TWKS - Earnings call transcript Q1 2022 | Thoughtworks Holding, Inc.

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Unidentified Company Representative

Hello, everyone, and welcome to Thoughtworks Earnings Call for the First Quarter of 2022.

We will be recording today's call, and during the presentation, all lines will be on listen-only.

Joining us today will be Thoughtworks' President and CEO, Guo Xiao, and CFO, Erin Cummins. The earnings press release was issued earlier today, and is available on the Investor Relations page on Thoughtworks.com if you want to review or download a copy.

Some of the matters we’ll discuss on this call, including our expected business outlook, are forward-looking, and as such, are subject to known and unknown risks and uncertainties, including, but not limited to, those factors described in today's press release and discussed in the Risk Factors section of our annual report on Form 10-K, our quarterly reports on Form 10-Q, and other reports we may file with the SEC from time to time. could on results this uncertainties from differ and expressed those call. risks cause to actual materially These We caution as you these when forward-looking not to place because made. are undue they made only of date statements the reliance on

our financial which non-GAAP for we reference information measures useful call today, provide During will investors. certain we believe

a financial our growth foreign The assumes to, constant our at non-GAAP currency provide I Thoughtworks.com. Form superior performed, excluding to revise currency will now of performance on provided, the businesses this reconciliations non-GAAP measures available underlying section over presented fluctuations. of measures should the a Xiao. to call. in include obligation website framework the Thoughtworks for, the also to which considered X-K, financial our GAAP. We substitute of GAAP information accordance as rates with in on effect to rate financial We Investor or is as measures Relations our or as how update measures prepared for release, no press our assessing financial not an of hand in be exhibit furnished conference

Guo Xiao

to before first business overall then Sean. more our open for I'll to you, guidance, everyone, quarter results would sharing first take of financial you earnings Q&A. will provides then some highlights, update in Erin detail. by our and Welcome, I call. like on Thank the and share start an quarter Erin business, we through our

a with Thoughtworks. me recap about start Let

XXXX. I’m currency. first XX.X% digital our constant reflecting of to XXXX, and by quarter, the technology modern innovation. our for the in cultivating in growth we the the adjusted established integrates EBITDA million, drive The growth disruptors quarter transformation end five Thought to be report culture create revenue and We to over reflecting of and XX,XXX quarter, excellent strategy, and believe first for At we around industry. $XX in reputation enterprises driven global to talent of XX.X% design, achieved culture. every pleased March, has that results unique what demand and businesses. global of services. diverse in the and fostering digital continues and continents. retain We’re as continued they compared a best XXXX, quarter world extraordinary to strong the XX% Thought digital thrive were In attract a would across for culture. to Workers through the to we technology $XXX and leadership worker the year-on-year thank delivered Thoughtworks like million of We impact technology high our enable thought a consultancy first excellence engineering I

levels. IDC, XXXX. than well practices, products, organizations, pre-pandemic continue trillion We $X.X demand and fast-growing According more to the in global double reach operate to the remaining the market, of and on transformation is the in to digital above industry spending analyst XXXX, with large market size in of business forecast

are platforms, Strong data, growth we AI, experience, our services, design. and of and see across transformation, cloud, For Thoughtworks, prevailing. all customer this themes evidence product digital

We seeing then for and are and end-to-end and Let by seeing of from bringing growth me the enhancing products And growth new elevated Thoughtworks’ for to with relationships digital enterprise across platforms is logos. strategies systems a services clients customer customer-facing services around Thoughtworks a and our continues strong, this our geographic and their and We're partners, revenue especially architecture, strategies data working. expansion. in share platforms. clients from high AI around supplement domain-oriented together. in friction, to building areas with decentralized data retail existing be expertise We're wide some high interest Data core, services, demand domain-specific demand a demand businesses, removing deepening examples. luminary, from payment At like out our experiences, clients spectrum Mesh, our and focused from winning modernization, also new M&A, invented

M&A. targeted share acquisitions. They deep XXX undertaking our product in has better like we both experience, family. lifecycle, in and Turning our capabilities forward building entire on products and looking to April, and have North pleased across to continued in than development. have America. product our CX enhance Connected In Connected our we digital have strategy they business, Connected strategy to businesses services, from design that in research, would further and I'm expertise first design, of welcome to transforms more the will to our employees customer to acquired I'm Canada. engineering. to products. supporting business Thoughtworks growing by I impact the and Connected

to update next expansion. geographic Turning on

seen may planned rich of a Vietnam is technology You market have into in Vietnam. shared we news April, our expansion talent. for

their we in faster clients right transformations Many clients of pleased outcomes. diversifying have talent at Singapore, client expertise business let share client their we means larger I'm Our digital Vietnam pace. help further all details help our in to can now, nearshore that our clients address that And to deals. business. continue through capabilities, strategy a ambitions to The challenges Australia demand more see from on scale service our hub breadth Thoughtworks’ and portfolio. from me of and our depth will

Our them, we our XXXX, sustain years, across was clients by In clients value average seven the pricing. we revenue with to and ability remain confident in position to our XX continue top premium tenure create and we the and relationships. appreciate our our grow

largest together working in client Swiss Data world. the Roche healthcare a the our at Mesh pharmaceutical example, ambitious For company, multinational we're company initiative. is and on an Roche,

looking construct across for the in clients, new We're selective to work using transformation. approach customers and Mesh to architecture and quality for vast clients We're is leverage cases data-as-a-product with digital chain, finance, together with a work Data ambitions deliver supply innovative manufacturing, our reliability, better use Our to and working and Roche’s data. outcomes in to various patients. long-term

Pacific, from new have quarter. we and with the first some been have I'm QX, In clients working we Asia pleased with the XX that momentum examples share the quarter. clients first in contracted to in We infrastructure positive a continued and working new we're leading of is and Siam in transform Thoughtworks to retailer define to an data-driven a Thailand. Makro. build client, wholesale trade organization. new a Siam Siam with help now truly will customer-centric into Makro Makro

asset client, consumers digitally their platform access. customers. for new the build and Brothers’ a Mesh the make agreement increased and Thoughtworks tools. best multi-year Richie delivery development, Thoughtworks. will company, those brought marketplace Brothers In using software signed landscape architecture. disposition enable to in continuous modern methods, opportunities continuous new is Brothers, retailers working a has a with North We're America, management practices, with has data data-driven reliability, who including We ecosystem engage using Richie rapidly principles digital to of and Data The enterprise for real-time changing can delivery developing visibility, global to Richie decisions accelerate our integration,

of greater you customer You numbers can of going these section through I'm some details new our can now that to Thoughtworks.com. on in the the find detail. to she take website, successes Erin over of so hand

Erin Cummins

our and thanks results today. high our us of to geographies Thank with were you, verticals. joining pleased demand continued very We Xiao, demonstrate quarter, you and across which in for the first all

prior Constant growth quarter. Let the In revenue me period. of saw for a to of growth revenue the compared first by summarizing strong quarter, XX.X%. XX% year was begin few highlights the currency we the

faster in Our up for execution, attrition strong representing revenue impact shared and of and compared I March is higher demand EBITDA the million, was Omicron, primarily lower-than-expected ramp of currency quarter. growth to constant a growth including XXXX. the X.X% to guidance clients, is This lower-than-expected new Adjusted for a quarter the in year-on-year $XX XX.X%. due from

of compared quarter. consistent, adjusted range was I when last has to the higher points to XXX due mainly to the EBITDA improvements foreign XX.X%, guided March. gross the exchange offset midpoint the Adjusted during to basis effects year, compared remained EBITDA adjusted Our margin, by margin in in impacts of margin, of

share Now details. let some me

the brand, to our currency employee. revenue evidenced revenue first is for quarter, average by XX.X% Thoughtworks constant high was and a growth Turning year-on-year basis. premium on a revenue, XX%, per

XX.X%, diversified with $XX in momentum their the bookings period of year. overall year-on-year clients by we the We we Europe bookings industry trailing period, compared months XX-month in XX.X%, verticals. with verticals quarter XX.X%, have XX.X%. see XX America XXXX, LATAM to by increased XX all a first by and transformations grew across a to And clients million, accelerate strong by XX.X% trailing to and than and greater Over across saw the XX geographies. digital APAC our same Thoughtworks. last billion. had In North We business continued at clients geographies $X.X

growing services, verticals industry The to in growth quarter. see financial at was good our We strongest also XX.X%. continued during growth the across

and XXXX, our $XX TTM quarter with Our increase pleased retail grew TTM existing the clients. than clients from by and XX.X% grew the XX.X% energy, at came perform XX.X%, around of our XX.X%. have with year. at and health services of XX%. of transport from business we on end public, continued very than now at first business vertical quarter, time XX a and consumer to clients. greater At grew a are from We more the basis, existing and million, growth revenues travel, same XX.X%. grew automotive, last Technology the and well, eight

statement. income Moving down the

improvement XX.X%, quarter, the first was a For points compared adjusted gross to XX-basis XXXX. quarter margin

the primarily liquidity. $X.XX, was XXXX. compared free first quarter increase earnings per positively compared impacted by operating compared SG&A positive quarter, Adjusted prior flow to to our On million, higher was this primarily due quarter, quarter, good other due quarter, impact the customer quarter and an to $XX premium year. margin the offset cash offset adjusted as stock $XX.X percentage of to diluted was lower in diluted of SG&A. bill our Adjusted areas due first flow performance the increased adjusted XX.X% was Our $X.XX to consistent prepayments XX.X%, a with was GAAP an leverage cash share revenue, compensation our increased with we loss million solid year first with consistent basis, by prior free a charges. $XX.X the payouts adjusted quarter for EBITDA XXXX. costs to margin services, a In by share continue utilization. annual in quarter. gross compensation The was non-cash the $X.XX, by rate partially per adjusted And was XX.X%, programs was first million of profitability, last quarter first for have QX. operating of the as of of operating company, in Negative the offset driven public year and EBITDA to by

XXXX. $XXX balance approximately to X, million, Further, $XXX at March March balance Our as debt compared million X, was cash at was XXXX. of XX, million $XXX XXXX, our March

back updates hand to like to Xiao would additional I business quarter. from to our the Now, first share on

Guo Xiao

Erin. Thanks,

Let of and Australian proud workplaces. now in technology cited the for diversity in XXth our our gender for ranks Management has of study. From and LGBTQ+ to X% We've awards how again with has share develop that inclusive focus amazing women better increasing In winning equip been leadership XX.X% in Australian the me Gender Awards Workplace been the the at a inclusivity culture, agency. in cultures in systems. and for Institute inclusion Thoughtworks for grown I'm embedded Thought gender Business Thought XXXX, including We've March, Harvard case Bangalore, this and by the are sector. Equality government leaders XX,XXX, Agency, of returnee on participation Workers programs. we recognized subject categories, and developed been case statutory is underrepresented the to Thoughtworks year recognized pleased number now a and women work development Workers India study on is an the This of start our future We're work Diversity diversity our the of in inclusion. in to top also of inclusion women been of seven the minorities, the diversity workplace. equality now community, a Thought long-term enable inception, won values women to Workers. over India quarter, to WGM. with have community our to and and The promoting

to Our the proud attract Thoughtworks first applicants strong quarter. engine. I'm XX,XXX employer very best brand had continues our in during recruiting the talent of world. the to We over

a hires Thoughtworks third to of sourcing, see referrals, coming a We and a inbounds. from from continue our third third from around

very advancing me demand an people share let update fast, is like capability in our talent on data cloud. and Now, and areas Technology for high with initiatives. top

School Workers Thought Accelerator, track share is Our additional now partner Workers on that for an to scale accelerator Thought being technologies to students in support data of Data a designed the London online XXXX. is Thoughtworks X,XXX the well. We're values. and and progressing new program pleased backgrounds situations Political Analytics projects company, developed around Science, by education train Careers to will during that develop months The holistic the program industry train an will now different Thoughtworks’ provide train Thoughtworks Economics to also six data cloud, real-world and I'm to approaches skills. FourthRev. and simulate from

for grow place and talented is be a to Thoughtworks to priority Our have for impact. technologies

our and Our which known early rating technology industry, the is, sector X.XX. of brand of our thought first the the global that's from company. measure for the reputation as and who we're higher In X.XX, days our Glassdoor than overall a progress how a the built is quarter, services our revolutionized again, We're rating leaders making. was rating as we IT

unique NEO, share can software is vision industry techniques, Standards our and this in these recognized and around a from XX% portal. are leadership supply-chain to by address in-house guidance hundreds And just clients me their teams. Technology securing the facto as is XXXX efficiency, but like interest XXth concept written Thoughtworks NEO the on understands leadership market. Data new chain. is the create self-service to more It focus now we Data With knowledge for successful. on March, effectiveness a luminary, innovation digital the our the The the critical standard to edition We're it the that Mesh, a where is latest environment frameworks, levels our Mesh. consume software SLSA, and sandbox, software Thoughtworks modern cloud that Many our that and Thoughtworks culture. controls through we available. help In in a to of Data-Driven of entries special robust thought the of around in that pragmatic de I'd Value in It environments. a real Data XXX tools, highly testing, the well transformations engaged the platforms, and Technology is lot a improving languages, architecture our for out of edition some much-anticipated And by there the now data. NEO as organizations potential the as I'm engineering developer Radar, by being unlock that within principles enterprise tools systems data One issues. engineering have the are effectively published valuable is Radar finally, share for been security teams explore recent Thoughtworks’ data production, that sharing of of behind developers data. to on first coined delighted a seeing treated very product, and an Mesh applies is engagements. on Thoughtworks insights be industry. provides in Let such something Mesh, XXXX, in owned edition supply by to is Thoughtworks at update Delivering demonstrating client Data on impact Scale, Awards latest artifacts, of can developer is domain luminary published, on book, books based than winner time just a received Radar. aspect as of cultivating to authorship has XX%. use operational CIO where lays

back Now, let to me hand Erin.

Erin Cummins

areas would focus update on Thanks, within you our like ESG priorities. Xiao. I to some of

me with approach environment. our the Let start to

areas two focus. of We have

strategy. reduction First, our own carbon

the We greenhouse in have gas Science-Based targets Initiative. reduce our Targets with emissions, ambitious to line

by and employee, Scope Scope reduce emissions per GHG from XXXX, XX% and reduce by a to expect by emissions baseline, X Scope XX% XXXX. X XXXX by We also GHG X

we electricity Additionally, increase of our to expect renewable XXX% sourcing to by XXXX.

Our Targets with Initiative the validation. are currently Science-Based for targets

technology industry reduce Second, we our their carbon are committed footprint. to the helping clients and

able HolaLuz footprint whose energy One is mission Let with reduction Optimizer work technology doing carbon a energy. using me by X% we closely HolaLuz a the carbon green in act in been tool built, green Working footprint and company, Compute monitor outcome is with infrastructure enable AWS now leveraging some XXX% have example Thoughtworks, cloud open-source Service. an of cloud has costs. to a share planet the fast. that to HolaLuz, been is powered Thoughtworks that its its Spain

the goals. Development these within Sustainable am strongly social social Digital proud projects Goods ESG and an to deeply to Workers change official the transformational Alliance. strategy, the help now continue Goods Nations Thoughtworks open-source, moving our in is United Now, culture Public to of share supports member that our Goals. I are is business do Thought world. impact around and ingrained Public our social achieve Digital Thoughtworks

a for For provide an using healthcare to in policymakers right. insights simulation populations. public example, open-source, Ashoka disease is experts calibrate and we Gates to and agent-based is Collaboration developed BharatSim human health modeling believe The formulate policies. BharatSim and BharatSim with Foundation. that Thoughtworks to University health has framework synthetic aims

turn business Now, to let outlook. me our

robust. remains pipeline Our

second expect in year-on-year quarter $XXX basis. the a currency the of $XXX reflecting constant of range at million, the XXXX, growth to midpoint XX.X%, or to we XX.X% For be revenues million of on

acquisitions approximately will expect revenues. to reported contribute We X%

that be is the with for in in We plan, our XX% adjusted and nature, larger annual quarter operating including XX.X%. our pay the rises EBITDA This some of line of margin the range are second expect the impact to seasonal impact to of of in in costs reflects countries.

we $XXX weighted in to count outstanding. shares earnings adjusted the range approximately expect a share per $X.XX, diluted second of be of diluted to the average million $X.XX quarter, share For assuming

currency to XX.X% XX.X% the in we year-on-year range growth on expect XXXX, year revenue full be constant a of basis. the For to

basis approximately to impact currency X%. which a XX.X%, XX.X% revenue a of reported translation growth range in of expect includes on negative We foreign the

reported approximately to acquisitions will We X% contribute revenues. expect

full For XX% XXXX EBITDA margin, be adjusted to we XX%. expect to year

We assuming share $X.XX weighted shares to of expect $X.XX, for average per in adjusted outstanding. of year full a share million be count $XXX range diluted XXXX diluted earnings to the approximately

For environment support XXXX, and demand we believe to brand will our continue is the ambitions. that strong, our growth employee

Sean. back to hand me let Now,

Unidentified Company Representative

Erin. Thanks,

to You many the for on you provide you our possible can move ask each instructions ask and to the find Operator, a allow investor would Investor We on on to that question Thoughtworks I as now keep as those to of Q&A. presentation participants would website. follow-up Relations question. call? a please one

Operator

[Operator instructions].

Our line Huang Tien-Tsin first of comes question from JPMorgan. the from

is now line open. Your

Tien-Tsin Huang

so Really Clearly, quarter gross wanted I about to or don't strong you here. ask quarter. mind. if margin, nice was gross the much. Thank really margin, in you overall margin the

So, just imply here, some about sequentially. margin wanted to step-down ask your outlook

understand perhaps? driving know So, there conservatism, Any utilization be just going better would that. Is what's want on seasonality. there's great. there with some some to I something color

Erin Cummins

Tien-Tsin. Thanks, with and that margins. start I'll

out, and drive it our and a for geographies a what We we pointed We guide strong you my performed than the really strong broad-based board well heart at number that. We across across sectors. a reflected. reasons QX As in growth margin had quarter. higher first the execution. There's saw of of was did

able ramp first attrition The up supported we engagements first was to quarter. certain is, expected. the were for than lower-than-expected more This by quickly we

benefit of margin And our with We overall engagements. had we impact billing from a then and EBITDA were expecting gross milestone also Omicron respect fixed some lower price the in some the than had to quarter. of adjusted which margin affected we

QX. I that lot quarter. there of add in the first a bad to that QX, was a SG&A there margin would debt also in working piece respect was in our and with is The overall, that quarter. final positive It was benefited recovery So, strong

at two We've margins. year that, approximately a QX QX, is were strong saw point. last seasonality, mentioned QX. if seasonality of before, you summarize within points that And quarterly is close We key profile. performance, to the Tien-Tsin, that going to just So, then, specific there's three discussed which to our was I margin looking there uplift in QX at

QX approximately I QX that are three to points items are to if seasonalities play to two year. describe that And there's seasonality so, or at impact specific this related of about of again, margin would items think we that

pay rises. is First

that's events associated schedules. in QX, annual because also countries time quarter public the We QX. and taking is actually, impact comments. several is in higher prepared a mentioned I pay have that Compared quarter, to level a which with happening when pay are really that for in given. of the of second have great rises to there's that, long The leave a in expected these addition the holiday rises my And first in-person time. always lot place in are or there's the demand vacation the in marketing highest several in the events rise

something in us would with have margin the which the we would just So, a if we using for just year, margin it’s well. out, of us at the look guidance midpoint first strong for the celebrate. line under to general, that and course, profile, definitely as In I our very year put the point for half XX%, is of of the guidance

QX, in And very is a which comparability, were in as the affecting plan line we first strong with but second definitely and all, a is expecting, quarter. quarter seasonality also importantly, all factor. transition the feeling QX then is good QX So, really the about just to

Tien-Tsin Huang

thank you, No, complete that. appreciate I very answer. Erin. Good. It's

or in you Connected how here? it and Canada-based, standpoint, follow-up, that I Thoughtworks to special so heard just employees. unique quick growth. you trying incremental might Just platform, about to or my bring here layer acquisition for the if that XXX think unique on in Xiao, Thanks. that's So, on an some amplification Anything maybe the think bring from

Guo Xiao

Sure. Hi, Tien-Tsin.

product actually So, product Connected in about about own new methodology unique known has methodology, development that's its It area services. development. well is an

expertise across are We cycle. excited able really developed entire to them with the They very together. life being about product deep some work have

around the North very just strategy, Majority US. as product well area based customers have this product we customer demand America. Connected design, design from development, it's is engineering. research, and specifically It's So, in strong as also in product then, engineering. experience, of in not seen world, the And but

like footprint. XXX in lot people - of talent us US mentioned, Canada. in a synergy pool our chance it’s great a got, with a gives Canada. has It further our Also, big to you scale it So,

generally we're Hope So, your answers question. very Connected. excited that about

Tien-Tsin Huang

All good. good. guys. Thank does. Very you, It

Operator

Thank you.

Our next comes Ashwin from Citi. the question of Shirvaikar from line

Your line open. is now

Ashwin Shirvaikar

and you, really me the congratulations solid well on Thank for quarter. as

at the the look really putting maybe for that or only look acquisition. kind of some countervailing in there offsets just XQ? I it we as impact As Are cadence sort outlook you you particularly could seems you're the the a provided, that but rev factors year, that that talk should consider, seasonality though that full about of it, perhaps broadly for if would be great. of

Guo Xiao

Sure. Hi, Ashwin.

our as just Erin earlier, a a little for impacted So, mentioned some a perspective, on then bit revenue guidance impact there's and QX, of as even definitely from utilization. seasonality, well by COVID is

So, drop bit public seeing a in taking lockdown in spring during a Easter, last the more then, more also just news. countries. COVID we're year, it's of seen around current holidays, China, - utilization in the now compared we're seeing of we And people the uplifted people that as to due and there's in with not holidays most the constraints have

year So, of mentioned, impacting, QX looks full the of for compared at seasonality the it there's where It’s looks. what a Ashwin, - definitely year, to forecast, on-plan. expect exactly be QX us, very a we strong. you to as bit it’s the the but But that's revenue how beginning

X.X than year QX guidance. points I the by just the raise In it fact, guidance, our think acquisition, not would about would full I raise

the this And from of from strong we of growth. half So, that point. that, organic come see acquisition, just half bookings other half at about pretty

have bookings. it's months. the clients XX think about billion more about also $X.X I trailing XX we $XX And with million then in than

for robust of well the as year. the So, rest pretty pipeline

positive and full still So, strong about very year. feel the

Ashwin Shirvaikar

underlying the for you there. thank No, Right. details

relatively like and a versus things pricing question, offsets when discussion the appropriate offset inflation? this you that the can is for Could it mean, timing and that you that, - investors, frequent you get is or for pricing topic problem just I nature of point of of Thoughtworks’ inflation broad increases should command, premium should wage that other the wage not of The with we getting offset wage be of that. you the given business, to just assume levels a and

Guo Xiao

in proposition Yes. I even is higher The talent to competition pricing problem Data would I the mentioned command premium Thoughtworks do us countries. value-add does adding we value And up the say for drive that environment, this for driving this Mesh, pricing. allow wages mostly structure services that a across not for us in earlier, to premium higher it's then allow on we rate services our innovation, the average. through and and by example, offer the

We rate, single-digit certain to terms is that offshore also the regions price then offset just bidding months. increases rate. XX high And last by moving over work the only have had in average a offset lower to where inflation, charging extent the by wage of but it's offshore regions were at a

last the keep us. distribution revenue QX because inflation, a then in then the XXXX, for our helps And wage to long year, remains run. of and gross well, at the that as together, really that offshore us and for to that per similar manage us just all put you employee level So, sustainable margin help then

Ashwin Shirvaikar

that for wish best. Thank the you it. and all you Got

Operator

Thank you.

question the from Maggie from next Nolan Blair. William line comes Our of

Your line is now open.

Maggie Nolan

last bit that Thank you. that you? could for just talk on question, may inflation geography and vary can more attrition I and delivery If you a by build also explicitly wage little about how

Erin Cummins

that's wage add a in. so than last that by for has as the Xiao and pretty wage across would start. say been your you can question, geographies. or what have consistent inflation generally experienced, year differs definitely out of is Maggie, the I What Maggie. country. points so, it higher couple by Thanks, inflation, historically I'll point we

or India countries historically As or as we consistent. in would in And the see are is US, we UK higher such expect, pattern that the again, levels than Brazil what Germany. say

that. Xiao mitigate talked whole, ways the the has to been able On about we've

not affected our it So, has margins.

with The clients. definitely price first our increases driving is

piece efficiencies other that across operational just that as looking as work are leverage, countries. and of to is delivering we improvements The able really how we're looking well at drive,

period, inflationary good we've manage all, to been we With really higher well that. to trends do in quarter. the margins this attrition continue about have respect our and been all this to ability attrition, our So, able feel good to through for

we've demand So, a strong, there's as remains talent. competitive definitely seen. environment That for talent

that ended compare trailing If around we think reduction XXXX, was around is where So, attrition reflection talent. for XX%. QX XXXX, around we of we attrition higher. we to points couple positively, the And if strong last that - It's competitive of XX%. XX% where of this trailing a QX of year, XXXX. do it our around is environment a that compare XX-month to But right is XX, for was from XX-month a

seen in we've trends positive some attrition. So,

and to talent our continue we in We invest and attrition programs, retention at levels. see staying similar to expect our

Maggie Nolan

you the the value Thanks great perform weaker and of would in is Erin. much, little drawing how what perhaps may terms can talk performs the about bit proposition economic the so a environment, and margins company revenue how recession And on different be in then, company during a today? structured how maybe

Guo Xiao

add. feel I start. can free to Erin,

invest, our continue - weaker discretionary prove to be clients opportunity careful trying years So, us always their economic potential during of with And then digital to and key the to especially way to most with more digital down focus with, focus working on the relationships spending. taken times - tend have of strategic to But spending. working higher pattern, clients want been this that over services economic generally, technology, most of more a have have in we we customers, ones downturn. be to downturn be their with on initiatives. the their in the a with been double reduce see to firms environment, the They best doing cashflow, for relevant one has stronger with of hard with strategic value-add them we've assets. to tends remain on and what been probably to seen work building key And so long-term the a

value it So, XXXX our have environment. previous our definitely in comfortable we economic when we're - feel We that to definitely XXXX. proposition, recessions comes to doing from weaker the about done a approach

Erin Cummins

two to I or And add points just would that. one

explained Xiao think I it well.

that's us last great One over in Maggie, our qualify We've engine, your years to building not which Thoughtworks. is different that we the not how the recession. sales only of is recession about during demand did have and different last definitely we Just the terms capability. at but few inbound outbound question, clients, lot a what clients for improving outbound invested about also thing versus

positive. And And historically been it do as impact a slightly strength from we a does from recessionary business we've it's is, seen margin today. we've or seen so, of see perspective, while from what growth, a margin general, point of view, our a that then margin neutral perspective, in margin topline what

Maggie Nolan

congrats for and the Thanks quarter. a information, on all great

Operator

you. Thank

Sachs. Our question line Essex the from of Brian Goldman next comes from

line is now Your open.

Charlotte Bedick

public is company This Hi. from for Congrats of going now, your of pipeline your Thanks. guess a your I quarter. couple Charlotte you you status? about public Brian. on a on could you seen a forward? for have the pipeline benefit company been talk that now great have breadth And quarters

Guo Xiao

Hi, Charlotte. Yes, we can talk that. certainly about

pipeline The over our the remained last across mentioned, a seen XX% months. That's verticals the Like very about over first robust we growth is then, and - the has of quarter, pipeline than TTM. steady the billion pipeline certainly higher same $X.X the of very previous the I time And geographies. strong. last So, booking last XX year. strengths, all, have

us We being company as of definitely in seen see side a public There's have being more There's From on has the last we working wouldn't the pipeline last public the the perspective, innovations. leads. in of benefits terms I've After both wouldn't a the company, say that on supply a our the from changed more of side. majority - and referenced I recognition on significantly because inbound but company of more. from - more this during leadership, quoting the XX brand a technical been comes there's demand brand strengths the definitely being brand the thought say I conversations, recognition, the public years.

company in has leads us. status the the and for The but public shift to nice community, not So, inbound it's technical where brand have, the that's been recognition sure, strong, is it's for - paradigm significant comes a majority always from. of

to a broadly. with recruiting ability it to the compensation, with the with for the ability more especially On side a definitely That known supply as public side, lot, helps as now example, provide helps company, stock-based well. the be

So, I the that hope question. helps with

Charlotte Bedick

your much so for time. Thank Definitely. Very helpful. you

Operator

you. Thank

of next Our question the Research. Wolfe from comes line Darrin from Peller

now open. Your line is

Darrin Peller

the change whether per environment, then begin revenue a guys. you that. the to head has Number you with. seen wage environment that higher environment a obviously on the caused second is, and very part you're charge - labor environment geopolitical tighter questions have anything be, on but would market tend handling And couple labor. Thanks, to of Look, well, of one in the

term? terms through about sustain is next to passing So, in inflation, the need there wage that medium we of the over anything this ability to worry

Guo Xiao

Thank you, Darrin.

So, I'll geo the labor. on start with impact

have little Europe we Belarus in very, or exposure - Ukraine Russia. first very exposure or We Eastern and have in no of all,

really from hasn’t our pipeline perspective. it a impacted supply So,

a is more some from what have then, have before. in impact. certainly asking bit Europe. talent our Europe clients have been of Latin pool very of our higher their to America. a fits recruiting people diversified Indian, that a we America, has the diversify work around in used - other definitely some strength. to than to perspective, continents, created to world, to has We pivot a Latin we seen see Asia, a from capacity And Eastern seen, India, big We they done in haven't for demand that But This from

of we to technical as side, because earlier, pipeline. people mentioned lot Erin similar inbound. strong have of As And we a the continue the a have to attract recruiting brand, demand - then

build from people internally, come hire hard third the we sourcing have referrals. a very of and referral to Almost been We capability program. we the working have very strong a

on about seen on value-based, actually rather the we do pricing. then strongly value-based our impact mean, haven't wage And we than feel the we pricing, more pricing much our So, tension. side We the cost-based increase really outcome-based pricing. overall, to supply do - inflation, how to on geopolitical side, I continue from ability

to And maintain a rate. the charge we're we us higher value, we able to to, that continue have gross So, margin to comfortable be we will continue and adding been by add feel a changes. as price new innovate, allow as that long that's why think I

wiggle sometimes inflation. next few years. lot is in wage we increase us room year-on-year, single-digit least allows the of leeway high at comfortable That the sustainable price to for a manage and digit, that single - So, feel us, give

Darrin Peller

That's right. to All great hear.

by since the now? the Just and follow-up demand would or in then and you're on since short one I mean, mean, quick side. to quarters be doing you even I something demand is the been is very most have it there differentiating there seeing you've change still any where public? time more, more go the that that's is guys since, broad-based gone come

Guo Xiao

from from strong cloud. we the broad-based be highlights. Sure. coming with the and It's we would service see - continue and because on definitely broad-based, think directions. all be offerings highlight across verticals, Highlights would geography It's demand but service the also modernization some all platform enterprise line, to

We not have continue architecture systems, modernize demand more the digital they time. cloud, as down, into the customer-facing more just them them digging After fruit, and to modernize their hanging increasing of to same companies applications, deeper but the legacy the for to double the many see that that transformation. also moving realize low

vertical from from demand perspective, And So, and are highlights. financial we're also area. that even coming a the retail services higher definitely seeing

both the cryptocurrency. been there's services, the with neobank, have to areas, the of and in fintech landscape. a We disrupt financial continue lot investing The then also

a new as well of and has surge the been recovering retail fintech working strong bigger the online we're digital So, with pretty from well as the scaleups sector. the both channels, shopping, the come benefiting post-COVID and and customers banks, also the growth of post-COVID. in lot That's incumbents, from, where

those that broad-based coming well. And of demand growth but So, we're that are the seeing nature also highlights, I as strong then from think the hasn't changed.

Darrin Peller

lot, a Thanks All right. guys.

Operator

you. Thank

line now Dan, question Dan from Perlin open. RBC the Capital your line is of Markets. comes from Our next

Dan Perlin

Thanks. add me at macro wanted ask rest just just let here. I Good the and level. around the uncertainty strong in my a of visibility clear Really congratulations There's question to embedded as well. morning, for results a guidance year.

is utilization specifically, thinking about talked so You China lockdown. rates coming existing around or growth from I you And said thought clients. XX% kind of here some of I'm

just what So, maybe, and cohort current of environment, confidence outline some I you the that factors so of much then can the the you is in the are think that other remainder year? in how growing, give

Guo Xiao

Sure.

is our So, client consistent And XX% about this that of Normally, would then of this growth cohort the time. what business. have remains of long-running the relationship customers, in half generate existing the seen we quarter. existing pattern pretty growth over

mentioned XX more more top XX, TTM million the And them that, a especially especially a relationships, seen top we've way. very than earlier, $XX have XX in long-term building more bookings clients than XX then growing our on with $XX revenue. focusing as been billings of I have dollar We than top And revenue robust clients. XX have - have million that's well. about of then

years. XX So, clients. become clients we of we more over top expect more of million the And this the plus $XX relationship continue to also expect

visibility. logos existing continuing. is quarter. momentum been lot new been the new time. quarter, contracted And has previous are we this for Also, gives on the in We of So, focusing that's logos. XX of us the think with a we've kind something a feeling of customers, XX growing I That pattern new long customers, we contracted

to logos continue and we up, to before, So, as continue we have relationships. develop ramp most - to will of these seen new as

So, year. foundation to we’ll the of that's us this that will rest continue another build revenue give the for

all of for the adds the So, XX ahead that previous seen have to also, continue billion $X.X up to total of last through what see months. trend And the we rest this year the we years. billion way the pipeline of

our there's diversified sure, our is in including regional North different is demand in pipeline because highly some concerns world, Although economies the America - about revenue - across Europe, is APAC. but economies the economic the - parts of some for that world, also

regional any the geography mitigate So, risk to slowdowns. that we of the diversification gives that any have economic - of us some broad confidence

that hope the address helps I So, to question.

Dan Perlin

were Yes, as free cashflow, about the I the of sounds think to remainder called lower that's we think Thank was for that I customer Are know great. the is, compensation quarter, like year? it - you. some out you think call then My dynamics negative cadence follow-up it there you we in the improving as throughout there about any prepayments and the quick out programs. that want

Erin Cummins

Dan. Thanks,

You’ve out elements. pointed the key

at by quarter, definitely revenue Overall, our DSO QX. of to in particularly we line target. the impacted overall we of growth up was cashflow with what line strong AR or and look we that unbilled our that free would our with had, in what the it's ramp QX for we So, and and percentage in right if end revenues expect

free respect terms in there's see compensation first to QX. particularly because cadence we significant annual of seasonality with is of So, of out a Where to again, that bit cashflow the nothing point beyond do program. in quarter,

prepayment had year, evident that because it deferred we client the - we As last client revenue significant QX. to that in less or was compare

that. nothing to So, add more than

and whole, accounts our the receivable, are On expect. our client invoices we payments as behaving would

Dan Perlin

That's you. great. Thank

Operator

Thank you.

the Bergin line question next of comes Bryan from Our Cowen. from

line Your is open. now

Bryan Bergin

of a hiring or you mentioned Hey, on was Good reference and within talent. existing comfort I quarterly can X,XXX stand are afternoon. that more base? bit levels that think professionals in potential? new you the the Can you're and new a little morning. retain maybe your that you. Hoping to headcount track around Thank additional where dig Was a talk something pace good an around about net XXXX. And to you professionals in or the add joining,

Erin Cummins

Brian. with Xiao can Hi, I'll start your and question, add in.

I'll last about strong around to retain feeling develop, we with question doing. as in are our that just very start the as we're training talent. our So, talent, well our general, ability your

demand strong We very data are seeing in infrastructure. and cloud

So, need. of a started that have to are address new. we the some professionals, training And client program X,XXX them

are Workers. them Thought of existing Some

training programs will be are is employee we hires, lot of it generally. population available some to our a So, making new but that

really in to are with rates higher that see of So, in it then of XXXX. we we really just We QX. to hiring Workers. capable done not And that excited talent incoming at have in challenged Thought across bringing and of that year we strong is historically, ourselves We're pace have about expect and talent, skills see the technical than for we saw proved respect programs. continue a XXXX, we'll to skillset ourselves development board, the those new last

recall our terms to and our with talent. year, you'll out we we look of also very across about to But be probably excited tends program our highest proposition. do have hires. talent on programs about these in whole, the That clients. of timing to strong feeling university the the it QX to from new hires We're As our the invest means has number that of comments, in continue we talent. what and our We're and prior graduate

So, definitely for strength. us, it's area a of continued

Bryan Bergin

your about your And organic Okay. inorganic and talk both pursue here. on plans you’d Can Vietnam expansion development you follow-up we my then means? there? should this just Is something expect

Guo Xiao

very to looking attract as both, mostly and have feel definitely We organic growth. starting top We're we Sure. comfortable at but at the a looking with point, brand digital our ability we're talent.

into We delivery have to opportunities seen diversify and strong We well. demand wants at look further as organic who Singapore did from Vietnam. customers their centers Australia coming

premium and a that who America find perspective, a good from them - from space. we but is generally fit anyone seen in the It's offshore. smaller and Europe, far, premium occupy culture North haven't less on to harder easier fit in companies perspective. to It's find a value offshore in so the proposition region especially onshore side, the premium So nearshore premium

taken We'll good inorganic an have continue if at we help So, organic find us we approach. scale. candidates to to look

Bryan Bergin

Thank great. you. All right,

Operator

instructions]. [Operator

Our next comes line Koning the Baird. from question from of David

now Your open. line is

David Koning

XX was at just my guess top first clients. I filing you Yes. the looking Hey, guys, great And job. question, gave and I

third gave But non-top I XX revenue you what's about growing first clients, a we have that. the XX%. time of is, think might interesting been look it's if that at

up, keep that XX just wondering, high could at grow the hit such XXs to growth. still a you clients can those to all, XX and pace? hypergrowth have you'd wouldn't And you non-top top continue at grow maybe If

Guo Xiao

relationships, well smaller starting more of continue from to and portfolio. But as We than definitely us higher we are it to see size percentage. a the the logos the build clients XX increase of of just top the their because then growth, allow to top who the revenue we long-term tends It's new term sustained longer question. steadily given the definitely rest with as the number a great portfolio, the on XX will rely higher the point, growth get ones because of acquire,

the on to going - portfolio in there operation With is non-top I long rely and our if in be too too the think our will much fluctuation XX, we business just fragment much the run.

on years to of as we on on So, clients, have previous choice the been have more we opposed logos that's terms smaller few we a made just so the and seen it's rely focus of new the but we on in down, to which larger what years, we last in intentionally something growth. based double focusing could, that XX clients, pattern

David Koning

kind one then stock you thing that just do And of non-recurring know Thanks. I year you do expect maybe how how in QX, that one expect the and had go comp, on big but through to Gotcha. a - longer - term?

Erin Cummins

Yes, Dave.

saw was stock-based approval As you the of that last quarter, in million I compensation that about $XXX first and point, and $XX to related impacted China our quarter. in out million. briefly Part of expense talked of QX $XXX was the the million was that we SAFe,

to elevated remain related the and that to down, Our million. approximately do the be with start through next as it timing time rest will think stock vesting has is of the on, $XX as And to RSUs into as estimated It'll the goes really year. well we QX a little about mechanics then, of to IPO. bit come the but the year, as for this compensation

won't And go until next cycle through full year. so, that

David Koning

All right. Thank you.

Operator

you. Thank

Our comes Wedbush from line Securities. Khatri from of Moshe the question next

is open. line now Your

Moshe Khatri

Erin, reasons didn't during one of why but recruiting. a And and talk utilization as margins can maybe I'm results, calendar assuming add able kind have headcount let addition of that function planned this that's were you the I’m Do sequentially. congrats for rates morning. and of the me thanks. Maybe year? terms And again, look in follow-up, gross about questions. the number attrition down fact Hey, this you assuming, great, you then, housekeeping a maybe And rates quarter? on my of hiring Good some any is that very Thanks. bring strong to

Erin Cummins

Sure.

the I about versus the about We've QX already Xiao see that point. and we I talked seasonality with QX. So, utilization - talked start will

So, utilization reflect reason QX operating plan some the impact to from and a QX. would of about, seeing holiday not but margins lockdowns be to the little is significant, that and the because It's talked does already definitely down. impact our we as well than period more will quarterly of that a the QX as The for certainly Omicron does we're that in China. QX That make the difference seasonality. bit it

already In hiring terms not of what there's the more add much numbers. talked to than about. we

did record We a number hires have We to expect strong last hires. year. of

people to strong demand. hiring of the expect give We'll same in throughout is, The QX, along in XXX where expected you to XXXX to year. QX. around is to added hiring with And the strong graduates. do that see in to sense our support be biggest We the we a continue

Moshe Khatri

Thanks.

any in your FX year did for guidance? the reminder, Just a you mention headwinds

Erin Cummins

There Moshe. mention. around to little year. say. an in also for for XXX was Thanks that. our initial affect thing I growth did the basis year, knew but an if the FX there guidance We of does should last a quarter QX. from FX that guidance this whole to to bit little bit good not, that That be embedded and a is we the for was is compare estimated from to points, a quarter. I already FX then, And that the headwind, that's of transition headwinds also QX going the there's headwind on on

Moshe Khatri

a Thanks Excellent. lot.

Operator

no over Xiao the call for remarks. Guo I would back I'm Thank you. showing At time, questions. further this like to to turn closing

Guo Xiao

to our acknowledge to everyone, all our want and would support for closing, thank clients, the us I and continued day would partners the joining of thank we're I you, every like in our impact shareholders. to And delivering workers, just I today. for board together. like extraordinary

to and up next quarter. So, forward then with catch stay well, we look you

Operator

This call. Thank participating. conference concludes for you today's

You may now disconnect.

Thoughtworks Holding (TWKS) 9 May 222022 Q1 Earnings call transcript