage market tailwinds. Further, our ability to retain existing clients and increase the level of services we provide resulted in incremental revenue expansion from 2020 to 2021 where this industry remained as our top revenue contributor.

During the nine months ended September 30, 2021, we had positive revenue growth of 43.6% in APAC where the top three revenue contributing customer location countries in APAC were Australia, China and Singapore generating revenues of $83.7 million, $70.7 million and $42.4 million, respectively, compared to $52.7 million, $58.9 million and $24.3 million, respectively, for the same period in 2020. The increase in revenues for APAC during this period was driven by increased client demand in the technology and business services industry vertical for the same reasons as described above.

During the nine months ended September 30, 2021, we had positive revenue growth of 36.8% in Europe where the top two revenue contributing customer location countries in Europe were Germany and the United Kingdom generating revenues of $84.2 million and $83.5 million, respectively, compared to $59.9 million and $65.7 million, respectively, for the same period in 2020, with the largest driver of client demand coming from our automotive, travel and transportation industryconsumer vertical where ~~certain automotive manufacturers and service providers continued~~our clients continue to focus on digital transformation.

During the nine months ended September 30, 2021, we had positive revenue growth of 24.8% in LATAM, with Brazil being our largest customer location in LATAM contributing revenues of $21.6 million compared to $11.4 million for the same period in 2020. The largest driver of client demand came from our technology and business services industry vertical which was driven by our increased focus on digital transformation where we pivoted our offerings to leverage market tailwinds.

Revenues by Client Concentration

We have long-standing relationships with many of our clients. We seek to grow revenues from our existing clients by continually increasing the value we provide and expanding the scope and size of our engagements. Revenues derived from these clients may fluctuate as these accounts mature or upon beginning or completion of multi-year projects. We believe there is a significant potential for future growth as we expand our capabilities and offerings within existing clients. In addition, we remain committed to diversifying our client base and adding ~~more~~new clients to our client mix.

The following table presents revenues contributed by our largest clients by amount and as a percentage of total revenues for the periods indicated (in thousands, except percentages):

~~During~~For the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022, revenues from our top five and top ten existing clients experienced strong but slower growth ~~as a percentage~~compared to our year-over-year growth rate of ~~our total revenues~~35.0% as we ~~continued to focus on diversification of our portfolio to re-balance sales exposure. This was also driven by an increase in our number of clients resulting from new business wins and~~saw a higher contribution of revenues from our top ~~twenty and top~~ fifty clients growing at a faster ~~pace.~~pace compared to the the same period in 2021. Additionally, we continued to focus on opportunities with new and existing clients, with 4.6% of revenues from new clients and 95.4% of revenues from existing clients, representing increases of 35.7% and 35.0% in revenues from new and existing clients, respectively.

We use Bookings ("Bookings") as a forward-looking metric that measures the value of new contracts, renewals, extensions and changes to existing contracts during the fiscal period. We believe Bookings provides a broad measure of useful trend information regarding changes in the volume of our business. We use Bookings to evaluate the results of our operations, generate future operating plans and assess the performance of our company. However, Bookings can vary significantly quarter to quarter due to both timing and demand from our clients and thus the conversion of Bookings to revenues is uncertain. The amount of Bookings involves estimates and judgments and is not a reliable predictor of revenues over time. There is no standard definition or measurement of Bookings thus our methodology may not be comparable to other companies. Bookings were $1,510 million and $1,082 million for the trailing twelve months ended March 31, 2022 and 2021, respectively.

During the three months ended ~~September 30, 2021~~March 31, 2022, cost of revenues (including stock-based compensation) increased~~increased~~ by ~~$69.1~~$128.6 million, or ~~60.2%~~95.4%, compared to the three months ended ~~September 30, 2020.~~March 31, 2021. This increase was primarily driven by a~~n increase in payroll and benefit~~ ~~expenses of $37.2 millio~~n due to higher headcount as we invested in additional talent to support growth. This increase was also driven by the cumulative stock-based compensation expense of $25.8 million related to the accelerated vesting of certain employee stock options in conjunction with the IPO of $13.7 million and $12.1 million for the issuance of new grants in connection with the IPO and an ~~increase in professional fees of $3.9 million related to contract labor.~~

Nine Months Ended September 30,
(in thousands, except percentages) 2021 2020 Change % Change
Cost of revenues $471,047 $351,750 $119,297 33.9%

~~During the nine months ended September 30, 2021, cost of revenues~~ ~~(including stock-based compensation)~~ ~~increased by $119.3 million, or 33.9%, compared to the nine months ended September 30, 2020. This increase was primarily driven by a~~n increase in payroll and benefit expenses of ~~$85.9~~$42.3 million due to higher headcount as we invested in additional talent to support growth ~~partially offset by reduced travel costs of $9.7 million due to the COVID-19 pandemic. This increase was also driven by the cumulative~~and stock-based compensation expense of ~~$29.1 million related to the accelerated vesting of certain employee stock options in conjunction with the IPO of~~ $82.7 million.~~$17.0~~ ~~million and~~ ~~$12.1~~ ~~million for the issuance of new grants in connection with the IPO and an increase in professional fees of $9.3 million related to contract labor.~~

Gross Profit and Gross Margin

Our gross margin decreased by ~~6.1%~~25.4% for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020,~~March 31, 2021 primarily due to ~~costs incurred~~an increase in ~~conjunction with our successful IPO, specifically additional~~ stock-based compensation of ~~$25.8 million and incremental professional fees discussed in detail above.~~$82.7 million. This was partially offset by our revenue growth from the increased demand for our services along with our ability to ~~accelerate~~execute certain strategic operational efficiency initiatives.

Nine Months Ended September 30,
(in thousands, except percentages) 2021 2020 Change % Change
Gross profit $312,098 $245,332 $66,766 27.2%
Gross margin 39.9% 41.1%

~~Our gross margin decreased by 1.2%~~ for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily due to costs incurred in conjunction with our successful IPO, specifically additional stock-based compensationTable of $29.1 million and incremental professional fees discussed in detail above. This was partially offset by our revenue growth from the increased demand for our services along with our ability to accelerate certain strategic operational efficiency initiatives.Contents

Selling, General and Administrative Expenses

For the three months ended ~~September 30, 2021, selling, general and administrative~~March 31, 2022, SG&A expenses ~~were $113.0~~were $111.7 million, representing an increase of approximately ~~168.6%~~68.0%, compared to ~~$42.1 million~~ in the ~~same period in the prior year. Our selling, general and administrative expenses increased~~three months ended March 31, 2021. The increase was primarily due to ~~an increase in~~ stock-based compensation expense of ~~$47.1~~$36.2 million ~~related to the accelerated vesting of certain employee stock options in conjunction with the IPO of $42.5 million~~ and ~~$4.6 million for the issuance of new grants in connection with the IPO. Further,~~ payroll expenses (excluding stock-based compensation) ~~increased by $13.2 million due to higher headcount as we invested in additional talent to support growth, including our number~~ of ~~clients and revenue growth, including acquisition-related retention payments of $0.5 million, facility expenses of $2.8 million and professional fees of $4.8~~$8.0 million, partially offset by a decrease in ~~bad debt expense of $0.1 million.~~

Nine Months Ended September 30,
(in thousands, except percentages) 2021 2020 Change % Change
Selling, general and administrative expenses $248,366 $139,498 $108,868 78.0%

Depreciation and Amortization

Depreciation and amortization relate to depreciation charges on our fixed assets, capitalized software amortization expense and intangible asset ~~amortization. There were no material changes~~amortization expense. The increase was primarily due to an increase in ~~depreciation and~~the amortization inexpense related to increased capitalized software development costs for the three months ended ~~September 30, 2021 as~~March 31, 2022 compared tothe three months ended ~~September 30, 2020.~~

Nine Months Ended September 30,
(in thousands, except percentages) 2021 2020 Change % Change
Depreciation and amortization $13,007 $12,587 $420 3.3%

Depreciation and amortization relate to depreciation charges on our fixed assets, capitalized software amortization expense and intangible asset amortization. There were no material changes in depreciation and amortization in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.March 31, 2021.

Interest expense is primarily related to our term loan and revolving credit facilities. ~~There were no material changes in interest expense in~~The decrease was primarily due to decreased borrowings under our term loan facility for the three months ended ~~September 30, 2021 as~~March 31, 2022 compared tothe three months ended ~~September 30, 2020.~~

Interest expense is primarily related to our term loan and revolving credit facilities. There were no material changes in interest expense in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.


		As of		As of
		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Accrued interest expense	Accrued interest expense	$	86	$	85	Accrued interest expense	$	72	$	76
Accrued employee expense	Accrued employee expense	2,123		1,786		Accrued employee expense	1,674		2,320
Accrued travel expense	Accrued travel expense	432		383		Accrued travel expense	301		514
Operating lease expenses	Operating lease expenses	324		212		Operating lease expenses	249		262
Insurance charges	Insurance charges	167		257		Insurance charges	209		170
Professional fees	Professional fees	12,008		10,320		Professional fees	7,010		5,188
Withholding taxes payable	Withholding taxes payable	34,489		43		Withholding taxes payable	4,637		26,077
Other taxes payable	Other taxes payable	10,248		8,643		Other taxes payable	11,545		9,402
Rebates payable	Rebates payable	599		2,307		Rebates payable	943		943
Other accrued expenses	Other accrued expenses	4,646		5,713		Other accrued expenses	3,205		6,741
Accrued expenses	Accrued expenses	$	65,122	$	29,749	Accrued expenses	$	29,845	$	51,693


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☒


	September 30, 2021		December 31, 2020
Customer relationships	$	177,100	$	166,000
Less accumulated amortization	43,177		34,122
Customer relationships	133,923		131,878
Trademark	273,000		273,000
Total intangible assets, after amortization	406,923		404,878
Changes due to exchange rates	(5,103)		(2,823)
Intangible assets, net	$	401,820	$	402,055


	Time Vesting (1)	Weighted Average Exercise Price (1)		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Term (years)
Balance at December 31, 2020	10,462,531	$	2.76	$	12,149	1.36
Granted	1,068,283	14.05
Forfeited	(134,135)	5.32
Exercised	(966,005)	2.36
Cancelled	(1,752,878)	2.88
Expired	—	—
Balance at September 30, 2021	8,677,796	$	4.13	$	20,033	1.04

Exercisable at September 30, 2021	5,585,354	$	2.46	$	3,729	0.34

Nonvested at September 30, 2021	3,092,442	$	7.14	$	16,304	2.29


	Performance Vesting (1)	Weighted Average Exercise Price (1)		Aggregate Intrinsic Value
Balance at December 31, 2020	15,440,716	$	2.66	$	12,498
Granted	1,397,260	14.05
Forfeited	(193,681)	4.92
Exercised	(187,943)	2.38
Cancelled	(1,009,831)	3.60
Expired	—
Balance at September 30, 2021	15,446,521	$	3.60	$	24,776

Exercisable at September 30, 2021	15,446,521	$	3.60	$	24,776

Nonvested at September 30, 2021	—	$	—	$	—


	Number of Stock Appreciation Rights (1)	Weighted Average Grant Date Fair Value (1)
Balance at December 31, 2020	9,032,006	$	3.47
Granted	3,096,082	14.05
Forfeited	(1,681,980)	5.77
Intrinsic Value Adjustment (2)	(3,744,975)	12.19
SARs Conversion	(6,701,133)	21.00
Balance at September 30, 2021	—	$	—


	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2020	—	$	—
Granted (1)	5,017,572	21.00
Granted - SARs conversion (1)	6,701,133	21.00
Forfeited	(90,148)	21.00
Vested	—	—
Unvested balance at September 30, 2021	11,628,557	$	21.00


		Three Months Ended September 30,					Three Months Ended March 31,
(in thousands, except percentages)	(in thousands, except percentages)	2021	2020	Change	% Change	(in thousands, except percentages)	2022	2021	Change	% Change
Cost of revenues	Cost of revenues	$183,945	$114,849	$69,096	60.2%	Cost of revenues	$263,349	$134,791	$128,558	95.4%


		As of September 30,				As of December 31,					March 31, 2022		December 31, 2021
		2021		2020		2020		2019
Cash and cash equivalents	Cash and cash equivalents	$	452,810	$	142,231	$	490,841	$	55,973	Cash and cash equivalents	$	339,638	$	368,209
Availability under revolving credit facility	Availability under revolving credit facility	165,000		85,000		85,000		85,000		Availability under revolving credit facility	165,000		165,000
Borrowings under revolving credit facility	Borrowings under revolving credit facility	—		—		—		—		Borrowings under revolving credit facility	—		—
Long-term debt, including current portion (1)	Long-term debt, including current portion (1)	604,154		440,502		439,757		442,503		Long-term debt, including current portion (1)	502,935		504,530