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May 19, 2024
Thoughtworks Reports First Quarter 2024 Financial Results
CHICAGO , May 07 /Businesswire/ - Thoughtworks Holding, Inc. (NASDAQ: TWKS) ("Thoughtworks" or the "Company"), a leading global technology consultancy, today reported results for the first quarter of 2024 and provided an updated financial outlook for the full year and second quarter of 2024.
Guo Xiao, Thoughtworks' Chief Executive Officer, said, “I would like to thank Thoughtworkers worldwide who work tirelessly to deliver extraordinary impact for our clients.
We delivered revenues of $248.6 million in the first quarter, which exceeded our revenue expectations. Our ongoing restructuring program is focused on driving efficiencies, and we are committed to achieving our 2024 margin profile as we continue to execute on our plan. We expect to return to sequential quarter-over-quarter revenue growth in the second quarter of 2024.
While the macroeconomic environment continues to be challenging, we are seeing signs of stability in our business. Bookings in the first quarter were strong and we contracted with 49 new clients. We continue to see high client interest in our AI services portfolio. We have also seen market traction around Data Mesh and our DAMO™ managed services.
Our thought leadership and employee base of outstanding technologists position us to help our clients harness the power of cloud, data and AI to achieve future success.”
Update on Restructuring Activities
On August 8, 2023, Thoughtworks initiated several measures to reduce operational costs and better align our business with our customers’ needs in a challenging macroeconomic environment.
During the first quarter of 2024, Thoughtworks incurred pre-tax cash charges of approximately $2.1 million, which include $1.0 million in wage-related costs and $1.1 million in non-wage related costs. Since the program’s inception in August 2023 through March 31, 2024, we have incurred pre-tax cash charges of approximately $21.1 million, which include $18.3 million in wage-related costs and $2.8 million in non-wage related costs, and have achieved $87 million of annualized savings, which is above our targeted range of $75 million to $85 million.
We are continuing to execute on our plan, and we remain focused on driving additional savings. As we have undergone the process of improving our cost profile, we have identified additional opportunities to drive further cost savings.
As a result, Thoughtworks is increasing its restructuring program to capture additional savings of $25 million to $30 million, for a total restructuring program savings of $100 million to $115 million. We still expect the restructuring program to be completed by the end of the third quarter of 2024.
Thoughtworks expects to incur additional pre-tax cash charges of approximately $6.5 million to $8.0 million, for total expected pre-tax charges of approximately $26.5 million to $33.0 million (the “Updated Total Charges”). The Updated Total Charges include $22.5 million to $27.5 million in wage-related expenses, such as employee severance and related benefits, and $4.0 million to $5.5 million in non-wage related expenses, including costs related to reducing leased office space, vendor contract cancellations and professional fees.
QTD first quarter 2024 highlights
Revenues for the first quarter were $248.6 million, a year-over-year decline of (19.0)%, or a year-over-year decline of (18.7)% in constant currency. Acquisitions completed in the last twelve months had an immaterial contribution to revenue growth in the quarter.
Net loss margin for the first quarter was (12.4)% compared to (2.6)% for the first quarter of 2023. Adjusted EBITDA Margin for the first quarter was 2.7% compared to 11.4% for the first quarter of 2023.
Diluted loss per share for the first quarter was $(0.10) compared to $(0.03) for the first quarter of 2023. Adjusted diluted loss per share for the first quarter was $(0.02) compared to Adjusted Diluted EPS of $0.03 for the first quarter of 2023.
QTD first quarter 2024 summary
|
Three Months Ended March 31, |
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|
|
|
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$ in millions, except per share data |
2024 |
|
2023 |
|
Change |
|
% Change(1) |
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GAAP Metrics: |
|
|
|
|
|
|
|
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Revenues(2) |
$ |
248.6 |
|
|
$ |
307.1 |
|
|
$ |
(58.5 |
) |
|
(19.0 |
)% |
|
Gross Profit |
$ |
69.8 |
|
|
$ |
97.5 |
|
|
$ |
(27.7 |
) |
|
(28.4 |
)% |
|
Gross Margin |
|
28.1 |
% |
|
|
31.8 |
% |
|
|
(3.7 |
)% |
|
|
||
SG&A |
$ |
76.2 |
|
|
$ |
86.3 |
|
|
$ |
(10.1 |
) |
|
(11.7 |
)% |
|
SG&A Margin |
|
30.7 |
% |
|
|
28.1 |
% |
|
|
2.6 |
% |
|
|
||
Stock-based compensation |
$ |
10.6 |
|
|
$ |
17.7 |
|
|
$ |
(7.1 |
) |
|
(40.1 |
)% |
|
Net loss |
$ |
(30.9 |
) |
|
$ |
(8.1 |
) |
|
$ |
(22.8 |
) |
|
|
||
Net loss margin |
|
(12.4 |
)% |
|
|
(2.6 |
)% |
|
|
(9.8 |
)% |
|
|
||
Diluted loss per share |
$ |
(0.10 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.07 |
) |
|
|
||
Cash flow from operations |
$ |
(15.8 |
) |
|
$ |
33.0 |
|
|
$ |
(48.8 |
) |
|
|
||
Non-GAAP Metrics(3): |
|
|
|
|
|
|
|
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Revenue Growth Rate at constant currency(4) |
|
(18.7 |
)% |
|
|
(0.9 |
)% |
|
|
|
|
||||
Adjusted Gross Profit |
$ |
77.1 |
|
|
$ |
111.8 |
|
|
$ |
(34.7 |
) |
|
(31.0 |
)% |
|
Adjusted Gross Margin |
|
31.0 |
% |
|
|
36.4 |
% |
|
|
(5.4 |
)% |
|
|
||
Adjusted SG&A |
$ |
70.3 |
|
|
$ |
77.2 |
|
|
$ |
(6.9 |
) |
|
(8.9 |
)% |
|
Adjusted SG&A Margin |
|
28.3 |
% |
|
|
25.1 |
% |
|
|
3.2 |
% |
|
|
||
Adjusted Net (Loss) Income |
$ |
(7.4 |
) |
|
$ |
10.1 |
|
|
$ |
(17.5 |
) |
|
|
||
Adjusted EBITDA |
$ |
6.8 |
|
|
$ |
34.9 |
|
|
$ |
(28.1 |
) |
|
(80.5 |
)% |
|
Adjusted EBITDA Margin |
|
2.7 |
% |
|
|
11.4 |
% |
|
|
(8.7 |
)% |
|
|
||
Adjusted Diluted (Loss) Earnings Per Share |
$ |
(0.02 |
) |
|
$ |
0.03 |
|
|
$ |
(0.05 |
) |
|
|
||
Free Cash Flow |
$ |
(20.0 |
) |
|
$ |
31.4 |
|
|
$ |
(51.4 |
) |
|
|
||
(1) Percentage change for net loss, diluted loss per share, cash flow from operations, adjusted net (loss) income, adjusted diluted (loss) earnings per share and free cash flow were excluded as they were determined to be not meaningful due to a loss or negative position in one or both periods. |
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(2) Acquisitions completed in the last twelve months had an immaterial contribution to revenue growth for the quarter. |
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(3) See “Non-GAAP financial measures” for how we define these measures and the financial tables that accompany this release for reconciliation of these measures to the closest comparable GAAP measures. |
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(4) Revenue Growth Rate at Constant Currency is calculated by translating the current period revenues into U.S. dollars at the weighted average exchange rates of the prior period of comparison; therefore the weighted average rates used in each respective calculation are not consistent. The change in revenue growth rate at constant currency was excluded, as it was determined to be not meaningful. |
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Bookings
Our overall bookings for the trailing twelve months ended March 31, 2024 was $1.2 billion, stable sequentially and a year-over-year decrease from $1.5 billion. The sequential stability from the fourth quarter of 2023 to the first quarter of 2024 is a result of strong bookings in the first quarter of 2024 as our industry-based go-to-market strategy is gaining momentum. The 20.0% year-over-year decrease in bookings is primarily a result of reduced client budgets reflecting caution around the macroeconomic environment and smaller contract sizes which reflect a shift to offshore services, where bill rates are lower compared to onshore work, and, in certain cases, discounts or pricing adjustments.
|
Trailing Twelve Months Ended March 31, |
|||
$ in millions |
2024 |
|
2023 |
|
# of clients with bookings greater than $10 million |
32 |
|
38 |
|
# of clients with bookings between $5 million and $10 million |
25 |
|
32 |
|
Revenue by geography(5)
|
Three Months Ended March 31, |
|
|
|||||
$ in thousands |
2024 |
|
2023 |
|
% Change |
|||
North America |
$ |
88,800 |
|
$ |
115,060 |
|
(22.8)% |
|
APAC |
|
86,713 |
|
|
97,484 |
|
(11.0)% |
|
Europe |
|
62,212 |
|
|
78,784 |
|
(21.0)% |
|
LATAM |
|
10,868 |
|
|
15,728 |
|
(30.9)% |
|
Total revenues |
$ |
248,593 |
|
$ |
307,056 |
|
(19.0)% |
|
(5) Revenues are presented geographically, by customer location. During the first quarter of 2024, in connection with the restructuring, the Company updated the disaggregation of revenue by customer location to reflect the geographical market based on contracting location, consistent with client ownership within our geographical markets, versus billing location, as previously reported. All corresponding disclosures and historical amounts have been recast to reflect the change. |
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Revenue by industry vertical
|
Three Months Ended March 31, |
|
|
|||||
$ in thousands |
2024 |
|
2023 |
|
% Change |
|||
Technology and business services |
$ |
65,369 |
|
$ |
74,133 |
|
(11.8)% |
|