TWKS - Earnings call transcript Q1 2024 | Thoughtworks Holding, Inc.

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Operator

Hello, everyone, and welcome to Thoughtworks Earnings Call for the First Quarter of 2024.

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.

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

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

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

Xiao Guo

and I'm and world, for been Sutcliff from I've taking software has Mike industry. opportunities roles I world. of as stepping down spent starting in various and be business in selected around to will a what our I'm and have to from developer have learn years has delivering the my able Rob. you, be be growing the that June extraordinary proud at together, and It today, this everyone. Thoughtworks, clients XXXX grateful Hello, the a role, announced our the to brightest for Thank privilege we before accomplished around leadership XX successor, a XX. I Board we Earlier my the best out effective as had. many Thoughtworker, impact

to expecting I baton. leaving a as and We're now, the continue in return to hands. an capable to I time sequential right And adviser in it's support smooth transition. to pass QX, very know will I'm this growth the business to ensure

In yet a We QX, showing revenue environment we exceeded expectations. in delivered context our improvement. of stable, though the isn't signs of that macroeconomic

client monetization services. sales still Our cycles but for conversations growth-oriented steady. managed our are and strong AI work and portfolio more DAMO We're enterprise client services, data elongated remains demand seeing having around and

QX, in resulted due guidance. supply of short adjusted our rebalancing ongoing mix. in gross offshore/onshore fell timing lower-than-expected which a This margin has of our margin. However, adjustments we EBITDA This to includes primarily program, to our is the

improving we're committed and ongoing to on program we're executing Our focuses efficiencies, plan margin restructuring and to our achieve it. profile, our

client Our strategies are technology. centered around

sales continue partners investments for marketing, and and are on clients. new Our services off, and impact extraordinary to in focus our delivering paying we

X.X%. $XXX quarter, during of adjusted Now We let our first revenue results. me million EBITDA quarter the generated first with of margin share

gaining to is We to quarter expect growth bookings and sequential delivered in momentum. return XXXX. go-to-market industry-based QX strong Our in quarter-over-quarter the

at We in with of remain reflected clients trailing growing as quarter our XX-month $X XX relationships, focused the over on bookings million client end.

in acquisition first the the contracted client compared quarter clients We quarter New a in XXXX. remains new XX of with strength. fourth XX to

we verticals sales in on. traction new public a higher from services. These logo have technology our vertical-based are health with that services, seen model focused intentionally and business energy, have and We acquisitions

clients of and success. have to to and We're outstanding harness future evolve operations reputation technologies positioned We power leadership. the adapt AI our for innovation well data and and cloud, thought to help their

over let hand to Erin. Now, me

Erin Cummins

for joining everyone Thanks, to and thank Xiao, call you our today.

relationships, client we our across invest and We verticals. driving strengthening engagement are all clients with continue to in

Our from with focused QX efforts. XX% returns quarterly of continues bookings provide coming in to approach outbound building to ongoing demand

opportunities, teams Our us top pipeline of our converting in expectations are achieve ahead helping line QX. results

backdrop said, we a plans have of the partnering budget still needs clients macro against Our steady team's we their incremental the and and into That they pressure last remains environment. quarter. challenged macro execution not action. of our intact, development as since remain with Their comes put digital the client seen are

decline let's of and detail the revenue currency. in QX. first last in quarter. the both $XXX USD growth a representing Revenues about more the to constant XX% Acquisitions months immaterial Now rate turn completed were million, to in XX were year-over-year

of in public X% America North by & year-over-year verticals, During saw and services; financial in retail in travel declines year-over-year the XX% quarter, automotive, health APAC, XX% services consumer; XX% in XX% the and XX% and industry services; in LATAM. Among declined in revenue and transportation; energy, XX% in technology business in in and XX% we Europe, insurance. XX% and our

saw public XXXX, of automotive, energy, and we travel health; technology QX transportation; and & and services. business growth in to sequential Compared

During percentage revenue, XX of top XX%, generated XX% and top XX XX%, clients QX, respectively. top our as and a total X,

clients As than business million. greater from clients. of QX, a $XX TTM of end existing the On of TTM came basis, XX% our we with had XX around revenues

annualized our per QX revenue average of employee $XX,XXX. As of XXXX, was

the above strategic which that believe industry remains of average this importance our work. to continue reflects We the metric,

XX% finished we down XX-month billion, bookings trailing of a QX $X.X basis, to QX compared with of On XXXX.

bookings the length Our which change and client over that reflect prior the pressured developed year-over-year TTM contract year, in sizing. behavior

stability and were among XXXX. However, sequentially relative of we unchanged bookings to TTM from QX continue our see clients

XX% year. for to gross As compared the Xiao mentioned, our margin were prior Adjusted QX XX.X% during QX bookings was strong.

utilization on a high gross continued onshore basis. like-for-like impacted by to be single-digit lower QX and pricing adjusted margin declines Our

million an as margin $X for percentage was through SG&A quarter, management million X.X%. XX.X% EBITDA year. in reduction in to adjusted the year-over-year revenue of quarter first was still of In the a the investing cost from SG&A Adjusted our a first compared seen We've adjusted XX.X% of generation. proactive prior while in demand EBITDA $X adjusted

share $X.XX in diluted to was year compared the per $X.XX period. QX loss GAAP prior

adjusted XXXX. during was was Free of $X.XX year the compared the Our QX in $XX prior flow cash compared period. first million per loss diluted quarter free flow to EPS adjusted diluted cash of million during share to $XX of $X.XX negative

The headwinds in year-over-year impacted addition cash timing to of items quarter. revenue flow certain the in

We expect cash positive flow in QX.

As of million. XX, loan balance stood March XXXX, our at term $XXX

We have revolving to with continue cash of quarter a million undrawn $XXX million ending and facility. good liquidity, an the $XX credit balance

and believe industry. Our we in make possible, have our outstanding best employees that the to we the technologists continue achievements

basis on QX up XXXX. in rate remains attrition an averages. year-over-year TTM Our was a sequentially from and XX.X% of slightly In QX, improvement voluntary XX% attrition in QX XX.X%, below XXXX, industry from

At of head count XXXX, the QX end our XX,XXX. was around

selectively are sets, skill hiring on infrastructure. We focusing and data as specific such

to to back the let update hand Now call share business. a me on the broader Xiao

Xiao Guo

Innovation We're Thoughtworks Erin. progress market in was provider and only named focus pleased a QX global by be making geographic Services with we're leading were XXXX from Forrester, research continents. a on to Thanks, pleased We service report Forrester company. listed steady Landscape receive to recent Consulting the recognition Research. X

deliver continue We extraordinary execute to to our impact for clients. our vision

We company, platform, innovative Group, this client stories with of Australia's since actively Foxtel Sports, share aggregator their XXXX. worked BINGE engage subscription streaming integrate to Foxtel life. bring to has some with Group me Hubbl. services, the Kayo leading Thoughtworks television to Let and

with under future that sports streaming corp. conglomerate affiliated Kayo the Foxtel thriving shape Sports, the We also of umbrella Group is to service news American aim a

sellers. the Autotrader partnered largest is transformation. to marketplace, Autotrader with XX% automotive Autotrader experience. Today, pool with retailers. engaged automotive vehicle largest to years brings working U.K.'s U.K.'s Autotrader their is with on industry-defining to Thoughtworks most connected access providing of and realize provide customer aspirations the an of major over the largest audience together X ago ThoughtWorks consumer a

and monetization approach XXX in and systems to change Wine expanding with stores, of approach. applied upon its ERP to Using sets, product-led intricate our adhering Wine Total Total data outcomes. on and business buyers' product in it response to were a get while the a product largest to this for Total the enterprise on to store Having shelves independent schedule tight time. fine reviewing acting for approach, extensive experience and also Total supporting expected to wine systems, more grown cut The prioritized is down reduce client, operational product improve focus for ERP easier buyer a work organizational Wine initiative and applying to drive our More streamline And operating retailer impactful Wine thinking into for thinking efficient. building making the tasks, & broader and tedious internal costs. buyers U.S. them the aims

to financial allow key migration, the Global to to this and marketing Through reuse efficiencies, Google, integrate have entertainment commercial Grupo partner, Global reduction and its costs, products, from need The transparency. improve and linked platform Play a of and Brazil's data intelligence efficiency. and commitments. months. legacy driven XX% reduce system it This the ESG increase our to ] project migrate group, processing with X optimize Together XX% just its was processes, in Google saw one leading data of better enabled Cloud a scalability cost and communication of set code by to by we in size teams [ streamlined reduce Global

with challenges you can harnessing these expertise intensely cutting-edge are our focused technology. on In our clients' solving examples, that by toughest see our technologies

to our professionals AI Now bring and and strong, to AI-related is team service AI. to let's AI turn working of ambitions demand and for world-class Client remains interest our work clients' reality.

of to were working the organizations creation, on the production a is XX At client San with Watchful's acquisition and effectively, into announce AI their returns globally. become talented of projects. This partner accelerate to expedite IP Thoughtworks' projects deployment, moving the of first enhancement the AI to investments. delighted successful leading a individuals, deployment of suite from services that AI providing of proof and acquisition transformation and of we over data end company clients on concepts The from the We're strategy Francisco-based Thoughtworks' AI enables quarter, faster models. Watchful thereby Watchful. and technology integration technology helps rapidly AI AI-related will

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our new engine, X launching quarter, first we the services. up In AI powered launch services

source AI-first products clients and AI digital of and covering example, be followers. our services, delivery, for range a and AI-powered For platforms. cases, We value of a use technologies these AI software will believe wide

improving AI's their clients data to on and increased also We're monetization systems data offerings seeing harness demand for as potential. our AI and focus enterprise service

me a Let few share client examples.

with XX streamline process. have its a customer top global bank to compliance worked We

bank tax summarize large large complaint in language delivered working a customer We the models. recently, We this experience. for with challenges, many a data built and a and to platforms, extract and on bank's system on in have complaint based decade language resulting poor The faced models. more audio been team

[ interaction. common a customer summary ] structural web save Additionally, improvement achieved XX we To and and irrelevant information. hallucinations, and techniques, page agents employed conducted delivered QR out the per filtered can web harmful customer efficiency complaint complaint analysis we and seconds now chatbot. of minimize analysis We approximately XX% for

in cost the chain time. and the maintenance We dollar and airlines reduce maintenance sequence days airlines modeling holding number due between operational reduce system double-digit internal data to optimize an evaluate one costs use by airplanes integrated an optimization models activities. the find has algorithm developed This already million optimal are to costs. ahead to trade-offs schedule. visualize to XX inventory ongoing this world's to built We data revenue. program We top of maintenance with We update grounded of disruptions in of maintenance the and savings to delivered real the

All this scale built regulated is in look than commitment complex, this critical as often and environments. our is in technology. they AI our on ever, to and clients to fast-moving technology More ethical to deploy expertise

and expansion. them XXx shift services help we labor-intensive services DAMO managed DAMO We're deals managed managed to Diversifying productivity client applications. offer. the longer-term enhance good DAMO our strategic pleased Thoughtworks and Thoughtworks' to service that that managed deliver a priority. for for transform, services beyond and uptake QX. simply XX portfolio We continuously are AI-powered providers with services service go is to is Thoughtworks' contracts new getting sustaining in expect

write and They technology make which technologies that look our the the more Our differentiate the Clients books to leadership tell us us to right clients often challenging. turn technology. them that shape arguably never to future help Thoughtworks. we thought me because of been is decisions,

books. This quarter, new X published luminaries Thoughtworks

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the Thoughtworks I'm yearly ]. platforms, also tools, that and proud based the Technology edition snapshot the the published XXX AI. [ highlights Radar Through ThoughtWorks we clients. XXth hold. series clients over techniques, assess of to frameworks trial, should blips adopt, the what blips, a they of to X/X on of share relates working languages with teams global includes is twice it XX and of This experience Edition and

to you, Back Erin.

Erin Cummins

Thanks, Xiao.

Now let and XXXX our QX full business discuss me outlook for year. the

we stability developed client environment less, with achieving more QX. macroeconomic Clients the is incremental seeing our pressures during not remain and budget We focused base among are but unchanged. on did see

budgets. Our teams converting pipeline on within opportunities client are of framework focused the

conversion drive of QX and our focused the QX. approach, helped faster which seeing in into are We vertical benefits

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

FX rates, incorporates an At in current guidance immaterial QX. impact

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

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

year-over-year XX% year full X% XXXX to $XXX to million reflecting to Turning currency. constant billion, revenues our the decline XX% in of in expect a We outlook. and $X.XX USD to XX% in of now range

supply we We and X% still driving functions, for remain XXXX. EBITDA expect and as we expansion our in to through the margin to adjusted G&A efficiencies year, both progress Additionally, continue margin full our on focused expect XX%. we of

August. realized we March cost As $XX last have savings began annualized we XX, of in million restructuring since our program

from cost improving undergone we the million. to we of targeted cost have total we our million $XXX are $XX $XXX savings range range further profile, of targeted Accordingly, initial to As million our our million have raising savings identified $XX of process to opportunities.

recorded our restructuring now QX. cost expect pretax which With already total million, increased from million the $XX charges through $XX savings of million of the of $XX.X target program, end have we to we

Importantly, service anticipate opportunities. these savings client any not as execute we to upon incremental do we disruption

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

at we are we that an For of year, $XX believe compensation million. stability. the signs full we point share-based expect inflection Altogether, will total and are seeing

Our expected growth into QX is encouraging.

results improving driving on focused margin intensely are expansion. We and

while are building client delivering and company We more thought through a leadership impact excellence. our resilient technology

thank Q&A, Xiao we Before get to you into leadership. I of many would like to years say his for

seen here. to business many greatly and never work has wavered. We honor passion You've you've all and your you. been contributed changes, your the It's that for work an Thoughtworkers all throughout time appreciate this with through for

Operator, for will the provide that, instructions with call? And move let's Q&A. you to those please on

Operator

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

Tien-Tsin Huang

with the of Xiao, Yes. here. you the course, best, transition wish

great as importance But bringing important an it choice. things to type of of with I in Thoughtworks about the systems who's a everybody, like together outsider just correct? in I you as balance first wanted really package if a is curious time, bringing the the expect your just the can just of and to integration the Thoughtworks, to I'm some know which around what We is verticalization we And the think Mike, you've continuation and know about well that culture, to the successor, think, of that implementation trying talked balance. more of change -- work. and I ask lead transition I'm on Mike.

before Just great. Mike joins would whatever share officially you can be

Xiao Guo

question. the for you thank Sure.Tien-Tsin,

we to time external we blood, term to believe. the next we're are grow next So good continue at quarters. a the looking the years, obviously, the what done expertise to at to not need or And trajectory, of And think then X think And new consider We've X we we growth and more is experience. business. I things X I we transition, to more we a phase think is one that X, in then at longer a are restructuring. to just the bring look where path on see

a that to what that, think you we we lot Thoughtworks. leaders what take tenured and long believe, then with more external As Tien-Tsin, We mentioned time it's combine experience. of have in have we

So rationale. that's the

example, of we lot the We to modernization. TAM. our on do for terms us do expanding them strategic Thoughtworks point we, clients, believe often the we're client more on change, implementation, those become the not path of implementation. focus supporting legacy restructuring, areas increasing by Thoughtworks, asking And about change of strategic vertical then and intention our on in helped our and more a to also to especially software And to that. into very to bring the have integration have system the package software the also and because that planning see Thoughtworks partner system better experience integration, we -- at we package a We're

And unique And end, asked, creating in committed the culture pursue our then our is Mike continuous for industry as excellence. then built focus culture Thoughtworks' and [indiscernible] to we a through just are you that and proud knows want technology and that been I we long improvement. has culture at technology impact excellence, that of about time, the extraordinary the also of of mention, have excellence, purpose to he on

be to situation. going a it's that confident we're So win-win

Tien-Tsin Huang

Great. No, glad hear that's it. case. I'm sure to the

hear, -- that on pressures just whatnot. to that's no second incremental on, my stability you the just follow-up commented question, the On and great

to and related forward? visibility do that, have you good environment switching front pricing projects . pricing the the on Just here around

Xiao Guo

Sure.

drop and also QX mentioned QX in seen we're then quarter. pricing 'XX, the So in this we

for or mostly during signed QX of was that driven the by we and QX. deals the budgets, it about quarter during As it client quarter, the negotiation some big during we especially talked XXXX last year-end

dynamics in already, this the pricing is of contract our that believe new moment, at the we So majority portfolio. reflected

So much declines should to significant stabilize. further pricing QX less from should be QX and

up work new the higher and where rate tends meanwhile, signing we have a to the discounts. volume we're new than to sometimes In for at give give -- a bigger the logos start deals

normalizing We So don't drop significant overall, and stabilizing. is it expect a pricing continue. to

Operator

comes Katri Our next Wedbush with Securities. from question Moshe

Moshe Katri

you, great good luck. Xiao, been interacting it's with and

on up wanted just pricing conversation pick to the I again.

any some my terms been mix there than rather here that's just in pressure? was question. driving factor pressure, pricing That's of like-for-like of pricing that offshore So first

Xiao Guo

working great Moshe. with Yes, you. been it's

world. question. The And I So expect that the offshore/onshore we impact continue pricing the also being higher comparison. definitely mostly to on then that average thank -- is for across -- then an referring what but like-to-like a as call price The to mix earlier work by the it you was offshore mentioned move drop to rates the average expect creates definitely, higher bill utilization. pricing. more our offset offshore, we to margin, And that's we pressure

because were don't were But we they're pricing pricing ours Overall, it the I decrease is referring mostly the offshore/onshore mix. think of stabilized. environment mind to we if pricing, -- being like-for-like

Moshe Katri

my you China. and past, seeing on APAC. there In Singapore, follow-up provided some Australia on some in is guys Maybe the us Understood. updates you're what there? And color

Xiao Guo

Sure. market we that and last matter. APAC Singapore seen has Indian the for local then stronger And growth been have resilient over pretty quarter. in

of mostly growth has local because over seen been sector our mentioned, -- the in market. you and Australia As slower tech the then Australia tech time, long exposure in a have period

further. It's recovery. It's definitely shoots. not green seeing stabilizing. We're then seeing declining we're And

but ramping Some of for it's not rebound fast as a projects, as perspective. were up are hoping clients adding we headcount, our now from long-term tech

continue, better. we incrementally think, So getting just I

growth. we back there. opened getting we there's local are The country growth One -- X the work the do there. up, lot we're rebound as from after there to also work not economy is There's the as but return do growth as a expecting, not as China growing. work -- fast offshore fast It's perspectives. economies local of the still start economy is to to the it's

it are. stabilizing still but And have we the it's as It's growing as not might been rebound. seeing otherwise, and We're so growing. fast

the for Offshore being we're China tension. geopolitical a conscious risk of exposure. market the little because a And constraint while been for also of has then

China, we're Asia not to and more on growing other pushing America, India other some at Europe, looking areas. in instead hard the the of we're the of So some Southeast offshoring and Latin offshore Eastern

Operator

Bryan Cowen. next TD comes with Bergin from Our question

Unknown Analyst

on [indiscernible] for Bryan.

First we on question had demand.

highlight time further the dig XQ, which demand years? indicators call-outs to the could as to months? in forward? wanted over you else X or into tailwind you X how looking for in almost implied X changed would that giving geo have about notable What And past confidence view sequential would or what's say Just growth vertical any the be first headwind a you

Xiao Guo

we of we similar hasn't changed. but a from ago, the macro ], Zach sales size -- in It's churn, earlier, smaller and quarters to deal a current see described longer to project out perspective, with we years for compared is [ client recent Erin Sure. have the behavior what environment continue stabilizing with to called cycles in respect couple fundamentally example.

But there's seeing more are -- that of marketing in efforts increased spending We're a with vertical-focused our investments paying off I approach. and ROI. also strong probably some -- sales think there's and restructuring seeing where importantly, discretionary especially where also case a said, we we're for opening

team QX. good opportunities did in strong have And bookings then we QX. in Our pipeline converting job also a

confidence for coming So quarters. give the those us

then growth expect later do similar this putting sequential year. return by to this and to trajectory QX together, followed we So a

Unknown Analyst

margin impact like more supply XQ the it front, fulfillment latest are in Got still it. last and it's to causing coming results Could this initially And here revenue friction, so that these whereas so some the internal on elaborate on emerged limitations quarters? if is constraint, the the a time, you quarter expected sounds issue. but on

Erin Cummins

take [ that I'll ]. question, Zach

did Xiao the last as specifics, in addressed has pleased release, I That terms change fulfillment, higher put and did is the say, lower some in that's with bit well touched what but been as the earnings you offshore/onshore frictions the around things been just we're processes seeing that's as our the internal the had mentioned, in we what of to the on now. What supply. mix. and little from as we impacting more Really, some and expected. is revenue fixed onshore utilization we Just margin then supply that on of with adjustments and I'm offshore restructuring on with normalized, new a just touched was have utilization

those that we should issue, so of it to last is is note margin. all that. that And work highlighted the -- I and say, would highlighted what couple through had quarter impacting quarters a We did of that take

So on are our the release, the we plan. talked get there, issues supply. about whole, to It that feeling supply addressed. on our quarters to We're couple the been will QX they've in us of that we a also progressing very good focused of take but and is rebalancing

Unknown Analyst

wish to it's you Xiao, Understood. you the on good we you next chapter. with work luck been and

Operator

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

Tyler DuPont

for Dupont is on This Tyler Jason.

if known discuss to and spend projects. be sort to could of less bill want start, the more like on consulting-oriented in those just initiatives ROI. Thoughtworks you and short-term with across those for minute continues just of the projects high discretionary realizable is demand and visibility I rate you're the maybe First, focus sounds more on types on a that working the It the projects

to the X out? XQ, are historical compete the types? differs you work? sort you pricing what discuss aggressively current Given as there's just that you you're a Thoughtworks, in between had make calling difference worth rates any project go-to-market those concessions particularly more of if in focus your seeing And how for if can Particularly between win of

Xiao Guo

you question. for Sure. the Thank

we're lot because a we've of of necessarily they're consulting a with do We continues That' work. a have And important. do of focused strategically historically but is on is long-term think lot funded -- right clients. done ROI. now getting delivery everything our engagement short-term work, not lot then doing we So what I

much on So more from on consulting our away is getting more what of seeing projects and And more just just lot funding a It's back the short-term from from service not to then focus bit just as so kind consulting client offerings steering not buying or -- do products. -- on focused just executing projects it's a so their of is the we're much consulting kind deliver perspective, sometimes a we projects. but delivering behavior. go-to-market to side, focused on pulled really expanding

So hasn't -- changed. go-to-market that our fundamentally

rate up of been win couple consistent over last has and then especially the moving quarters, this Our quarter.

part I market over with pricing because aggressive, are contracts, more a realistic we is of environment. going in the we that and the think more to the are current of turning some

approach, we believe our giving to increasing another vertical perspective, to their lot focused also, give edge we that, us And rates. our win solving in clients our that from problem be us a more believe, ability relevant domain-specific

in similar. no feeling rate, we're the then new perspective, good overall, delivery consulting win So about our both then terms there. much of win is and from projects a and extension difference rate There's

lack competition. projects the of I think against to competing to more on is consulting due client pulling back budget as opposed

Tyler DuPont

XQ modestly follow-up it numbers, year came looks based as low definitely range. full below end And a on we're on margins, like of Okay. weighted. the looks half more in it then back And like the just

through were across budgets us you projects margin will? what 'XX reacceleration, through the you the sounded pricing dynamics if many business walk curious in if back like concessions for XXXX, made gives confidence you the I'm can year the broadly. half and that It across facing

So the do Or you would offset anticipate any back on just clarity to there helpful. that? in pricing of be strength new half year projects the

Erin Cummins

start. the Thanks question, Tyler. for I'll

pricing dynamics, half. not or there the included pricing in in an the the of dynamics of back terms no, improved is guide the year margin for In assumption

not our the we stay are the environment, the But of pricing And talked on discretionary about. Xiao expectation stabilized seeing a largely change. seeing expecting are that is which macro mix unchanged. some to work, consulting then will We whole, while are we

in quarter. confidence we bit And on touched a already. little the do this last why I I worth It's have about this also a talked margin? But increased So reminder.

to margin at look our utilization. first XXXX, we improvement, increasing all, is X As key elements the of

have of some we there's utilization, room plenty While increase still seen go. in to

The cost the particularly piece because oriented onshore second utilization we offshore of of that that the lower supply our rebalancing locations. higher is have towards and is mix,

headwind margin we've that So that experienced. part of has that been driving

As we confidence, in momentum prepared the first strong all, incorporates in QX. the go QX remarks, I have that as feeling are year. an line we touched my we sequential inflection top growth where on we point forward, about positive our from for have to and guide QX the at of We're bookings

that so helps. And obviously

offshore. time, costs At very our managing carefully, with aligning to are and base supply that the we we our same are shift

So expect that And really, QX, base the have uptick a more utilization margin margin expect the we management. discipline of half second continued it's margin I guided I is to and consistent a improvement. improving year. revenue see our our to combination uptick, in stability In in what our plus the and drive in of cost to that

Operator

Instructions]. [Operator

Our Baird. from [indiscernible] with question next comes

Unknown Analyst

This restructuring for ask, the big line you intact. with to the Dave. stayed Why on margin have in is Jacob raised margin raised guide guide that. just wasn't savings, But want the restructuring you I savings?

Erin Cummins

I the delivered first savings say, savings, all, I million we will in reminder, The $XX QX. savings, additional of as of have a guess, restructuring the annualized end at

QX. until come it will QX been most some and some of when timing there certainly in come of won't come have that some those will through of of it realized Now little through, but bit are in through, savings differences a will QX,

really, So the And that it. part be would differences. of of most timing it is

view, to that. it's done an making service. that client to intend As there's had thoughtfully QX are we taking of carefully so and and we shift that the with continue not talked do mix, good very sure incredibly supply the actions, We've job around we about just impacting far we're our something

little and focused on we're but So updated that thing shifted is say, the I the base, We're for guidance. of haven't would the the adjustments margin a right client. doing doing thing on we the the our is the why bit, cost timing on whole, right

Unknown Analyst

And sense. just you. one more for question makes That then

was the you So down. share count expand was? that guys on guide Could why

Erin Cummins

an you have back for answer will to the The share count did place guide But in quarter. some QX would out sure in we'll we specific fuller assumptions just the of be a some that place, don't get I took changes from that shares because we some make with but review, issue the took come that have now, answer clear. that's I question.

Operator

question comes Matthew from with Roswell next Our RBC.

Matthew Roswell

been years. couple to over it's Xiao, the with a last of Yes. pleasure you work

you're the What it guess areas cutting up comes you in? that, too to guess, restructuring? restructuring part when on savings finding extra that I were the -- And not cost as question. -- what following think I makes you're are you maybe the of much that

Erin Cummins

I very into we our mentioned focused about the terms making at thoughtful of we're continued we go-to-market. execution see sure in earlier, very restructuring on savings, we're As and taking, are the actions well being our momentum as as that that demand client

Again, where So adjustments because there's of we is some mix. facing it's where particular, onshore/offshore focused in are the nonclient areas

utilization so or we see over expect don't where that next to the in we're a looking. be And improvements so, would where place X months

vendor perspective, -- fully are of we expected. as by see operating from expenses. our opportunities supporting operating good we business as decreased expense our an to part We what realized as QX, of the the that, some our addition We office-based In had seeing we've, with globe. functions in end the of around of our really movement restructuring well for rationalization further expenses some

we last So consistent. just in identified opportunities. It's whole, year. on it It's we've with that the more restructuring very an increase started line the program is because really

We well. continues make client go are sure to that to service treading carefully very

Xiao Guo

just to that do for we then to see ] do it's growth. And Yes. is but to that distributed. increasing, sequential evenly services expect part, only [ client add demand think We service

that to Now see we going more demand know for services. offshore we're

then years. what we're last and that's and slightly infrastructure For example, we to far skill data different skill cloud going over sets, developed for more sets than see few so the sets demand have skill

So we're areas areas. certain sets skill in and other of capacity the move in as some to reducing trying we increase forward,

of to opposed down growth, the optimization at this the growth to growth. the support the in to empower as spirit is cost So the all

Matthew Roswell

that And the percentage your if stabilizing question Is sort I percentage improvement what control? sense. that market of is on could utilization based utilization. kind makes follow onshore up and or increasing of the on And shift the mix improving? Hopefully, of is on what under the --

Erin Cummins

had the sense. of stabilization growth in the matter. we're lot we we've our pleased mentioning about, the the which in quarter Part market does the go-to-market make But we It and again, bookings for strong of control. market worth dynamics it, be Matthew, we course, that XX% talked about, of have a would dynamics, expect it, what sequential under QX. really seen momentum,

of we our that it path confident is under the market clearly, we're but control, about and matters, very So feel most the on.

Operator

Peller Our Research. from Wolfe with Darrin next question comes

Paul Obrecht

ones on Obrecht on is new Paul more approach as detail Maybe go-to-market on existing winning This some for is customers? for with maintaining at both mostly Darrin. you find new Can customers and do model provide it this how optimized there the resonating work going be are point? you relates done to And develop capabilities? the still and is to who them that further Or marketing is some industry-based this sales to renewals?

Xiao Guo

There's the of particular definitely a sales and to domain as Thank professional more the changed go-to-market our and question. and a retain being team is services We're diluted. that that at The sales ground is constantly go-to-market done. we more for intention longer only the lot would journey. expertise team, you lot beginning then our hypothesis on a our over vertical be and they the this team focus time vertical approach the opposed especially on so of to period of build

on. -- with higher are and and are then we're how I language So we where we point wins moment, and clients. verticals technology. seeing new can logos, have we clients, of we've business That's and chosen with talk same to savvy more that focus understand the the off, biggest And our our seeing then with solve when more our pursuits, then speak in relevant why their have paying to people who to especially we understand I at this problems new especially think, views new

services. and auto sector, public then energy, example, in For financial

helps clients. And with then it for -- definitely ongoing

One given keep of rotating time to of so have have and domain a we Thoughtworks had it's our over the is challenges out built they with that of believe then the they clients team, their far. lost seem knowledge the vertical opportunity, out people

technical more model, over that's and talent a we have talent this key delivery with period So ring-fenced vertical of in time. longer particular a

solving better becoming expert get to problems. their they our So helping a at clients

like journey. said, the it's the beginning But I of only

We doing we're approach believe time, off even We quarters. paying to that have couple more. going a over only this been this of see for

Paul Obrecht

anticipate deploying do early. I we could this see work then start know won't as I And materially know ready. concepts Gen scale? by and Gen year-end proof happen to follow-up it of majority platforms AI, it's getting XXXX? data the maybe begin at as being Great. But done a you the expect AI revenues on the of contributing of work until do is topic clients mostly the you Or

Just perspective. trying to think timeline about this from a

Xiao Guo

data a up work You're language POC point. work. do of, of definitely spot there's a expect large especially lot the kind of We yet. on hasn't preparation terms in short-term theme been work platforms. The some of model a Gen it AI building, at building itself, really lot And main to there's pick

some Now it's going of to end year, be it. the them more of next probably year, definitely of

early for It part the for [ we is going reason a later you others. this tell area development that we to more it's year. language is tools That's example, the what to have especially Watchful, acquired believe specializes model scaling, key definitely the feature And which accelerate model large from us be of effective ] building a year, product next company. eval to in to is than POC this

see we as model of do your at We're year. which it's norm. is But -- see few the year beginning end still next expect of not to is of good the large going probably or do the be more language we ours, but to development. as seeing So later them, guess

Operator

comes next Maggie Nolan Blair. with Our question from William

Unknown Analyst

transition. It's Congrats, wish Xiao, [indiscernible] luck Maggie. we on on and your for you

about a cohorts and client seeing more top about in bit I current increased this quarter? you're the those Can wanted X asking looks the sequentially. talk those both off little XX to start buckets. top It dynamics like you guys

Xiao Guo

Sure.

X So out, -- incrementally still increased top you pointed It's the from like the XX%, revenue well top by range, diversified. relatively in a clients X% has is have constant which XX% XX and perspective. as concentration

concerned given offerings new current mostly clients example, packaged then So is top service increase adding about the and strategic we're focus system overly due longer tend our environment, term, we to not like the retaining integration. for more more DAMO it. to relationships, on But software develop --

So we'll expand continue our to footprint.

it's to customers, expand from them macro, a to have their to vendors. of when -- consolidate Given current easier the revenue the especially some intention existing perspective, top the with

that, And more gaining with actually momentum benefiting so our are we from top clients.

And expand projects, of environment, longer the smaller [ size. land And deals following some just deal a the also get-go. size, a current smaller especially we not tail, ] given starting increasing. at at That lot there. we're then approach so are logos new said, It's is new seeing these a getting we're then of that big the of a lot

Unknown Analyst

constraints on now was next helpful. certain skill Can then That's the sets. last on is, was And my quarter, some mentioned expand question that it seeing seeing you supply Thoughtworks front? what around you're maybe hiring

Erin Cummins

are place question. skills infrastructure and we're earlier. where some a doing the seeing demand. demand. continues seeing particularly speaking where little Where I'll [ data about that touched we a Thanks, ]. take skill to Xiao of that bit we of around it was be sets lots on Kate We more are hiring, it's good

specialized skill the And do sets sets data requirements. have skill some experience of or

team. been for so focus And our a that's recruiting

and our from effort quarter lot the in We positive seeing are that. put a recruiting quite momentum last very some of in

And continue to the about whole, we where so ability to to are feeling and strong good on demand. we fulfill the see expect supply that

The other has that thing is on been pretty touch that I would offshore strong.

is we're continuing locations. so more And well. where And to whole, the in offshore on going our hire

see momentum. So the and going hand, is we think supply well, we very recruiting, recruiting pleased to are we're are areas the constraints the particular in well where in

Operator

question last comes Ramnani Piper our with from And Sandler. Arvind

Arvind Ramnani

your you the a you wish pleasure next on was and working with endeavor. very Xiao, it best

you're environment you improvement? of some see or done improved? there not you doing, demand signs work type improvement something necessarily kind just has the is Is getting what there of to idiosyncratic But your I environment, on of but of kind starting about demand even it's your not really mean, the or services all a or worse. offerings that to characterize I as though are had an specific it question, you that you'll no change, something are the still where seeing the have demand

Xiao Guo

Sure.

Arvind. First you, with a of too. all, working been pleasure thank you, It's

us, especially after focus focus despite and we restructuring that So from marketing perspective, capabilities. it a the have is has invested demand additional that sales more of generation we made what the to capacity, our demand macro in believe environment, outbound for on better

the for a sales came the we're think, our higher efforts. new bookings outbound also we given XX% that enjoyed marketing the the we result, over I You QX, new and these is in is then example, our due bookings of from from as effort, historically, conversion have to in. right from now from seeing put inbound might XX% brand have definitely, and opportunities. XX% That's generated of has outbound, only remember And strong team

we mentioned And earlier, we the to are vertical-based this continue the current environment. then we're approach. this I same verticals at then resilient that time, invest believe in more focused And on in

these verticals. health energy, of For paying example, we're our And logos science. well. automotive that care, off number seeing life come from large public A and as new

mentioned efficiency management catering of services. the application the operation asking short are where for, the are digital and DAMO, the and -- of some clients saving we programs, especially our the service finally, expanding term And for nature offerings, in also strategic cost but I then

this Now XX this. clients opportunity gives we total Again, our of market even service. have. this obviously client with -- couple using It X the was top a to few years approximately continuing our addressable increase ago. expanding portfolio are are a XX% same of us we to

Arvind Ramnani

one That still around saying of think really it. work pilot. helpful lot then. is And explains on proof-of-concept and what AI, were the I then a That's earlier questions, of Gen you

fairly So in small scale.

where Thoughtworks is project? is even And look at at this even any you scale your if if of much seen promise could Thoughtworks what you I see a want large-scale do even you've larger haven't, you when it -- just there not AI large-scale seen there like proof-of-concepts clarify AI kind where project? of you've clients together, is, be? see be what would Like [ -- or and where you the would you does there Gen come a maybe project single I to Have any AI kind at -- it is ] involved? Gen project seen, Gen

Xiao Guo

question. great a It's

bit the large model. like some the of the a So -- open the rack-based have to happen fairly do cloud-based model -- language to existing to tasks up. some the which ] And is a peel that large content then more of RAG and prompts approach, performa is the down very larger analysis. And and work the rack takes what use projects. simple a simple the in to using few Gen popular layers, another use we POCs then feed just into that basic to then you tends AI-related do some generation There's layer you [ to base, now, language move rack-based, do any right before platforms

language So that's large the work available. the around still ones itself large model, readily is the but the language commercial model is

fine-tuning. down, when then which layer is And we

computing of data model that from then perspective. power have certain requires fine-tuning that's a the and effort, a and cost heavy more more bit more doing lifting projects language We that's little large

as but far The large so language And seen already others, that the own is definitely the phase, believe than And we've have that is then POC and to right, more language proceeding I going your progress, we them model. final do developing more the and G&A of finally moving in large flight. programs that's building adoption of largest work we your from to we're as what progress, slowly model. we see earlier, to left this mentioned from own fewer

every and Now will that, case, of a effort you them require then those need LLM bigger that's generate significant but a in own will projects. some and much build don't to your

Arvind Ramnani

And pleasure once a with working helpful. was really again, That's you. really it Perfect.

Erin Cummins

and to still the how the treatment I share accounting in simply that wanted follow jump call, up count on about quickly respect the going earlier. we're dilution. count dynamics I the Jacob with quickly dynamics while impacts asked to that just the reflect highlight would on share share I'm to price it

the this big of last example be a An quarter. options. would from that's quarter to from So dilution change part

to you, I'll that, with over hand operator. And

Operator

Xiao to remarks. like over the There questions. are I'd call closing no turn further for to

Daniel Perlin

for Thank today everyone, thank our you, for us joining you, and QX earnings call.

clients Stay well best. impact all for thank every extraordinary the all to and together. partners day we're want Thoughtworkers, the I delivering and

Operator

does and conclude program, Everyone, may Thank your This you great have day. participation. now you a the for disconnect.

Thoughtworks Holding (TWKS) 7 May 242024 Q1 Earnings call transcript