Earnings call transcript Q1 2023

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Rob Muller

Hello, everyone, and welcome to Thoughtworks earnings call for the First Quarter of 2023.

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 press release was issued earlier today and is also available on our Investor Relations page at thoughtworks.com.

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 are the uncertainties could forward-looking These made. from cause made on actual expressed when as of to date those statements only materially call.

During certain our call today, will we reference measures. non-GAAP financial

growth an for in a in to superior GAAP non-GAAP performed, rates as furnished to release or our rate foreign business underlying prepared X-K. to provide of assessing our be provided the We the currency framework for should in effect excluding The of reconciliations press measures measures fluctuations. financial currency constant will GAAP. We financial exhibit as substitute non-GAAP with not how performance include as also considered a accordance our Form

this or update the assumes obligation no Thoughtworks to information conference presented revise on call.

hand now to will over I Xiao.

Guo Xiao

our Thank you, to Rob. Welcome, call. first earnings quarter everyone,

detail. Q&A. will to before we open then I will highlights Erin our guidance our you and take on our in I then would of start and through more like quarter by provides sharing update an for share business overall Erin business first some results

I'm strategy, joined as global of our milestone design the the marked we've a on clients Thoughtworks Thoughtworks. digital a week and and XX integrates I big impact at proud years Thoughtworks with and that years turns innovation. world me a drive start XX ago, Let large. about consultancy We We're had almost recap engineering this old. to technology

driven that's and transformation and our new helped results better, people's pleased services. to report for by I'm continued transform good make industries, our lives something demand have to quarter to create the services in XXXX, opportunities, celebrate. Our first digital

the XX and now million basis basis, $XX on We delivered stood ago, billion. revenue with is a in end the midpoint clients $X bullish at year a increase of pipeline of Though than new the less contracted $X.X XXXX, of year-on-year. XX revenue million a We better a overall the guidance. of with our TTM greater environment clients our $XXX bookings We at TTM quarter, million than sales well. XX% is on our first than QX the quarter building demand have in

sales of March of Our larger at in program to workforce. Reduction to the countries factors in quarter Force are show proactive program RIF XXXX, pipeline. some seeing approximately in our employee deals investments we're The the Thoughtworkers February of end The phasing the continents. X across results, conducted March employed number XXXX. in of and of the reductions X% impacted due we XX,XXX At in in XX we and starting the had and marketing Thoughtworkers end

We specific hire continue to skills.

and our managing We driving demand. while are rigor business discipline and supply with

this the and As with our thank target through during technology for our create we we're impact pleased exit the that they levels. I and is would Thoughtworker our time. like first now in their operating every utilization quarter, commitment around excellence extraordinary line culture for to the world

first continues quarter. Global in uncertainty the

industry volatility minimal recent in on the impact However, the had Thoughtworks. banking

get to to change them to close from and be in to clients, adaptive We continue our technology. their returns better investments helping stay

themes rapidly publish themes, year's categorize which two opportunities products, for This of the With represent X horizon which address hundreds our Looking industry lens, themes. the technology many challenge Lenses, mega Glass, dimensions, AI. this be and trends For we identifies for keeping real include can plus we with To gap, Thoughtworks each vision, businesses, up a with platforms making annual These how our scanning we partnering technology as call recommendations. the significant changes. clients given in metaverse and Thoughtworks. our

prioritize informed Looking make Glass opportunities. decisions helps about our what clients capitalize technologies best to to on

Let me of the technology our vision client recent share in some work. context examples of

First, Platforms client. end-user committed relentlessly delivering as with designing platforms products, and which our value to are

digital First reliable, Student, and we're cost-effective working bus driver transportation to special nationwide shortages to help with provide to needs. platform deploy a students address

leading America's million X North journeys is completing Student provider, student each solution school day. First transportation

a time. unused on transportation their providers The AWS. the enables third-party matches vehicles. of to with benefits created data platform analytics. we digital specialized platform’s student Together, This drive Among hours work leverage needs to platform First is Student to

platform instance, those it on with parents. transportation, timelier having impact an provide drivers, ramps, students helps of is the and and experience efficient wheelchair route For extraordinary

with I'd The second how Museum. connection. metaverse, new Abraham Google transform to sector at technology the augmented making extended enables experience the example about of is Library to working forms of our vision like public the Lincoln visitor and Presidential talk digitally reality We're and

will and Our technologies. With Google collaboration visitor augmented of be and interactive intelligence, These reality will Cloud experiences. to life for to millions partnership, visitors. the bring this on history XR use will hosted create extended use American museum reality artificial to accessible, engaging

with automotive vehicles. companies fully one provide stack. tool world, in and of share new sector cars. We're the We AI autonomous data the software-defined platform managed as The a seeing connected is intelligence won products to with enables example its around science mainstream. contract automotive AI XX and machine vehicles its in third existing team in to provide this to This top I'd the AI recently trend like becomes partnering a services offboard client,

on What AI asking great from share They're driven us large partner they is AI? capitalize a Let looking to language me of can opportunities a clients. how ChatGPT customers other subject other Partnering seeing and we're by interest with themes with couple. to models.

customer about using Thoughtworks generative AI experience? thinking helping and be capabilities, question. we're Alongside to X-X models innovation language I answer How and the product large support product clients should

productivity. is development And another software theme

engineer work codes development. provides engineer accordingly, and refine with to encouraging, with the to Then productivity its architecture the as AI development. partner have using guidelines by clients and large Thoughtworks recent together models are point language A be gained in and a junior productivity Our showing AI-assisted output. AI to software observed collaboratively gains reasoning. Early we good work tests the software

AI. clients, guidelines Working responsible the of for also with our we're application embedding ethical and

Language You can Chief programming read Fowler, Large about Prompting called article Scientist. for Martin an of our Thoughtworks, learnings a recent in example by Model

in productivity and to drive continue also see client propositions We our interest efficiencies. that cost

offering up of leveraging their the achieve clients and XX Also, Five operations. in our in our digital maintenance software talent. critical For of application services productivity of retention example, our zero strength DAMO solutions, engineering by clients which engineering for and boost QX. managed effectiveness top services sign DAMO management our helps

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

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

me provide an update on let First, partners.

our including Our focus with Directionally, primary is goal working is with GCP XX% providers, partnerships drive go-to-market to our hyperscale partners. growth of by revenue AWS, to Azure. and develop cloud

the AWS designations. and Microsoft In services solutions of specializations. to partner Cloud certifications continue and partner and capabilities. include achieved data analytics We data AI and data in specialization quarter, Google a first These our invest we competency, swathe analytics

expertise breadth can outcomes. our our range that means of to help client a depth now We portfolio. broad of clients Turning and of through capabilities challenges. our strategy business from The right address we assist to

their Thoughtworks XXXX. look create the Our average of them we value to at clients This enterprise. in able partner, tenure transmission increasingly of technology reflected XX with clients across the as our new and end top is the strategic digital appreciate a at X-year scale

partnership National has Thoughtworks with new MYOB MYOB smart NDI since a Agency, Singapore's first provider to Digital important for the And with to leading digital working business work GovTech initiatives. years. have a with position nation. partnership GovTech long-term we transformation world's XXXX, signed For NDI. drive to Singapore's Thoughtworks initiative, The digital Identity continue into digital cementing XXXX. solutions. City signing is with contract management for MYOB's another a had began years. state's example, has to Technology a X national our most is digital project to strategic adopt technologies around We're Government on partnership and pleased the X government of been the Singpass, support In Thoughtworks

The Singpass a X to of build first, evolution on innovative focuses and goals: trusted, platform. secure

visits, with be Singapore took requiring by that Transactions performed connection. entire Singpass more take offer to is than residents. anywhere hours now ecosystem of scalability cloud of to offer the one to used NDI to world's now Second, platforms native reliability. days complete, third, or million leading residents; provide Internet physical and They to can minutes. be X.X and from services previously flexibility, Singapore

XXX seamless XXX As every from of a services evolution X,XXX more It app organizations. year. trusted, to transactions as million than corporate supports XXXX, more than XX, all-in-one March access personal Its ongoing. offers is Singpass and services

Now to new turning clients.

new a logo & new to working North independent XX new work We have We're products. rapid Total momentum acquisition, and beer America's focused have More, clients, continued with to retailer from fine contracted largest in value clients we with of helping We related TWM, digital spirits, quarter. transformation. will new business wine, client the with the approach deliver in organizations Wine first see and

planning digital to the be agreement that and chain to working of processes, business. have support modern and TWM's The on embracing will apply product-centric Azure applications. includes legacy supply resource multiyear able innovate helping blocks This with applications a Microsoft a to and delivery We building effectiveness. team engineering the model. drive merchandising evolve productivity by enterprise those We're a

of details website, can on our successes You section news customer find these some thoughtworks.com. of of

the to numbers Erin, take now that hand she can to detail. so greater I'm you over going in through

Erin Cummins

Thank you, joined has call. Xiao, who you to today's everyone and thank

to our in Revenues We million. constant that prior XX.X%. currency, $XX margin both for the declined million, margin QX equating guidance X% with to to we compared and revenue period. the EBITDA to are QX percentage the of adjusted declined EBITDA was provided to Adjusted quarter In exceeding revenue in QX. pleased announce adjusted points EBITDA $XXX year-over-year revenue results in Acquisitions contributed year growth an X% February. X

for difficult am the to in midst I our ability execute a team's environment. macro thankful of

is we navigate today's efforts landscape, As to close strategy clients while core our our and we results. driving are previously a outlined, sales remaining

transformations, clients undergo and with they partnering long-term closely are short-term We as digital long-term as are weigh clients we programs. their decisions working within our

this Our revenue in quarter above We employee, first per average the our value our and and for the $XXX,XXX was with average. clients thought which working reflected recognize Thoughtworks. industry annualized leadership see remains

caution in their still strategic. our clients remain buying patterns, some While highly exhibit solutions

Now additional the let about some details me quarter. share

the a $X.X on at overall of QX TTM Our billion. bookings end at stood basis

base clients. geographies, verticals well-diversified across revenue a industry have and We

diverse the Europe of by APAC, of nature to year-over-year basis, followed America, was our non-USD quarter geographic were basis, on LATAM. best-performing region first then XX% in on our XXXX a currencies. our business revenues North contracted Due a

euro, U.S. As our currencies alongside and the a reminder, dollar. the dollar primary pound Australian British Great revenue-generating are

industry by Financial services business to saw Technology XX%, rising XX% transportation our and Turning solid verticals. services consumer at fastest-growing retail growth public X%. declined Energy, and vertical, vertical our travel Automotive, be continues and health and decreased to by by services year-over-year. and our declined X%. XX%.

TTM than on quarter around For with year-on-year. the $XX XX% clients. business came more first now greater clients million a revenues of than of X basis, increase a the on We our existing TTM from basis, a have first XX XX% XXXX, quarter,

customer concentration. We relatively low have portfolio with a client balanced

and XX.X% line quarter XX of top XX% In Adjusted pleased I compared the a am X, and share first for with decline, for period. gross levels. XX our the was yearly that to QX clients XX.X% exited in generated revenues. year with Utilization respectively margin the percentage responsible primarily XX%, quarter, to top prior during our total operating XX%, target the top but utilization was we as

XX.X% percentage was In quarter, period. to prior in the compared year XX.X% as adjusted the a our first SG&A of revenue

$X.XX million compared the Adjusted $XX GAAP was Adjusted expenses. the per in of period. adjusted EBITDA in year million a loss $X EBITDA QX lower for $X.XX loss utilization declined margin first of prior to was approximately EBITDA share recognition from and severance-related diluted margin quarter, and the was XX.X%. year-over-year

EPS compared of to Free XXXX. compared cash diluted year quarter. adjusted cash $XX negative million first Our million was $X.XX free for the flow prior flow $X.XX for of the the to quarter was in $XX quarter

with a of balance an XX, $XXX facility. credit as March XXXX, alongside We have revolving liquidity undrawn of million ample cash

as prepayment We term of continue million outstanding $XXX XX, in following a stood reduce million XXXX, which February. to loan, our at $XXX March

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

Guo Xiao

Erin. Thanks,

Let Thoughtworkers. me start amazing with our

XX% included diversity March and WUGM women inclusion, on XX,XXX as of XX. focus community long-term the With our and underrepresented Thoughtworkers gender of minorities,

XX.X% value to our impact demonstrates the has Our TTM We basis of voluntary and digital the best that this clients. employee our the in strength create Thoughtworks industry, proposition. talent positions believe extraordinary well attrition of on us a for

quarter, index score the Thoughtworks that have active first Work trust of an Great Place certification In average XX countries in pleased we're to with XX%.

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

rating Glassdoor making. progress we're a of global the Our is measure

first the was X.XX, companies workplaces your career overall U.S. which on services higher the X.XX. the In grow We're for LinkedIn's in ranked than quarter, is delighted to to be our IT rating the best top ninth sector rating XXXX, the of

move The data career ability LinkedIn ranked within growth at the pillars to lead skills new tracks that to companies from company. employee opportunity skills gender employees to they at ability Talent employed external diversity. based pillar include looks growth a are advance, how to when the gaining growth, using company LinkedIn Skill The on and Insights. X company. pillars and while advance promotions

hand Erin. me let back to Now

Erin Cummins

Thank you, Xiao.

I ESG. targets the by initiative. science-based were to pleased validated climate targets the to Turning science-based update quarter, am commitment Thoughtworks that first in

SBTi of can in investor our our targets You details find presentation.

own Foundation, of clients our committed our a helping Thoughtworks to carbon Green adopt sustainable we while co-founder the As technologies, footprint. Software is reduce

helping organizational In horizons of explore was the now, tech-enabled accelerate to its sustainability the technology goals. undertook achievement zero sustainability achieve how assessment map engagement, later At end a categorized can and Thoughtworks tech the goals. road first developed of sustainability quarter, into next for for to a

pipeline business grow. QX and new XXXX. to for continue engage our existing Both with the to their These outlook and drive needs remain Thoughtworks for move our clients me to continues year journeys. let full Now transformation and to digital intact,

decline quarter we to in to XXXX, negative expect X% million second year-over-year $XXX be to XX% X% the negative of reflecting For a negative million, in negative of revenues to $XXX constant range currency. or of X% the

X% revenue of to to constant X% the decline or X% For in full year, expect we currency. a X%

expect points and to will the growth contribute approximately QX X for We acquisitions growth full X year. in of revenue points

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

margin year, XX%. adjusted For XX% to the we full expect of EBITDA

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

$X.XX share expect shares we adjusted of approximately the diluted to XXX average of a For weighted EPS full diluted year, outstanding. $X.XX assuming count million

guidance Our incorporates share-based compensation $XX million. QX of

expect share-based million. we will compensation $XX year, full the For total

to As compensation annual a beginning in revenue. X% reminder, XXXX, we anticipate of stock-based to range between X%

is Now the we that the would informing like some of QX our guidance to rest provide for and context year.

First, to cycles to compared but scope widely we shoots. see continue incremental pipeline still and strengthening. quarter, size noted sales green discussing earlier more elongated contracting is environment incremental larger, is last year. are of Clients are the with We what general in and but projects the similar our clients encompassing the more there ramp-up,

are ramp-up year in seeing projects. led has anticipated moving full to therefore This However, our than guidance. a more is certain we and revised previously pipeline conversion slowly slower

Europe are and enter we in China QX. we recovery signs in Secondly, resilience of early seeing as

as growth India We Australia, America exercise continue offset relatively in caution quarter. APAC. positive remains to while see strong a in in The in line continued last environment with within North serves

Third, face technology our with we while verticals still pressure. see retail automotive recent vertical, quarters, and and in strength consistent

capabilities, seeing bringing quarter generation We the XX build we strong our progress. in bookings in saw to sales and also logos. outbound Lastly, continue we new are while

demand our on and we supply and costs, initiatives. XXXX, growth investing pipeline managing expanding In balancing against a focused remain executing into while our robust and

I we industry, this of navigate for all am talent represents We macro best the thankful extremely as continue in our to Thoughtworkers the environment. and efforts the believe that

close a as their multiyear will services clients digital our transformation of element our to We remain key remain journeys.

underpinned Our are relevant are the renewal $XX our rates growing million of strong, clients, and number we revenue highly service annual offerings. by

let back Rob. hand Now to me

Rob Muller

Erin. Thanks,

can presentation You Investor Thoughtworks investor find our website. the on Relations

on call? each would ask provide follow-up participants We and as possible keep allow a would that many will ask Q&A. move I for as to please you one question those Operator, on the question. to instructions to you now to one

Operator

first from Huang [Operator Our comes Instructions] with JPMorgan. question Tien-tsin

line Your open. is

Tien-Tsin Huang

just today. Xiao, just to it's take Great for know not we're some to ask on sure of of to on you can private questions it. that on Thoughtworks. everyone bid the always ask comment to talk again I'm you the press upfront if I tough public but call, reports getting

the I you. So a good news is ask figured itself. this leverage and thoughts just on to Thank opportunity your

Guo Xiao

Tien-Tsin. Thanks,

management on to value speculate the we, carefully. clients is as Obviously, the a offer and or responsibility know a not Board's that time. over all rumors. position that of it's our growing strategy, mostly we, in any any delivering management we table, focused As our there's if will people on comment But our our on our to as team, team, business street the we're evaluate to execution

Tien-Tsin Huang

Why appreciate I Xiao. I good. Very ask question, the

on with you happened me ask in directionally the which turmoil very let of know the mentioned So of I in what from banking heard some peers. business some your we've the consistent side, March. system,

So your I'll watching, you how I have Do on think, demand for didn't and services April. be exposure environment call-out. shaped ask into should more side on that the mention as example, maybe a quarter we Erin, any we up the as just financial detail little financial you went on services bit as the progressed

year So any just of cadence demand played on out. the update as you. Thank the

Guo Xiao

Sure.

than potential so invest exposure XX%, in long banking still long-term invest there's We through And current last in of of the this intentionally run, knowing to sector, the mentioned direct we maybe exposure we did digital direct we that strongly less going and year, the feel to we did a have believe itself. lot all, decide the in that briefly XX% a of in any sector have the in of kind of very -- portfolio transformation. it's first So revenue crisis only the services And that's little crisis, despite potential. then, financial don't of it. sector, we lot we headwind about the our entire then

focus continue on we'll So to it.

environment But the demand just coming Tien-Tsin, recent asked, similar that April, still quarters. were generally, you the into to it's

more commented of We conversations we're larger but tight headwinds on have budget clients cautious more persist, seeing programs about are work. Macro before. and and

the we're starting year they're kick up later. and fact ramping are just QX that of later that them. In to It's in more are going during some in

So overall, the clients health the the of activity and pipeline, our we're work about we're on programs the having optimistic the budget, with in still pipeline pipeline, but of the cautious, tight also about conversations starting. larger

Operator

Our comes Maggie from William next question Nolan Blair. with

Your line is open.

Maggie Nolan

wanted should expect give in initiatives I you look compared QX like would in cost idea your we us in expectation light to if what lower revenue? further EBITDA of adjusted the an for any can to margin know changes And QX? of

Erin Cummins

Maggie. Sure. Hi,

There So managing and focal our just two are in of initiatives, our terms primary we're how cost points. costs

one higher quarters that lot first The remains heard is prior about talk utilization. a in you've and us driving

So across the year, as to the levels we that piece big margin is a increase utilization expectation. increased EBITDA of look our

very managing just are low limited we hires are we're very headcount of number closely, hiring a our We in places. but hiring,

increase line as And we course attrition, normal have top continue good so in that improving along the the in utilization then a attrition, that half. we well is path second anticipate to the as as voluntary

theme management, for us. a terms this overall is In continuing of again, just SG&A

spend. QX in sales and we for we marketing business, commitment our Our and investing that that a That in continue QX. did see in is remains focus and

we that. So will do

good earlier off there. talked of signs are about the see of to Xiao we some his starting benefits and that As pay in comments,

G&A. investing we to if So sales looking efficiencies We're the drive SG&A and at continue in to whole, marketing. look we are in in

discretionary and amounts. it's while about really spend is, about to spend where remaining keeping thoughtful that So limited that

be in second everyone a And to margin to remind then year, with half tend are factors have QX where QX, the that in margin play of tends higher there margins. lower quarter to I little terms be seasonality are QX of seasonality. the we a QX at and QX, the bit respect lower. does then just would that

normal cadence that no have this apply margin to believe for wouldn't reason we year. So

Maggie Nolan

on looking the new how pipeline? that of playing Digital Thank you. in Management, the signed impact like more And Effectiveness of on the this a solutions you've the quarter? some that Engineering logos you the is Or solution what announced, and are those for are the those demand role cost-focused they and Application some already having

Guo Xiao

mentioned these you we year. question, I'll Thank the two put you, take oriented, calling offerings also the two new QX these engagements new in are logos those of some looking cost some XX getting are smaller then, cost-oriented, taking they're especially offerings of definition, new definitely logos. seeing that out in the acquired have clients costs services Thank out We're definitely out we given top focused By And we big areas at. a our the Maggie. clients, they're Erin. two on that there. that new besides of that's this engagements specific on we're for earlier uptick these

a we're So new might us revenue bigger to started. opportunities getting in that's seeing of but developing. quarters. pipeline we following give believe a baseline start They the seeing small, going We're

Operator

Our next with RBC. Matthew Roswell comes from question

line Your open. is

Matthew Roswell

I that about guess much be the delays because the of pipeline just being macro is implementation, changing of And might given is budgets in how the much environment? of that things clients cautious constrained? how sort about thinking

Guo Xiao

bit Matt. both. of a little Thanks, It's

have some seeing QX. clients because are cautious. are It's deals, we starting in We up and of from can the smaller the starting stronger We these than thought. booking mostly ramp-ups sign you we as that bigger tell the later

now TTM QX. $X.X Our booking billion is compared with billion $X.X in

So lots of signing.

risk They ramp-up not but mostly a before as thought contracted the small. team. least we They ramp thought, that start to is to before prove is are want it's because to see than up cautious. big clients or that working they slower they the want as Revenue at bigger is getting

one So that's factor.

budget size. constraints and is instead some seeing size amount existing streams of work That's the the this amount of current both us what the the then, extent of especially downward instead -- into on plays of due as We're certain that about seeing of in we're QX. budget to of continuing team, caution also mostly certain macro pressure with team on factors some environment. reducing And gave the

Matthew Roswell

follow-up for third and Should in revenue quarter of quarter the Okay. fourth these I we Erin. the changes guess as seasonality when it comes cadence possibility about given think between And any to ramp-ups? my

Erin Cummins

any around the in cadence No. revenue changes seasonality. expect I don't

similar is that I would it expectation with earlier. remain to years just line Maggie's prior Our in what in question mentioned

Operator

Our from next Koning Baird. comes with question David

Your open. line is

David Koning

I I in guess my look X first think clients, filing, X% we when top the at were question, up they top clients year-over-year.

So did pretty good trends there. And and X%. think down of then the we non-top were five kind I math, clients the

either big this pretty Is spending or X the So that clients right very there on through of Maybe like disparity. actually clients to X Or more kind that. talk very, something bigger now? brought just are quarter. acquisition large maybe

Guo Xiao

Sure. Thanks, David.

clients top X, to look the because not this top smaller we period our of of faster that brought larger of Our XX, X, similar clients at them. it's we in five clients fact, or the time. have than both tail over X top top indeed, just top XX, longer X are we the And cohort growing in

was tenure our XX fact, of In top years. the top XX, average out clients of X

pretty stable So they're cohort.

this at extensions expansions, up existing little moment new new new trying who for going things. of big customers that to a try our two reasons. logos macro bit for portfolio that is are we projects it's current believe in risk partners, faster we chance Now than better averse is both with they because have are ramping environment, growing in fact with tough, the more a when One the

taking more with our And that. have, share a in normal the through with second benefiting this they top XX going they time. actually during consolidation we're in would bit time. this We we are also is vendor a top that current environment, We're wallet do otherwise clients from the clients believe more than

second that the growing that's the So top reason we're we with clients. believe faster

million Like a top then over have of revenue top clients is earlier TTM that XX it's the X, I that a think with we $XX now year data not XX, XX. ago. top it's XX other, we shared I have just compared said, And

David Koning

about you. it Got in QX. Will was year? follow-up, expect recover compared last last the you gross that margin, flattish, the do you. is Thank kind of I how And year? back of my the just improvement like XX% think half gross towards to to XX% the like cadence see margin? half back XX% in be Like you the just of pretty Do

Erin Cummins

that to recover. expect do We

We We half won't quarter until to with are respect fact force. the to the back seeing we talked improvement already. the total, full QX the was costs by to included margin, see of of related reduction extent recovery around costs utilization was that's And in the year. course, in of in the in the we that the get line second that about. margin. our But with one-time impacted that lot about In in a gross million, of the gross were $X again,

impacted that So QX specifically.

levels. That we are start to higher And was trend then I earlier true. seeing did talk about comments at that utilization in my

to exited be the we now second quarter. continues QX that true into As

We're still but the moving go. have to for utilization, drive up we So that with still will room respect year. higher to levels

quite level clearly, challenging than year than year. at relatively expect differences, be we I but in no gross where, to be shape it consider that for starting margin we're expect will we in major different last of would last a year. the whole, XXXX the XXXX more say the to we On line, true out opposite last similar year, expectations the was versus finish whereas

Operator

comes Our Cowen. next from question Bryan with Bergin

line open. Your is

Bryan Bergin

workforce shifted you're timing per factors of potentially as working is for comment around has on the mix far versus as you clients on to as here revenue, optimization. I versus Can onshore/offshore first My think, other how drivers cost $XXX,XXX. things one lower on now capita like-for-like pricing

Erin Cummins

piece utilization is Bryan, The happy to to Hi, back the factor yes, comment. main it. actually of

recurring for it And is why X so theme is our obviously, us. that's Number a priority. That

with higher stable. dynamic. on we pricing temporary would to lower and And to the utilization, is that so will say firstly given that is pricing pricing our would where impact course respect stability highlight a the seeing as I we get to and from more factors, the good being the So which I see that a focus general we in continue are appropriate. of that challenged other macro, outcome then in and

The doing we but work shifting. rotating Part to where about talked what is locations or from of geo offshore with is we something clients, where mix rotating is we're the staying certain had That more our we're shore while certain onshore locations. for clients, near headwinds. seeing, work

XXXX. the And from change shifting is mix that's shift of in that course, that to pricing. remains of reflected from little an a somewhat geo the FX there's bit XXXX headwind So then, the

the those the are mention capita dynamic. that revenue utilization. And biggest temporary is So But all employee. per factors that's one the on are per to again, changing a

Bryan Bergin

on That's And Thank in consumer biz industries? follow-up versus you expect several view retail Do I talk you. harder-hit trajectory quarters. the tech delay next behavior the services. you And and those a should industries, about we stabilization so the cancellation to the to then I Okay. guess some of can over have the there? just helpful. progress guess a how

Guo Xiao

Thanks, Sure. Bryan.

projects as So the protect push cutting there's layoff their us are sometimes more they to tech harder Among to clients, a tech hit keep sectors doing retail start our own in-house and and themselves. for workers sector. the still mostly costs

quarters. at pullback two this spending tech the As least a of do next expect sector to we in continue result, the

Retail significantly impacted probably the is other sector.

cut from it remain the consumer coming sentiment, we vertical the or that in challenging. also will spending the tight budget this will the similar Given quarters, believe one two remain in clients,

difficult sector sector, the bright very on of from energy, year, revenue, XX% which growing low is And up obviously, to more focus the last public, it's in since this decided we now care us, during For healthy total our macro health a XXs spot a environment. resilient way. is

of QX automobiles. continue XX%, we is manufacturer then with drive world's processes infrastructures. the to and and cloud to in grew leading support the by spot that excited strong BMW in and one in premium of apply And teams growth industry, develop their expect international And then, where to bright them the the Group, automotive connected their platform work continue. for and We're to both AI we Germany to us

verticals. quick that's the we among So highlight of a see what

Operator

Instructions]. [Operator

Our Securities. Moshe from next with question comes Katri Wedbush

Your line open. is

Moshe Katri

revenue the for remember accounted probably guidance And I correctly, last year. issue A about couple for that base impacting quarter. of the follow-ons was of here. the APAC biggest X/X If

Maybe China in about that Australia. I a bit a talk can looking China, mentioned more bit think you better. is you details

in retail think a that Australia, Thanks. large Singapore I well as in have exposure context. you in

Guo Xiao

a of to revenue. indeed with driven the regions late XX% year by bigger retail. last other high the among and exposure It countries APAC all our Moshe. have tech a earlier in Thanks, compared saw global headwind Sure. Australia is mostly was has, we China. Australia

is definitely in impacted. was So the be then, post-COVID right It biggest also one that's now. first the seen was the recovering China the it environment. to impact And

in takes because rebuild a new work it's customers half given pipeline clients' takes start we then global China to Although of revenue for bit half in that it to time have local slow market. for the revenue little local and time our working the

Singapore late half had cycle a stellar growth bit other to little the of last second the a economic but year in in year they're countries. compared the

an it's though Singapore this seen in seeing still of moment. at we're last HX have Even accelerated a as bit more growth we in So year. it's growing, less headwinds

news APAC if a of this, coming in in mixed combine do APAC growth positive we the there's but a overall So expect all in bit quarters. you

Moshe Katri

Okay. these? a for the half you second Europe Europe. then, Thanks green Maybe Erin, in where that look the how lot. year? bit some shoots terms of And spoke about That's can of are we in you about And a talk fair. does seeing

Guo Xiao

I can take that. up

bit U.K. seen As biggest our Germany in We've Europe Erin a is shoots mentioned, Europe, seeing in we're green stabilizing. U.K. Europe. markets and two

of a see during kick Germany especially we have more year. automotive to promising is expect the opportunities, clients. in do where in the We couple later sector I large probably signed of ramp-up the as automotive center technologies the believe digital companies the invest is the to that digital in of most as continued car strategy. is earlier, sector, future mentioned We their

So to that being besides BMW, automated large contracts companies we with We also going incremental believe other several and later extensions and Europe signed. see then for large this drive growth we're expansions year. working they're

Operator

with Potter Ryan question next Citi. comes from Our

open. Your line is

Ryan Potter

Ashwin. has investments term. you taking a on on the where force you to for my making us you've or near Thanks start far? focus capabilities? for concentrated there. sales a Has Could guess, of become in sense in some have Wanted I'm could sales and been marketing to I talk regions these give the how specific larger And and color sales much it been of investments question. how give so expect much become you been -- on it with more and larger

Guo Xiao

Sure. Thanks, Ryan.

a across As and we mentioned, resources both marketing activities spending health in public definitely the on in in department a of of the also to current numbers effort, we're we're a we It's macro significant bit it's but in is of and we but And not sales it's and a not and headcount significant spending the the how that's compared don't the amount spending lot inbound sales as promising the automotive board in well what as we the outbound more few increase to we're leads. to increase marketing pretty but before. activity also sector industry how money percentage the increase, much to care see opportunities of report as then in spending. there, It's just are double much, recruit this also focusing generate increase energy to resilient spending environment. where

then and data we're in in also this engineering side, besides services. increasing then operation efforts application vertical cost-saving programs on sales management, effectiveness the digital efficiency-oriented And our

not seen the X bookings X widespread. some with it's this and efforts in. XX logos So that's geographies. or how that's we've new QX off kick of We're just targeting Geography-wise, strong paying in

Ryan Potter

what kind exposures or looking shift geographic of just currently Got of and priorities? the How uses it. capability And thinking capital. are in of are capital allocation terms types And M&A you of if I M&A, you at? of could to looking pipeline your how's

Erin Cummins

I will allocation touch then a pipeline. the capital quickly, whole, and our talk priorities bit I'll the Xiao just capital But the about let on consistent. M&A on allocation Ryan, remain

Our focus with is M&A program. well as reducing loan our as our term continuing

absolutely we is a and from investment. what perspective expect that part So capital of

in of priorities. noted obviously our that And You on just remain the had successful then we will, do a we priorities. on been Xiao, acquisition Those million quarter. have term $XXX the to paid the loan bit? have of the want our course, touch ITOC pipeline you in They quarter. first

Guo Xiao

Sure.

same. the us. is M&A It's still to important Our strategy

to be acquisitions and execute transformational, than M&A and We core continue rather business our muscle we pipeline small expect the complementary tuck-ins to to on will it. also build the

Operator

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

Your line open. is

Jason Kupferberg

So a digits. year quarter-over-quarter rates. around maybe guidance in then just QX implies decline and that thinking the the for growth the bit revenue quarter-over-quarter looking growth mid-single little forecast to full at quarter-over-quarter. QX like reacceleration It rest guide of year, looks about the to

just views get to on So of wanted visibility your that ramp?

I that mean know I currents of a lot cross there's there. out

the visibility sales about cycles elongating, talked encouraging, growth half. second in sounds but quarter-over-quarter hone-in on You've to the pipeline really reacceleration wanted in on

Erin Cummins

Xiao, is thanks free the from I With to Jason, small that we to feel highlight decline QX, you flat a and question. it's QX. the to quarter, would can I billable what But can sequentially, is normalize our in start, for small in. respect days if add that a for it increase.

by are QX while And on the QX, a we expected to to see day and fact revenue we slightly increase basis. so certainly a see from billable encouraged per an to earlier of were increase larger hoping

to important that's So understand.

heard us pipeline. Jason, you've quite visibility, then, you lot the and a talk And about asked about

new of lot pipeline. about We continue encouraging the There's the signs bookings, expand a to Xiao talked our logos. there.

Our rates the same. win remain

is Our healthy, and expanding. is it very pipeline

into obviously, are more conditions And a bit macro of QX so good is there rest the year. and the visibility But said, that cautioned.

slower we're some talking about conservatism course, of And and starts. budget

we how to the we've have looks. about we lower, QX, fact, absolutely, that. And feel bit even in on again, the focus little to a per We visibility, with year the of day second revenue and respect stabilization the to good and seen but continue is So growth basis. half return on start growth

Jason Kupferberg

Okay.

does will versus there underlying now? half outlook like bookings place got could follow-up dynamics what a actually is but just that revenue. right assume impact guess then just spending through trends to the in discretionary bookings improve seeing that I second you're converting said, you the question So You've thinking

Guo Xiao

Jason, strong mentioned, seeing we you bookings. As are

large seeing QX. QX, in We are clients ramping up

expecting or the to and of We're much terms extension pipeline of get In expectation our the worse. our incorporates conversion, macro much current the this guidance not better environment.

it Hopefully, remain and with So to second upside. think better, confidence that will the we're existing conversion But comes expect I of clients. doing rate the similar. get pipeline, year our the work, one mostly is from our of us stabilization will we of the give the that half the in more

later marketing that sales we year. Second and is the new this in that the intentional service investments we're offerings, and off making pay expect to

Operator

this over further back the closing like questions time. no Xiao to call remarks. are There for turn any I'd at to

Guo Xiao

forward the day want you would our partners QX acknowledge for Well, with call. and and In Board all Stay to for thank and you, clients to we're up impact our the continued thank I extraordinary Thoughtworkers, joining thank well, shareholders. I we you us of delivering earnings for our support together. closing, look like catching quarter. to every and next

Operator

your Thank participation. you for

may Everyone, a You now great day. disconnect. have

Thoughtworks Holding (TWKS) 9 May 232023 Q1 Earnings call transcript