TWKS - Earnings call transcript Q2 2022 | Thoughtworks Holding, Inc.

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Operator

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

We will be recording today's call. [Operator Instructions].

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 also available on our Investor Relations page at thoughtworks.com if you want to review or download a copy.

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

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

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

Guo Xiao

would Call. conferences meet our our and to was in We I you had our business take then through in highlights open like investor update to round Q&A. we overall of Thank you, on first to guidance provides start Sean, I sharing share and more everyone, quarter will detail. of person. by good Second it will Erin our in business, Erin June, results and then of many Quarter welcome, second some the for you an Earnings and financial before

me We to global technology Let innovation. and design We're with consultancy technology enable digital and Thoughtworks. that as strategy, to enterprises about engineering modern drive digital disruptors recap start integrates thrive businesses. a a

XX.X the achieved me unique growth XX.X% of the of let XX.X% the to of year-on-year services. turn report fostering for our results USD a the we growth USD pleased reflecting demand has XXXX. quarter thought to our In second strong established EBITDA leadership driven XXXX, quarter, Now and reputation and million, of second compared XX.X% and cultivating for We a in the adjusted constant to I'm financials. quarter reflecting of currency. second million delivered quarter continued in transformation Thoughtworks XXX culture. digital revenue in by

modern applications continues global help business XXXX best can outcomes. application in and and recognized transformation, track industry. In and the what Application the Modern to in their diverse Thoughtworks culture for build we talent digital enhance development Forrester speed development a Our leader retain believe as Wave. companies delivering services to be Development custom Modern products, the July, value

this and the technology as to and differentiator. around business geographies, would strong the I Some retain to for our were quarter, key XX,XXX X through and of is ahead and across diversified talent. we what's look end world culture. coming a industries by impact they we Forrester our Thoughtworker thank strengths excellence create strong continents. like across as Thoughtworks The second vision over our every and Thoughtworkers ability extraordinary to help the see to attract and include ability of the Thoughtworks our cited clients next as to top benefit At well

We demand. to see continue strong

even help According CFOs plan if to innovation of of in digital to to XX% Gartner looking XXX XXXX, increase in CFOs to digital a still or years. next leaders senior businesses, are inflation May and thrive persists. financial modern maintain clients Our enterprise-wide X them the survey investments as digital

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

share me Let examples. some

demand services, be services continue expertise from seeing clients to for with Demand operations. our in new see especially strong services products data digital demand high We around elevated to platforms friction Thoughtworks' customer-facing together. According We customer and and reimagining mesh. modernization enterprise in to spent We're help and data, name satisfaction continue a XX% software security We're AI only self-service and clients access to remove experience, enhancing bring clients data and interest API for higher also developer to through developer's excited to see around around time improve infrastructure, platforms. and cloud our few. to events developer a of Spotify, services, experience is code. XX% client interest from productivity writing

For that in we is these reasons, positioned well market. believe the Thoughtworks

from growth is partners growth relationships existing strategies. supplement core, and the then our focused M&A, with new of We details around our the strategies geographic expansion. share clients me At let deepening logos. winning this and with Now revenue

continued has and Turning consultancy innovation welcome than America. to our our undertaking XXXX would strategy for growing acquisitions. like more digital on business, of with supporting strategic a acquisition both M&A... delighted Thoughtworks and have services, targeted from to products they in Handmade Brazil. impact looking our in the will first to CX Handmade, and Latin and design and In employees in Handmade accelerating I in I'm family. to our clients. forward business XX and North to the the I'm America specializing is announce value second design of second with quarter, we their our strategy product

strategy. Now to let partners a turn me as growth

providers. focus go-to-market with hyperscale partnerships is developing primary the cloud Our

company with XXXX, update let you the AWS in Premier tier became Science. in of to Gilead medicine and people. a at highest Partner. of Sciences all pleased ability of that clients expertise technical Thoughtworks working me AWS with an technologies AWS at a AWS. I'm underscores AWS This with the creating goal our deep X% First, less vision of journey. Gilead Thoughtworks' biopharmaceutical breakthroughs cloud for a Web evolve has to working the support Gilead is cloud Thoughtworks culture Amazon this ambitious Services number on adoption of achieve client, are healthier the scale. This to that with their Services, with than world a achieved and partnering second our a status. and quarter Sciences has Gilead large greater mesh partnership success at data-driven share to demonstrate including innovation, drive AWS partners Amazon is recognition to of and data scale. more We're

share to client our of expertise means capabilities their of breadth our The from portfolio. me some Now that on we clients details outcomes. depth strategy help and let business through all more right challenges address our can

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

clients, at selective regulatory capability. platform work digital to PayPal, with the deliver world's to to transformation. We payment working engagement. long-term example, set client, in We're in a management new gold of together meet standard we're aim leading for a new requirements looking new platforms, clients and omnichannel content design, approach For one to our our with ambitions customer architect and for

XX clients new first have contracted momentum in the quarter. the with and from we quarter, second continued the We

power a that a is new named architectural the build processes. Latin Thor examples working announced the expertise working been some to specifically platform Cielo key with because we Cielo, our We're together in standards developer new in platform improves provide developer experience. me and In of and digital process an The infrastructure our and the will will let have A electronic payments platform the May, aspect of new Now to that for applying bring clients America. features it digital Thoughtworks strategy, the company delivery. of we technology creation experience. of the streamline agreement evolution with. Thor choosing around components, client, was streamline leading expertise Brazil technology of

wholesale helped and are digital at Cielo through which more the in vehicle condition aimed accurate, digital recordings, strengthening experience build include improve cutting engine easier streamline across tape more conditions, for vehicle that reports. understand reliable identifying information XXXX, and across Services. to displayed consistent We audio The developer used for accelerates helping is a of of best with understand. marketplaces Thoughtworks result And are platforms. Auction condition new a sellers part products. comprehensive provides combine we condition The single platform. the is and with expect ages the consistency by ensure The to and that operator and the condition teams more information sales buyers framework BacklotCars for enhanced of productivity KAR development CARWAVE customer to of range a secure easy now leading red wide features, BacklotCars KAR's to and mileages. reports vehicles. Enhanced and work frameworks functionality inspection new of features BacklotCars help report areas the while buyers features

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

Erin Cummins

of second Xiao, demonstrate to were you broad-based business. with results demand the across us our continued very you, today. our pleased thanks all for which and Thank joining quarter, We in

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

due and X growth Adjusted compared million, is May growth the primarily attrition guided execution the year-on-year $XX.X to to was midpoint better-than-expected to the representing XXXX. revenue for XX.X%. points quarter of currency Our of constant demand the for strong and in quarter. in I EBITDA higher is This range

the margin but adjusted our in points year compared full to adjusted prior range year when operating in plan. EBITDA was is XX line the decreased with midpoint higher of period May. of QX our basis EBITDA XX.X% to guided I compared margin Our to

EBITDA discussed in-person and annual level public or and several that marketing earnings expected in with adjusted I the call May, second during higher we a QX events company-related rises, margin pay vacation the our seasonality our quarter. be to demand public schedules, impacted place associated took of of leave holiday during by As expenses

me Now share let some details.

Turning to revenue.

first employee quarter, constant months is premium the a by brand, the revenue Thoughtworks XXXX. X per $XXX,XXX of year-on-year currency average annualized revenue a was on and evidenced basis. high our For for XX.X% second growth of XX.X%

XX-month diversified compared the XX%. the select increase see XX business a Over an million year, a Thoughtworks trailing period to have digital greater In continued of $XX we clients over than clients across last their second XX transformations. verticals had for and bookings XXXX, industry quarter We of same we to with period, clients geographies.

Europe XX.X%, to in North APAC year-on-year by overall momentum America billion. by XX.X%. We by our Our by grew and all XX.X% $X.X saw XX.X% geographies. months bookings by increased strong XX%, the grew trailing XX across LATAM

Given provide the in the months, into of dollar want recent its effect we on reported U.S. strengthening to view deeper a results. our

alongside the business currencies I the strength with dollar. are pound revenue-generating of British quarter. Australian primary Great euro, and the dollar Our the am underlying U.S. pleased this

XX.X%, revenue contracted a by example, and by currency revenues to For in year-to-date a XX.X% Great local June diverse prior basis, dollars of in as of grew Due British on XX.X% contracted by the dollar compared pounds XX on to the business year geographic currencies. euros basis, non-U.S. our were our Australian nature of period. our XX%

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

transport health grew vertical consumer public TTM the quarterly X.X%. XX.X% and and return around of of at and program we grew energy, from of is The was completion services our on public of business and services one major a XX.X%. a growth health successful and sector year-over-year retail Energy, XX%. quarter, at Energy, in the health at a impacted Automotive, future travel by At of public focus, double-digit the the came growth our Our clients. at to existing grew strategic clients. quarters. services and services expect end health basis,

and X clients of total XX relative low million, top percentage trailing revenues now XX% revenues. client In our quarter, a second balanced XX.X%, have X, representing with our respectively, XX.X% second increase. have top a than with $XX as XXXX, XX.X%, XX portfolio XX-month and We We quarter the XX generated more the clients a of top greater concentration. customer than

statement. income down Moving the

plan, with to was second year an the quarter margin per For year percentage an during by increase is by for of was quarter. basis XXX a was compared stock our with our GAAP which loss the On diluted diluted revenue In to with per flow for share Adjusted and consistent with quarter, second the quarter, share XX.X%, XXXX. the was XX.X% prior was $X.XX quarter the charges. million of XX.X%, Adjusted operating adjusted the of last to compared line good compared points the as adjusted $XX.X is respect of EBITDA have decrease million we previously quarter our prior second quarter, compared impacted factors Free prior which compensation liquidity. second adjusted XX.X% quarter to seasonality $XX.X continue period, the was EBITDA in SG&A million XX.X% adjusted year margin to in $X.XX impacted to basis, compared year. noncash the gross $X.XX, I EBITDA. quarter, earnings a was cash the XXXX. in discussed adjusted $XX.X and second

is $XXX June down at go July debt continuing balance end current million Our additional an to cash at million XXXX. brings paid in We June our our July, was $XXX which debt balance to to of XXXX, million XXXX. down. $XXX million compared Further, XX, at XX, the $XXX

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

Guo Xiao

Erin. Thanks,

with now women XX,XXX. a With start long-term We've focus Thoughtworkers. underrepresented gender XX.X% amazing to are of commitment me and diversity and Thoughtworkers grown inclusion, minorities. Let Thoughtworkers over our on our

Australia, of in over test-driven We're design and example, around automated. Companies proposition, better so Ecuador, recognized We the basis, code proposition. age example industry, best and been a Workplaces This been regionally Great this a Thoughtworks increased long-standing XXXX rated strength Kingdom plan Chicago on in our States. in a industry Great again that developers To Shifu Romania, our continue Place also of the us virtual Place India, for Spain, employee Results our ranking and We're far . the that that, proud talent has Best I'm aspects United the and Shifu a United demonstrates Thoughtworks Work India. the XXXX work. June a far ranked pleased for has place. TTM Places positions experience to Thailand, to so XX% XX is the employer extraordinary is to learners significantly norms. for in as than resulted to believe than one end the is in in impact to XXth value and only Work-certified the attrition built Brazil, Thoughtworkers methodology. coach well pleased United feedback XXth Spain, XX pleased provides the refactoring. operating in Best XXX recent the improve our Best Ecuador, States, Workplaces of have help not development Guru better submissions like, attrition Forbes XX.X% and was assumptions. learning Top that using across at employee our we and on Thoughtworkers by digital in upscale Work Thoughtworks modern in correctness, have the and to brand Best value Women priority. We Investing was of to Socratic top analyzes For our and coating by to in learning create is the clients. One entry-level trainees, Fortune Guru from U.K. but being to business we're

the during what to over the Our strong to to and Thoughtworkers' the sourcing. see had hires best from referrals capability, very proud XX% XX,XXX applicants our attract we recruitment I'm continue We second Thoughtworks employer brand in our be market. and coming over of believe talent of continues we to quarter.

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

of which again we're is IT the the making. than overall our for Our is rating second measure of rating ratings X.XX, the progress In services higher was X.XX. quarter, global the sector Glassdoor a

as York enable business exchange in days hires. world was shared the leaders our also business a we've ways program Our We transformation theme: Spotify, for for thought new Founded this and client the friend, and X.XX, I'm ideas brings to client with early saw Power reputation industry Mercedes-Benz, sector can Mondelez IT among for much diversity score and technology services April of convened about overall ITV, than In the ParadigmShift. around and of built which the Thoughtworks company. XX% that who would Thoughtworkers source ideas and speakers New as XXXX, our around succeed employee referrals inclusion executives to for the a improve human The pleased interactions. known given higher from new from brand and how the This year, a of recommend revolutionize others. that's X.XX. the customer year's score ParadigmShift, important are emerging We're company world. especially technology Togetherness, from very change executive industry, together us community a leaders our in to ways and at

luminary, published written by to Thoughtworkers over passionate sharing about cultivating culture, and technology are knowledge books. revolutionize industry, Full-Stack recent XXX a book, software discipline answering their perspective, a Thoughtworkers together, are XXX% inspiring, a rated capabilities to Over user and ParadigmShift our create person is looking of organization to experience stack, would incredibly colleague. were the We interface, we to high-quality feedback, products, and course recommend of be unit critical clients spoken XX% very across name Testing testing receive security, full a question absolutely the to rated deliver a to software. delighted explored program performance, new a testing, X our with any excellent, value I've before and code organizations new to aspect few. that for how about the back in they XXX% A days provides blending technologies, thought-provoking have Thoughtworks positive unique the accessibility opportunities Testing special the test and and said creation. for across how talent to and

is eating become As quality non-negotiable world, the in today's criterion competitive market. software has a software

me let Erin. to Now hand back

Erin Cummins

like our more ranging and emerging focus Thanks, are Thoughtworkers refugee you we workers, projects invested to around to we Behind. our address that crisis XX in the domestic of a Leave Ukraine Thoughtworkers to I support are One priorities. systemic proud tackling the work report company, Xiao. as impact months, like with social ESG continue update do Thoughtworks' would social some countries, our world. of transformational published rights In the public No June, XXX issues areas and in the impact Thoughtworks to second projects In last on within social really change. to reforestation from from XX undertaking the than movements, share

You can impact our website. Thoughtworks' report on social Relations Investor find

let Now our me turn outlook. to business

to While come businesses. there their is customers the our transform macro environment, continuing to Thoughtworks uncertainty in to are

For expect XXXX, third $XXX the quarter in we of range be of $XXX to to the million. revenues million

year-on-year expect XX.X% growth at midpoint XX.X% We on revenue of currency a or constant the basis.

revenue acquisitions completed to approximately contribute expect growth. year We reported third will the during quarter X%

expect for to quarter XX% adjusted to EBITDA of We XX%. margin third range the be the in

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

includes the the impact anticipated impacting guidance from and quarter Third both onetime profitability. revenue events in quarter

facing possible effects the and funding technology few clients. a of First, our scale-ups constraints on

in clients engagements due QX new a client-related are number and ramping Second, than of rather for constraints. to QX existing up now

on to China. an impact Third, as utilization impact countries COVID-related Thoughtworks' such due in

guidance prudent. Our third quarter is

view. realistic a taken have We

quarter We would broad-based guidance. have that challenges positive our impact I which likely on geographies. our of remain is third managing the most just across near-term regarding demand the expect any negate We shared overperformance environment, the

talent are engine positioned and the We have long-term believe We have and creation. healthy fourth we growth shifts. demand to pipeline future for the address quarter, value well for a and we

Now to turning guidance. year full

negative in to XXXX, on basis a range year currency we year-on-year which revenue growth full approximately of the a XX.X% XX.X%, reported X.X%. the expect of foreign For impact includes

constant expect basis in with revenue year-on-year is to range the to We guidance May. which currency growth my XX.X%, of in be on a XX.X% consistent

year to year XXXX has our to reported revenue growth. full We May, strengthen. X% the contribute XXXX to approximately full in continued year U.S. last outlook Since expect acquisitions I completed the in provided dollar

The into includes for FX expectation negative FX negative This $XX view deeper to exchange. a a exchange full providing impact plus the foreign million am I due impact negative fourth in $XX $XX of an the revenue year negative of $XX on midyear such, expected comprises our FX million impact XXXX foreign and of third impact quarter to guidance. quarter million FX XXXX. As million

we be in large revenue with a margin, expect operating consistent XXXX to to expenses respect in natural margin. EBITDA year XX% adjusted to regional May. is our the are my a normally With For exchange, there foreign currencies, XX%, guidance same to our extent full in hedge because and

U.S. diluted However, assuming outstanding. basis diluted in of $X.XX the XX to the heightened our believe earnings We average be to point a approximately weighted year of XXXX to full share the on dollar shares in share led $X.XX, margins. strengthening XXX operating months recent has per a compression around range count million for of adjusted

Our stock-based EPS exchange assumed from foreign full year benefit guidance and is impacted tax previously negatively than lower compensation. a by

to For strong, vigilant we any stay and clients our highly remain or XXXX, employer global continue developments. value to we external emerging impact and potential of and of believe factors our close proposition customer brand are

Now let hand back to me Sean.

Unidentified Company Representative

Erin. Thanks,

those find Operator, provide on presentation Investor for our please can Q&A. website. the to instructions now [Operator We move would Instructions]. call? Relations the Thoughtworks you You on on investor

Operator

[Operator Instructions].

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

Tien-Tsin Huang

just I revenue be sequentially. an okay, third sequentially it's history would up with FX-neutral, which looks guidance, be want know on on organic the thinking like check it if quarter appears to flattish to, your I basis.

interested difference maybe a So called I'm especially Erin, the is X quantify one. there out? that first the the those for to in factors, items X Is just you way us?

I guess, think I I mentioned funding be There effects wrote constraints of some possible tech down. you your what the that is some, could on clients.

pattern last that beating you're already? you Just given couple the seeing of again, quarters. in Or your your of conservatism that is anticipating? are something So checking

Erin Cummins

Thanks for the question, Tien-Tsin.

of driving how size. for. in approximately would the what is To in They're terms revenue much the about X/X, growth. account indicated, equal one, QX QX are you As relative I factors flat each understand to compared

impact the see to that tech funding. And no We the for potential position seen much funding of of want don't beat, settled. upside, there's in think We so be my it's would the the And we we've strong typically that don't I through. of upside. mentioned say the potential that constraints, largely come not you we some QX saw the and That why we a remarks certainly, included but QX. prepared are in terms is I not lot. in that same for in

So scale-up, to are beat challenge some of to has that the that utilization, want the lower to we these mean quarter seeing that's we expect. is means I quarter. the technology stronger little note and including QX the the impacts, expect have challenge, do for for funding it's we onetime it fourth a that in that that impacted we But funding growth why would us see bit growth. What harder have do the for in

in in We pipeline. doing QX, are These up our the where very clients to ramping ramp-ups And clients portfolio, still are these do were there We look XX expect more the a delays strong right important seeing and XXXX. in to we are if at of of support the client from some top clients. we QX. some be thing

Tien-Tsin Huang

Got very you. clear. That's

Any there the quarter the for that follow-up comment the you second what for Just just into delay, there on the quarter. and fourth given gross margin just given you third the utilization made? my then, stated outlook considerations quick half,

Erin Cummins

Sure.

seasonality. margin. terms before in of So terms for stronger a of in talked typically, that I've QX about is quarter us

X QX is items However, discussed. utilization about, impacting normalize the do a margin we mentioned EBITDA that around quarterly we see adjusted say, that We're the That just in would impacting growth, what points and amount. gross also would that impacts are But onetime I to we similar lower margin of by I It's for utilization seeing impacting quarter. target. the QX. expect as in fourth the than

giving expect guidance quarter, so And the see to noting worth would that quarter. third is compared in to it quarter specific guidance for uplift margin some fourth we fourth for not I'm while

Operator

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

Ashwin Shirvaikar

just and to up visibility. Tien-Tsin's question want follow about I on ask

then, found year? confidence would that So parts guess the of some might outcome? I that. the you starts get client-specific ramp contract level What's when One out is, the visibility two get to have the pushed to starts pushed when out what's potential these XQ and XQ? not at about out, And might next it -- not might looking

Guo Xiao

Thanks for Ashwin. the question,

earlier, From seen Erin the limited perspective, cycle QX. we client winning haven't yet. to buying a and for is So a factors onetime believe ratios change mostly we clear in the mentioned behavior sales impacts the

We inbound have of amount pipeline deals through still the are a similar pace. similar at flowing coming in, the a leads

similar we to of previous probably looking that visibility QX very we high following have we have in So extensions. win We a and still new had feel as a quarters, the at quarter. both logos ratio, terms

out of of we that's a I So some The -- good don't portfolios some feel QX. tweaked our little we the exposures At see those moment, bit, impacts rotate why very QX. about of this had to factors we mentioned earlier, earlier. think we continuing have

some not internal were mentioned of of In Erin to larger earlier of was terms The due our clients' available. delays due that -- the work. resources programs to this

ready was are into in not perspective. organizational teams that the from then time. Some have we planning our due And ramp We the delayed factored up we ramp-ups that comfortable will feel structure of to an -- process. QX that

Ashwin Shirvaikar

asking change provider. work companies be the cost-related you're the lot Understood. a of is premium focus have projects. a And nature because incorporate that rather I'm to used mentioned than to Other And projects what you're getting growth-focused changing? in of more the

your bill evident You rates. in mentioned it's higher

part what premium that the at are market, seeing? So you of

Guo Xiao

yet. reduction, heard then are we work and reflected have not definitely also to We that talks we do about growth businesses focus their from seeing in the changing cost

in both of business efficiency premium -- part also mostly think of of I mostly because digital addressing growth. of that work the growth the the is is do the terms transformation, it we addressing the and

at So time. cost same to often often, and business growth the we of do kind It's a way of is the productivity both doing growth transforming important new very that's work and ways. efficiency. The old

more do called it's less. with Sometimes,

work we makes the haven't kind of do impact I we hope sense. that really yet. on So coming of seen change thinking any this from significant

Operator

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

Maggie Nolan

you maybe if at to fluctuations wondering new I'm hires. an as bench utilization deploy at time different a average to can talent bit lever management, little balance or a talk to how about keep you look a productivity talent or clients for demand to your willingness in

Erin Cummins

Xiao for question, the Maggie. I'll miss I anything. then and Thanks in if jump start, can

to our business, as that a are balancing sure management, professional supply services with making on talent respect are So we to we demand. always, focused our

geographic and diverse us a we strong this gives advantage area. We footprint, have capabilities in a have geographic and -- very technology that big

So targets increase attrition the to we we in keep tight, adjustments. our We like is that attrition. earlier, than that now. close would And general, the of target, would about it bit If mention are on see make the to very to would pipeline sense down. this if positive a utilization that then again adjusting we oftentimes, also did too that certainly, come our we then we makes trends. movement if what's hiring. do year. getting part talked feel seen early but lower we've of I constantly is And we'll demand the happening in business. some utilization utilization In little on watch we're doing we Xiao see hiring a

reason our talent is And so pipeline. manage we general, another that that, in

Xiao some healthy fourth of balancing and we up demand pipeline. supply the the visibility earlier keep of always about we hard as demand, the quarter the talked So work and have. into

expect Xiao, as talents we see managing to mentioned so or more we And do do utilization want our an more add are levels. I anything to else? in-target accordingly. normalized you uplift to And earlier,

Guo Xiao

ways. in I lower it capacity than more expected. X supply different probably short us in attrition is we the to One term about give us think just one help thing

less handover; attrition, with Second, less transition; more new people and there's tenured and mentor senior definitely less people, coach newcomers, joiners. to

So short as term in that's also well. us terms helping in of capability the

Maggie Nolan

here? attrition drove And is far do And you and pattern? then XQ in your it what so from trending how that think better-than-expected expectations

Erin Cummins

opportunities and so it's forth. prior we engagement say with spend at Well, invest so factors. as and lot a We for capability, what know and a our a resonates Thoughtworks our employees learning hugely continue Thoughtworkers. advancement about on focus and building time We doing of is destination and we make with sure And exactly look to And value employer. on to employee talked that We culture offer drives lot we in calls, surveys for continuous a that attrition. and our understanding career number of on hard proposition. we

effort there that do of focus impacted believe positively going investment and do these has So areas. been We'll that. our on to a has continue We utilization. lot in

to far, seeing trending with respect QX So that we're it's stable. relatively what is

increase at point decrease an obviously continue to seeing a We or we're monitor. time. this So in not

outlook And so for our stable is current it's stay that the levels. moment, going to relatively with

Operator

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

Charlotte Bedick

is to on Charlotte it margins? to offset just talk to know attrition. net pricing the about you for you attrition? And be environment, Brian. given and more end? guess, this you increases, spoke the you trying try is I But to Or expect just have in Can accretive This even I inflation environment, about, the given any would to implemented

Guo Xiao

Charlotte, I I want sure to miss that it. didn't just make

that You pricing. said Is right?

Charlotte Bedick

increases given current any the implemented pricing you environment? Have Yes.

Guo Xiao

question. for the Thanks Okay.

increasing been to we we have the pricing We rate more and us more I value, of main One offerings. pricing value, that's higher get often. innovate the focusing ways. premium in always different is on add to rate, continue way think higher X mix, services very our where billing add Where is

X to demand, year we're digital months to in with where For data, example, deals low enterprise that on have better Earlier, we monetization, a X last I the macro picking selective situation and strategy. be new late also high with more pricing. able year, trend, this think, supply last

I it's in the is less going factor that to foreseeable a of or so. months X think think -- next be I

extent. look another offshore. average was little think that number And to earlier, it's That we're is XXXX, before. to offset more at for I And still per onshore factor going some especially revenue work to moving you be bit price a QX than services. the by $XXX,XXX mentioned to if Erin is still seeing, adding QX. increase we our lowered offset our then as employee, the which due expecting lower that then are overall, from is But that, similar about wage utilization inflation, some mostly due extent to premium it more to we're in

that to of stable, think I that's part keep allow overall, margin that So relatively. gross allow us -- the us factor

Charlotte Bedick

guess, can And you. I continued you the offshore Got to -- double-clicking movement.

from Just term. away your medium guess trying Like per exactly. to understand impact? overall more in just clients essentially, head the moving So revenue that the is are I'm Or offshore? overall, U.S.? is it, open to I And

Guo Xiao

Sure.

from some -- a think different has the firms. have Thoughtworks of I history other We

We onshore-only ago journey. we our started XX years have doing been when earlier,

always Over and India the like America, Southeast the gradually Asia. to nearshore regions we've increasing years, delivery Latin China, offshore, been

work to moved our Now XX%. down has maybe onshore gradually about

bit the the years. perhaps We of down to in that continuing XX%, are in maybe a coming further move process to XX%

long-term remote a clients more joining made strategy offering And the working we've that's possible COVID flexibility been and it our work given situation are to following. the is then definitely move themselves. So offshore

price down then very alone, head. that. seeing each offsetting you said, kind of revenue the slowly, the head of the in with it factors per And term, expect, -- other. we we're to this, like our stable revenue will factor because So and bring But near per increase but gradually, be utilization, this

Operator

Our Piper of line Sandler. the next comes Ramnani with Arvind question from

Arvind Ramnani

if are industry by see specific call I just wanted is you you can areas weakness whether of geo. out by seeing, any or to that it

of seeing of that's just Just based. or broad specific trying is you're to -- kind weakness, kind see it where there's if area some a

Guo Xiao

question, Thank you for the Arvind.

So well, definitely a start though geographic doing even North from we concerns. is perspective, feel there's that general geography. some From I'll inflation America

some economy, Asia, countries North U.S. has, strong of mostly Given and leading of coming the companies because position -- from the and there lot other grew growth It XX% expect digital especially QX foreign continue have strong in headwind. American not we the in to seen Singapore many by for of exchange a market. the over APAC concerns. Southeast of economic

dollar, only, dollar, look saw at by grew XX%. in In fact, Australian constant if we only, currency revenue that just Australian local currency we

confident feeling So very we're about APAC in HX as well.

there's of by XX% the XX%. disruption in at that currency, inflation, QX, bit a think of the In British pounds, if though I even supply of and a Great growth a saw grew euro we look more Europe, from chain we only XX% general by Europe, revenue concerns.

feeling continued -- that the in and tide starting of So risk there's and clients we're But is a turning to are then Europe our lot we're monitoring. ramp up.

So that's from geographic perspective. perspective. a Vertical

verticals. the generally, vertical see services growth driving different we we more different intentionally. a rate definitely our from of from business don't think intentionally But run financial of some focus on we perspective. And then the I across

we vertical. Sometimes, programs always couple ramp one don't same in the of a work see large vertical. replace in down We with them

But that So little seeing bit. sometimes, we this There's they no from coming the verticals. significant we're all that from generally, go fluctuate feel growth at up and moment the macros. impact they is a down,

Arvind Ramnani

Terrific.

environment? impact or has see an getting given quick type you working of work? a traditionally wanted follow-up. I folks clients in are lot Just And hybrid most on-site Are that in seeing work. dynamic, to sort back kind like of type work-from-office had business? just of that a Thoughtworks still a of work-from-home your is Or to of

Guo Xiao

think, more for we they're clients delivery think X their not on-site on-site this to on-site a work. yet. go right well seeing I lifting, more the figure to major this asking what years, initial strategy, their our where out Overall, yet, the no the also to after do heavy of as onshore Thoughtworkers office impact the to I to just and with We're consulting definitely kind work in hiccup But last, but work couldn't do, after high COVID, and had offices, hasn't work. returning the value-add one

Operator

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

Bryan Bergin

just theme Within had of clients your programs, company, where those those seeing second mentioned, the delay as industries maybe as you're you the stage Is XQ second just far region, hoping Erin. common dig we're into be among the to the outlook, of headwind the may grouping, from? there or any

Erin Cummins

there client that I Xiao work understand to underlying a a talked it the demand on actually spoke We've be aware no, is say we there's is programs want big about of thread Ultimately, there and our wouldn't common about Bryan, what side. if a we common of have lot of. an to found theme. theme. lot is

But absolutely committed to and Our the work executing that their clients it side. our in digital transformation are strategy, takes on it side and driving investing client's takes work takes work that on and it strategy.

a -- it's situations and a And been to just seen ready It's so some places. on are clients been And execute also countries, in definitely, and where our different get not going we've industries. happen few couple across we're seen as we've things. quite of that

clients change want to As ways we be sides. do our work look we can we think both programs support our help that on take about we that and and it, because prepared acknowledge identify clients

the side talent that there that recognize supply not also drive problem enough to needs just that that We overall, just we tech in, that it highlights client done. of know is to work be on we're the top the

underlying really second that point the for that So mentioned. that I think thread I is

Guo Xiao

Or stay to look lot is We it those our ask feel this I this We reduce of there's close is We're with clients, pattern onetime our economy? it. them. to like getting going not you -- did Yes. some Is factors. answers. any are concerns definitely the general just point? a doesn't talk at budget just like It macro because to clients. of over some

Bryan Bergin

just Have back delivery? And seen Okay. come the you way business any a and as then relates in operations component to notable follow-up travel it here. of just your

Guo Xiao

Definitely more. a bit

of -- sector have we back. We we is just the were we working with feel we that work bouncing are -- recently. couple have And airlines a not definitely that before contract then

as it's the yet. still not back definitely happy COVID. bounce it's probably volume bouncing latest back is from -- as -- think significant the We're pre-COVID pattern, it for was the to I but

Operator

the question next Kupferberg with Bank America. of from Our Jason comes of line

Tyler DuPont

This is I'll Tyler quick. be DuPont for I on promise Jason.

and expectations specifically on those year. mentioned. and you have expand what to on if drive the and touch the you rest vertical you technology trends growth for appears business pretty financial maybe strong the Can had in that services outsized continue to expect that to quarter? verticals Just contributed to of And the It growth.

Guo Xiao

service this got of to the then they probably by from I -- contributed the have question. the XX%, a a sector perspective. Thank you -- numbers have for technology number. grew and growth perspective, have by how I I quarter services grew No, revenue you, from on think Tyler, think I financial business Erin, XX%. percentage

think public XX%. -- is Retail about is of our Energy, think XX%. overall, I about as retail health, I business technology business. service XX%

XX%. services Sorry. XX%; financial services, Retail, it's low, our Travel is financial XX%. retail -- is still

the mentioned I grow we wish one size the pie then As getting faster will of bigger. that earlier, and

line we're size capturing increase business And more definitely So that overall, year. fin we these we're there's in rest growth hope that from intentionally in believe then of right continue of to of this believe serv because from revenue our services revenue believe year. of will that the the share our financial continue we sectors -- now. the these investing across We we than the the in -- business later that will throughout

Tyler DuPont

you whenever you to Perfect. fast specific Or super opportunity, And a verticals Great. M&A are then there any it? trying Okay. go target? geographies follow-on. just is for From an strategic that you're it perspective, or more, see

Guo Xiao

capability. we We're And perspective, North geography places perspective, not we're horizon. our If from demand where the that's at of where kind we the it. there's scan perspective, are a that a of Europe landscape. enhance but can good, mostly it from the go we definitely have America, believe But then we Australia a perspective. fit, top will a a tuck-in, at complementary And a looking to lot acquisition, looking from capability looking vertical and small, M&A offshore from for good locations core continue

Operator

comes question with Dave from of next Baird. Our the Koning line

David Koning

way almost a you're numbers little constant revenue the know, for based Does and be to in inflated out higher impact anything currency now QX. of in to of there creates couple probably was more QX questions -- is onetime A that little little create some pulled take a year, QX being in what's the now? more there we're going QX into quick. on QX? there little different to the going a that's revenue bit of of put just I guiding QX due kind out anything Like

Erin Cummins

be onetime guide there that have in would we that with respect annual the assumed QX no, in to isn't more Dave, anything nature.

So there and XXXX. on nothing impact no about note surprising or to

David Koning

It of couple And year based late guidance, like with the to been Okay. and the holiday big on historically, you higher margins. low said year to in to half utilization parts is a This the part full of in of and likely? ramp. get little there's in going range the of on has that point bottom is natural just then it's is a QX QX the I And going because margin know that's now like just the QX be the But of reramp. more know the too utilization of range. the seems of the it EBITDA years, already a ramp seems I low year, margins, year last big season. full

Erin Cummins

Thanks, Dave. Yes, as you're pointing out.

to guide I've the annual XX% margin adjusted XX%. So EBITDA of maintained

increases as so executed wage is about we've well very talked capacity. already in our seen were half managing the the We've offshore were I results we've would the really our this far year. pressure We -- for above just of on effectively just top we And so first first firstly, call our XX% half. on pleased and as year with well. price increased we the say the were leverage through What

expect lower-than-targeted underlying but and do to third The as mentioned is profitability there capability drivers just does the So is that importantly, it's potential already, there. on QX, do midpoint of the guide. It normalize. guidance, of see strong being because the is very increased we are asset profitability, it we our there's quarter your point, mean quarter, end potential I utilization. that the third strong. an challenge low And and to affecting growth to And the of to in the around as

EBITDA margin at the point the it or So quarter, on to focus even we're your to we same answer the is and time, guide, exceed in question end fourth third to going quarter. more the to top in at be directly, do challenging continue strong this execution in that but

Operator

call to session. Xiao closing question-and-answer turn remarks. today's back to Guo the like for concludes That I'd

Guo Xiao

the the extraordinary Thoughtworkers, the I'd closing, And at partners, clients want shareholders. due issues. all to for for Board delay just of Apologies the we're and Thank technical for continued I thank together. every in today. joining and like call call the our acknowledge you to the beginning day impact all delivering of to support

So you. everyone. with to next up stay forward catching look We well, Thank quarter. you

Operator

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

You may now disconnect.

Thoughtworks Holding (TWKS) 15 Aug 222022 Q2 Earnings call transcript