- Third quarter revenues of $280.2 million
- Provides updated guidance for the full year and fourth quarter
of 2023
Thoughtworks Holding, Inc. (NASDAQ: TWKS) ("Thoughtworks" or the
"Company"), a leading global technology consultancy, today reported
results for the third quarter of 2023 and provided an updated
financial outlook for the full year and fourth quarter of 2023.
Guo Xiao, Thoughtworks' Chief Executive Officer, said, "We
delivered revenues of $280.2 million in the third quarter of 2023.
We are seeing more stability in the demand environment and new logo
acquisition continues to be a strength, with 34 new clients in the
quarter. Our restructuring program is moving at pace. In the third
quarter, we took actions to achieve $68 million of cost savings on
an annualized basis.
We are prioritizing investments in sales and marketing and we
have seen an increase in sales activity around our AI, data,
digital application management, and enterprise modernization
services. Despite macro challenges, digital transformation remains
a key priority for our clients.”
Update on Restructuring Activities
As announced last quarter, Thoughtworks undertook a structural
reorganization. To date, we have (i) implemented changes to our
operational functions, moving from a geographic to a centralized
model, (ii) created a new organizational home for the majority of
our client facing workforce (Digital Engineering Center); (iii)
instituted a new regional market structure; and (iv) made key
leadership changes aligned with our new operating model.
Upon completion of the program, the Company still expects to
realize annualized cost savings of approximately $75 million to $85
million. The majority of the annualized cost savings are still
expected to come from reductions in operating spend, particularly
in non-client, back-office functions. By the end of the third
quarter, we achieved $68 million of the annualized expected
savings, positioning us well to continue to drive savings in the
fourth quarter.
As of September 30, 2023, Thoughtworks has incurred pre-tax cash
charges of approximately $15.6 million (the “Third Quarter
Charges”), with an additional $2 million to $4 million expected to
be incurred in the fourth quarter of 2023. The Third Quarter
Charges include $15.4 million in wage-related costs, such as
employee severance and related benefits, and $0.2 million in
non-wage related expenses, including costs related to reducing
leased office space, vendor contract cancellations and professional
fees.
QTD third quarter 2023 highlights
Revenues for the third quarter were $280.2 million, a
year-over-year decline of (15.7)%, or a year-over-year decline of
(16.6)% in constant currency, and were within our guided range of
$275 million to $285 million. Adjusting for the actual foreign
currency translation impacts, our guided range for third quarter
revenues would have been approximately $273 million to $283
million. Acquisitions completed in the last twelve months
contributed approximately 1% to revenue growth in the quarter.
Net loss margin for the third quarter was (9.2)% compared to net
loss margin of (11.6)% for the third quarter of 2022. Adjusted
EBITDA Margin for the third quarter was 12.0% compared to 20.2% for
the third quarter of 2022, and exceeded our guided range of 9.0% to
11.0%. We are executing on our restructuring program, and our
actions in the third quarter resulted in $68 million of cost
savings on an annualized basis.
Diluted loss per share for the third quarter was $(0.08)
compared to diluted loss per share of $(0.12) for the third quarter
of 2022. Adjusted Diluted EPS for the third quarter was $0.04
compared to $0.08 for the third quarter of 2022, exceeding our
guided range of $0.02 to $0.03.
Stock-based compensation for the third quarter was $12.8 million
compared to $59.2 million for the third quarter of 2022.
YTD third quarter 2023 highlights
Revenues for the nine months ended were $874.4 million, a
year-over-year decline of (11.3)%, or a year-over-year decline of
(10.2)% in constant currency. Acquisitions completed in the last
twelve months contributed approximately 1% to revenue growth for
the nine months ended September 30, 2022.
Net loss margin for the nine months ended was (5.3)% compared to
net loss margin of (12.3)% for the nine months ended September 30,
2022. Adjusted EBITDA Margin for the nine months ended was 11.2%
compared to 20.1% for the nine months ended September 30, 2022
Diluted loss per share for the nine months ended was $(0.15)
compared to diluted loss per share of $(0.39) for the nine months
ended September 30, 2022. Adjusted Diluted EPS for the nine months
ended was $0.10 compared to $0.33 for the nine months ended
September 30, 2022.
Stock-based compensation for the nine months ended was $48.1
million compared to $228.3 million for the nine months ended
September 30, 2022.
QTD third quarter 2023 summary
Three Months Ended September
30,
$ in millions, except per share data
2023
2022
Change
% Change(1)
GAAP Metrics:
Revenues(2)
$
280.2
$
332.4
$
(52.2
)
(15.7
)%
Gross Profit
$
94.2
$
88.3
$
5.9
6.7
%
Gross Margin
33.6
%
26.6
%
7.0
%
SG&A
$
81.8
$
91.7
$
(9.9
)
(10.8
)%
SG&A Margin
29.2
%
27.6
%
1.6
%
Stock-based compensation
$
12.8
$
59.2
$
(46.4
)
(78.4
)%
Net loss
$
(25.9
)
$
(38.6
)
$
12.7
Net loss margin
(9.2
)%
(11.6
)%
2.4
%
Diluted loss per share
$
(0.08
)
$
(0.12
)
$
0.04
Cash flow from operations
$
6.4
$
34.9
$
(28.5
)
(81.7
)%
Non-GAAP Metrics(3):
Revenue Growth Rate at constant
currency(4)
(16.6
)%
23.9
%
Adjusted Gross Profit
$
104.9
$
135.3
$
(30.4
)
(22.5
)%
Adjusted Gross Margin
37.4
%
40.7
%
(3.3
)%
Adjusted SG&A
$
72.8
$
70.5
$
2.3
3.3
%
Adjusted SG&A Margin
26.0
%
21.2
%
4.8
%
Adjusted Net Income
$
11.5
$
26.8
$
(15.3
)
(57.1
)%
Adjusted EBITDA
$
33.6
$
67.2
$
(33.6
)
(50.0
)%
Adjusted EBITDA Margin
12.0
%
20.2
%
(8.2
)%
Adjusted Diluted EPS
$
0.04
$
0.08
$
(0.04
)
(50.0
)%
Free Cash Flow
$
3.7
$
27.7
$
(24.0
)
(86.6
)%
YTD third quarter 2023 summary
Nine Months Ended September
30,
$ in millions, except per share data
2023
2022
Change
% Change(1)
GAAP Metrics:
Revenues(2)
$
874.4
$
985.5
$
(111.1
)
(11.3
)%
Gross Profit
$
282.6
$
241.1
$
41.5
17.2
%
Gross Margin
32.3
%
24.5
%
7.8
%
SG&A
$
254.8
$
295.8
$
(41.0
)
(13.9
)%
SG&A Margin
29.1
%
30.0
%
(0.9
)%
Stock-based compensation
$
48.1
$
228.3
$
(180.2
)
(78.9
)%
Net loss
$
(46.2
)
$
(121.5
)
$
75.3
Net loss margin
(5.3
)%
(12.3
)%
7.0
%
Diluted loss per share
$
(0.15
)
$
(0.39
)
$
0.24
Cash flow from operations
$
22.6
$
56.3
$
(33.7
)
(59.9
)%
Non-GAAP Metrics(3):
Revenue Growth Rate at constant
currency(4)
(10.2
)%
31.3
%
Adjusted Gross Profit
$
321.7
$
416.5
$
(94.8
)
(22.8
)%
Adjusted Gross Margin
36.8
%
42.3
%
(5.5
)%
Adjusted SG&A
$
226.0
$
221.6
$
4.4
2.0
%
Adjusted SG&A Margin
25.8
%
22.5
%
3.3
%
Adjusted Net Income
$
31.7
$
107.8
$
(76.1
)
(70.5
)%
Adjusted EBITDA
$
97.8
$
198.6
$
(100.8
)
(50.8
)%
Adjusted EBITDA Margin
11.2
%
20.1
%
(8.9
)%
Adjusted Diluted EPS
$
0.10
$
0.33
$
(0.23
)
(69.7
)%
Free Cash Flow
$
16.3
$
36.7
$
(20.4
)
(55.6
)%
(1) For QTD and YTD, percentage change for
net loss and diluted loss per share were excluded as they were
determined to be not meaningful due to a loss or negative position
in one or both periods.
(2) Acquisitions completed in the last
twelve months contributed approximately 1% to revenue growth for
the quarter and 1% for the nine months ended September 30,
2023.
(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.
(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.
Bookings
Our overall bookings for the trailing twelve months ended
September 30, 2023 was $1.4 billion, a sequential and
year-over-year decrease from $1.5 billion. For the trailing twelve
months ended September 30, 2023, we had 37 clients with bookings
greater than $10 million compared to 41 clients for the trailing
twelve months ended September 30, 2022. The 6.7% decrease is
primarily due to smaller contract sizes and shorter contract
terms.
Revenue by geography(5)
Three Months Ended September
30,
Nine Months Ended September
30,
$ in thousands
2023
2022
% Change
2023
2022
% Change
North America
$
105,666
$
129,421
(18.4
)%
$
323,755
$
382,856
(15.4
)%
APAC
97,155
108,353
(10.3
)%
297,782
320,233
(7.0
)%
Europe
66,292
79,937
(17.1
)%
219,524
239,466
(8.3
)%
LATAM
11,046
14,736
(25.0
)%
33,369
42,939
(22.3
)%
Total revenues
$
280,159
$
332,447
(15.7
)%
$
874,430
$
985,494
(11.3
)%
(5) Revenues are presented geographically,
by customer location.
Revenue by industry vertical
Three Months Ended September
30,
Nine Months Ended September
30,
$ in thousands
2023
2022
% Change
2023
2022
% Change
Technology and business services
$
70,612
$
94,219
(25.1
)%
$
214,440
$
274,815
(22.0
)%
Energy, public and health services
71,662
83,386
(14.1
)%
231,014
237,101
(2.6
)%
Retail and consumer
44,663
57,919
(22.9
)%
137,060
182,982
(25.1
)%
Financial services and insurance
46,447
55,004
(15.6
)%
154,380
173,139
(10.8
)%
Automotive, travel and transportation
46,775
41,919
11.6
%
137,536
117,457
17.1
%
Total revenues
$
280,159
$
332,447
(15.7
)%
$
874,430
$
985,494
(11.3
)%
Liquidity
We had cash and cash equivalents of $87.4 million as of
September 30, 2023, along with $300.0 million of borrowing capacity
under our revolving credit line, which was undrawn as of September
30, 2023. Our total debt outstanding, before deferred financing
fees, was $297.1 million at September 30, 2023.
Financial outlook
Thoughtworks provides the following updated outlook for the
fourth quarter and full year 2023:
Fourth quarter
Thoughtworks expects the following for the fourth quarter:
- Revenues in the range of $265 million to $270 million,
reflecting year-over-year decline of (15)% to (13)%; or (16)% to
(14)% in constant currency, which includes approximately 1% from
acquisitions;
- Adjusted EBITDA Margin(6) in the range of 10.5% to 12.5%;
- Adjusted Diluted EPS(6) in the range of $0.02 to $0.04,
assuming a weighted average of 328 million diluted outstanding
shares; and
- Stock-based compensation expense of $17 million.
Full year
Thoughtworks now expects the following for the full year:
- The Company narrows its expected range for revenues to $1,139
million to $1,144 million, reflecting year-over-year decline of
(12)%, or (12)% to (11)% in constant currency, which includes
approximately 2% from acquisitions. This includes an approximate $4
million incremental negative impact from foreign exchange compared
to the prior guidance.
- The Company narrows its expected range for Adjusted EBITDA
Margin(6) to 11.0% to 11.5%;
- The Company raises its expected range for Adjusted Diluted
EPS(6) to $0.12 to $0.14, assuming a weighted average of 331
million diluted outstanding shares; and
- The Company now expects stock-based compensation expense of $65
million.
(6) Adjusted EBITDA Margin and Adjusted Diluted EPS exclude the
impacts from restructuring charges.
Conference call information
Thoughtworks will host a conference call and webcast at 8:00
a.m. Eastern Time on Tuesday, November 7, 2023, to discuss our
financial results. To access the conference call and webcast and
the accompanying slide presentation, which has additional
information regarding Thoughtworks' operating results, you can
visit our investor relations website at
https://investors.thoughtworks.com. A replay of the webcast will be
made available on our investor relations website at
https://investors.thoughtworks.com. Information on Thoughtworks'
website is not part of this press release.
-###- <TWKS915>
About Thoughtworks
Thoughtworks is a global technology consultancy that integrates
strategy, design and engineering to drive digital innovation. We
are over 11,000 Thoughtworkers strong across 51 offices in 18
countries. For 30 years, we've delivered extraordinary impact
together with our clients by helping them solve complex business
problems with technology as the differentiator.
Thoughtworks uses and intends to continue to use our investor
relations website at https://investors.thoughtworks.com and social
media, @thoughtworks on Twitter and LinkedIn, as a means of
publicly disclosing material information and for complying with our
disclosure obligations under Regulation Fair Disclosure. Investors
should monitor these channels in addition to following the
Company’s press releases, SEC filings, public conference calls and
webcasts.
Forward-looking statements
This press release includes "forward-looking statements" within
the meaning of the "safe harbor" provisions of the United States
Private Securities Litigation Reform Act of 1995. In some cases,
you can identify these forward-looking statements by the use of
terms such as "expect," "will," "continue," or similar expressions,
and variations or negatives of these words, but the absence of
these words does not mean that a statement is not forward-looking.
Forward-looking statements represent our management's beliefs and
assumptions only as of the date of this press release. You should
read this press release with the understanding that our actual
future results may be materially different from what we expect. All
statements other than statements of historical fact are statements
that could be deemed forward-looking statements, which include but
are not limited to: the statements under "Financial outlook,"
including expectations relating to revenues and other financial or
business metrics; the statements under “Update on Restructuring
Activities,” including expectations relating to the size of the
restructuring actions, the amount and timing of related cost
savings and charges and the potential long-term benefits of the
restructuring actions; statements regarding relationships with
existing and potential clients and their engagement decisions; and
any other statements of expectation or belief. These statements are
subject to known and unknown risks, uncertainties and other factors
that may cause our actual results, levels of activity, performance
or achievements to differ materially from results expressed or
implied in this press release. Such risk factors include, but are
not limited to, those related to: current and future impact of
macro-related factors on Thoughtworks' clients’ engagement
decisions, Thoughtworks’ business and industry; the effects of
competition on the future business of Thoughtworks; uncertainty
regarding the demand for and market utilization of our services;
the ability to implement our restructuring actions, including the
costs of such actions and the uncertainty of the impact of such
actions on financial performance; the ability to maintain or
acquire new client relationships; other general business and
economic conditions (including such conditions related to inflation
and foreign currency exchange rates); and our ability to
successfully execute our strategy and strategic plans. For
additional information concerning these and other risks and
uncertainties, please see Thoughtworks' latest Annual Report on
Form 10-K, latest Quarterly Report on Form 10-Q, and other filings
and reports that Thoughtworks may file from time to time. Except as
required by law, Thoughtworks assumes no obligation, and does not
intend, to update these forward-looking statements, or to update
the reasons actual results could differ materially from those
anticipated in these forward-looking statements, even if new
information becomes available in the future.
Non-GAAP financial measures
Certain financial metrics contained in this press release are
considered non-GAAP financial measures. Definitions of and the
related reconciliations for these non-GAAP financial measures can
be found below. We use these non-GAAP measures in conjunction with
traditional GAAP measures to evaluate our financial performance. We
believe that these non-GAAP measures provide our management and
investors consistency and comparability with our past financial
performance and facilitate period-to-period comparisons of
operations. However, non-GAAP measures have limitations as
analytical tools, and you should not consider these measures in
isolation or as substitutes for analysis of our financial results
as reported under GAAP. For example, many of the non-GAAP financial
measures used herein exclude stock-based compensation expense,
which has recently been, and will continue to be for the
foreseeable future, a significant recurring non-cash expense for
our business and an important part of our compensation
strategy.
Certain non-GAAP measures related to our financial outlook
included in this press release and the associated webcast were not
reconciled to the comparable GAAP financial measures because the
GAAP measures are not assessable on a forward-looking basis. The
Company is unable to reconcile these forward-looking non-GAAP
financial measures to the most directly comparable GAAP measures
without unreasonable efforts because the Company is currently
unable to predict with a reasonable degree of certainty the type
and extent of certain items that would be expected to impact GAAP
measures for these periods but would not impact the non-GAAP
measures. Such items may include stock-based compensation,
acquisitions, income tax effects of adjustments and other items.
The unavailable information could have a significant impact on the
Company's GAAP financial results. Based on the foregoing, the
Company believes that providing estimates of the amounts that would
be required to reconcile the range of the non-GAAP measures to
forecasted GAAP measures would imply a degree of precision that
would be confusing or misleading to investors for the reasons
identified above.
Revenue Growth Rate and Revenue Growth Rate at constant
currency
Certain of our subsidiaries use functional currencies other than
the U.S. dollar and the translation of these foreign currency
amounts into U.S. dollars can impact the comparability of our
revenues between periods. Accordingly, we use Revenue Growth Rate
at constant currency as an important indicator of our underlying
performance. Revenue Growth Rate at constant currency is calculated
by applying the average exchange rates in effect during the earlier
comparative fiscal period to the later fiscal period.
Adjusted Gross Profit and Adjusted Gross Margin
We define gross profit as total revenues less cost of revenues.
We define Adjusted Gross Profit as gross profit excluding
stock-based compensation expense, employer payroll related expense
on employee equity incentive plan and depreciation expense. We
calculate Adjusted Gross Margin by dividing Adjusted Gross Profit
by total revenues. Our management uses Adjusted Gross Profit to
assess overall performance and profitability, without regard to the
aforementioned adjustments, which are unrelated to our ongoing
revenue-generating operations. We also believe this information
will be useful for investors to facilitate comparisons of our
operating performance and better identify trends in our
business.
Adjusted SG&A and Adjusted SG&A Margin
We define Adjusted SG&A as selling, general and
administrative expense excluding stock-based compensation expense,
acquisition costs, certain professional fees that are considered
unrelated to our ongoing revenue-generating operations and employer
payroll related expense on employee equity incentive plan. We
calculate Adjusted SG&A Margin by dividing Adjusted SG&A by
total revenues.
Our management uses Adjusted SG&A and Adjusted SG&A
Margin to assess our overall performance, without regard to items
such as stock-based compensation expense and other items that are
considered to be unique or non-recurring in nature or otherwise
unrelated to our ongoing revenue-generating operations. We also
believe this information will be useful for investors to facilitate
comparisons of our operating performance and better identify trends
in our business.
Adjusted Net Income and Adjusted Diluted EPS
We define Adjusted Net Income as net loss adjusted for
unrealized loss on foreign currency exchange, stock-based
compensation expense, amortization of acquisition-related
intangibles, acquisition costs, certain professional fees that are
considered unrelated to our ongoing revenue-generating operations,
employer payroll related expense on employee equity incentive plan,
final tax assessment for closed operations, change in fair value of
contingent consideration, restructuring charges and income tax
effects of adjustments.
We define Adjusted Diluted EPS as diluted loss per share, with
the numerator adjusted for the aforementioned adjustments to
Adjusted Net Income. In other words, the numerator for Adjusted
Diluted EPS utilizes Adjusted Net Income. We calculate Adjusted
Diluted EPS by dividing Adjusted Net Income by diluted weighted
average shares outstanding.
Our management uses Adjusted Net Income and Adjusted Diluted EPS
to assess our overall performance, without regard to items that are
considered to be unique or non-recurring in nature or otherwise
unrelated to our ongoing revenue-generating operations, net of the
income tax effects of adjustments.
Our management uses Adjusted Net Income for planning purposes,
including the preparation of our annual operating budget, as a
measure of our core operating results and the effectiveness of our
business strategy, and in evaluating our financial performance. We
also believe this information will be useful for investors to
facilitate comparisons of our operating performance and better
identify trends in our business.
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as net loss adjusted to exclude income
tax expense; interest expense; other (income) expense, net,
excluding a gain related to the mark to market adjustment on shares
received in relation to the sale and settlement of trade
receivables in 2022; unrealized loss on foreign currency exchange;
stock-based compensation expense; depreciation and amortization
expense; acquisition costs; certain professional fees that are
considered unrelated to our ongoing revenue generating operations;
employer payroll related expense on employee equity incentive plan;
final tax assessment for closed operations; and restructuring
charges. We calculate Adjusted EBITDA Margin by dividing Adjusted
EBITDA by total revenues.
Adjusted EBITDA and Adjusted EBITDA Margin are widely used by
investors and securities analysts to measure a company's operating
performance without regard to the aforementioned adjustments that
can vary substantially from company to company depending upon their
financing, capital structures, and the method by which assets were
acquired or costs that are unique or non-recurring in nature or
otherwise unrelated to our ongoing revenue-generating
operations.
Our management uses Adjusted EBITDA and Adjusted EBITDA Margin
for planning purposes, including the preparation of our annual
operating budget, as a measure of our core operating results and
the effectiveness of our business strategy, and in evaluating our
financial performance. We also believe this information will be
useful for investors to facilitate comparisons of our operating
performance and better identify trends in our business.
Free Cash Flow
We define Free Cash Flow as net cash provided by operating
activities less cash used for purchases of property and equipment.
We believe that Free Cash Flow is a useful indicator of liquidity
for investors and is used by our management as it measures our
ability to generate cash, or our need to access additional sources
of cash, to fund operations and investments. There are a number of
limitations related to the use of free cash flow as compared to net
cash from operating activities, including that Free Cash Flow
includes capital expenditures, the benefits of which are realized
in periods subsequent to those when expenditures are made.
THOUGHTWORKS HOLDING,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands, except share
and per share data)
(unaudited)
Three months ended September
30,
Nine months ended September
30,
2023
2022
2023
2022
Revenues
$
280,159
$
332,447
$
874,430
$
985,494
Operating expenses:
Cost of revenues
185,985
244,139
591,845
744,366
Selling, general and administrative
expenses
81,840
91,682
254,806
295,799
Depreciation and amortization
5,997
5,303
17,413
15,364
Restructuring
15,566
—
15,566
—
Total operating expenses
289,388
341,124
879,630
1,055,529
Loss from operations
(9,229
)
(8,677
)
(5,200
)
(70,035
)
Other (expense) income:
Interest expense
(6,649
)
(5,871
)
(19,661
)
(15,502
)
Net realized and unrealized foreign
currency loss
(8,813
)
(12,129
)
(7,658
)
(18,903
)
Other income (expense), net
43
2,056
(545
)
1,731
Total other expense
(15,419
)
(15,944
)
(27,864
)
(32,674
)
Loss before income taxes
(24,648
)
(24,621
)
(33,064
)
(102,709
)
Income tax expense
1,204
13,987
13,167
18,792
Net loss
$
(25,852
)
$
(38,608
)
$
(46,231
)
$
(121,501
)
Other comprehensive loss, net of tax:
Foreign currency translation
adjustments
(3,820
)
(19,217
)
(4,229
)
(45,448
)
Comprehensive loss
$
(29,672
)
$
(57,825
)
$
(50,460
)
$
(166,949
)
Net loss per common share:
Basic loss per common share
$
(0.08
)
$
(0.12
)
$
(0.15
)
$
(0.39
)
Diluted loss per common share
$
(0.08
)
$
(0.12
)
$
(0.15
)
$
(0.39
)
Weighted average shares
outstanding:
Basic
317,805,140
311,621,233
317,204,506
309,481,860
Diluted
317,805,140
311,621,233
317,204,506
309,481,860
Stock-based compensation expense included in the condensed
consolidated statements of loss and comprehensive loss was as
follows:
Three months ended September
30,
Nine months ended September
30,
2023
2022
2023
2022
Cost of revenues
$
7,462
$
41,558
$
28,688
$
161,040
Selling, general and administrative
expenses
5,344
17,602
19,403
67,268
Total stock-based compensation expense
$
12,806
$
59,160
$
48,091
$
228,308
THOUGHTWORKS HOLDING,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
and per share data)
September 30, 2023
December 31, 2022
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
87,405
$
194,294
Trade receivables, net of allowance of
$9,074 and $9,531, respectively
153,318
201,695
Unbilled receivables
141,838
122,499
Prepaid expenses and other current
assets
31,223
38,202
Total current assets
413,784
556,690
Property and equipment, net
28,592
38,798
Right-of-use assets
42,316
43,123
Intangibles and other assets:
Goodwill
416,372
405,017
Trademark
273,000
273,000
Customer relationships, net
115,230
124,047
Other non-current assets
23,451
21,175
Total assets
$
1,312,745
$
1,461,850
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
4,119
$
5,248
Long-term debt - current
7,150
7,150
Income taxes payable
8,470
22,781
Accrued compensation
80,286
85,477
Accrued expenses and other current
liabilities
32,860
42,920
Lease liabilities, current
14,709
15,994
Total current liabilities
147,594
179,570
Lease liabilities, non-current
30,007
29,885
Long-term debt, less current portion
287,706
391,856
Deferred tax liabilities
46,135
62,555
Other long-term liabilities
23,388
19,762
Total liabilities
534,830
683,628
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par
value; 100,000,000 shares authorized, zero issued and outstanding
at September 30, 2023 and December 31, 2022, respectively
—
—
Common stock, $0.001 par value;
1,000,000,000 shares authorized, 368,678,928 and 366,306,970
issued, 318,073,825 and 315,681,987 outstanding at September 30,
2023 and December 31, 2022, respectively
369
366
Treasury stock, 50,605,103 and 50,624,983
shares at September 30, 2023 and December 31, 2022,
respectively
(624,687
)
(624,934
)
Additional paid-in capital
1,615,417
1,565,514
Accumulated other comprehensive loss
(43,439
)
(39,210
)
Retained deficit
(169,745
)
(123,514
)
Total stockholders' equity
777,915
778,222
Total liabilities and stockholders'
equity
$
1,312,745
$
1,461,850
THOUGHTWORKS HOLDING,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
Nine months ended September
30,
2023
2022
Cash flows from operating
activities:
Net loss
$
(46,231
)
$
(121,501
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization expense
27,367
25,561
Bad debt expense
4,145
2,447
Deferred income tax benefit
(21,759
)
(24,989
)
Stock-based compensation expense
48,091
228,308
Unrealized foreign currency exchange
loss
9,488
22,242
Non-cash lease expense on right-of-use
assets
13,935
13,807
Other operating activities, net
2,599
(546
)
Changes in operating assets and
liabilities:
Trade receivables
43,827
(10,803
)
Unbilled receivables
(22,305
)
(78,445
)
Prepaid expenses and other assets
6,051
(4,856
)
Lease liabilities
(14,219
)
(11,842
)
Accounts payable
(1,183
)
(177
)
Accrued expenses and other liabilities
(27,204
)
17,135
Net cash provided by operating
activities
22,602
56,341
Cash flows from investing
activities:
Purchase of property and equipment
(6,351
)
(19,672
)
Proceeds from disposal of fixed assets
327
437
Acquisitions, net of cash acquired
(15,989
)
(70,011
)
Net cash used in investing activities
(22,013
)
(89,246
)
Cash flows from financing
activities:
Payments of obligations of long-term
debt
(105,363
)
(105,363
)
Payments of debt issuance costs
(99
)
—
Proceeds from issuance of common stock on
exercise of options, net of employee tax withholding
4,880
5,651
Withholding taxes paid on tender offer
—
(15,469
)
Withholding taxes paid on dividends
previously declared
—
(10,009
)
Withholding taxes paid related to net
share settlement of equity awards
(3,501
)
(33,017
)
Other financing activities, net
71
(6
)
Net cash used in financing activities
(104,012
)
(158,213
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(3,395
)
(18,032
)
Net decrease in cash, cash equivalents and
restricted cash
(106,818
)
(209,150
)
Cash, cash equivalents and restricted cash
at beginning of the period
195,564
394,942
Cash, cash equivalents and restricted cash
at end of the period
$
88,746
$
185,792
Supplemental disclosure of cash flow
information:
Interest paid
$
18,669
$
14,486
Income taxes paid
$
38,590
$
22,830
Withholding taxes payable
$
(683
)
$
—
Supplemental disclosures of non-cash
financing activities:
Withholding taxes payable included within
accrued compensation
$
—
$
11,534
Reconciliation of cash, cash
equivalents and restricted cash:
Cash and cash equivalents
$
87,405
$
184,544
Restricted cash included in other
non-current assets
1,341
1,248
Total cash, cash equivalents and
restricted cash
$
88,746
$
185,792
THOUGHTWORKS HOLDING,
INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(In thousands, except
percentages, share and per share data)
(unaudited)
Three months ended September
30,
Nine months ended September
30,
2023
2022
2023
2022
Net loss
$
(25,852
)
$
(38,608
)
$
(46,231
)
$
(121,501
)
Unrealized foreign exchange loss
10,223
14,448
9,488
22,242
Stock-based compensation
12,806
59,160
48,091
228,308
Amortization of acquisition-related
intangibles
3,656
3,449
10,916
9,744
Acquisition costs (a)
1,533
1,742
5,339
3,044
Certain professional fees (b)
2,051
766
3,801
1,632
Employer payroll related expense on
employee equity incentive plan (c)
264
2,950
755
6,447
Final tax assessment for closed operations
(d)
—
—
—
258
Change in fair value of contingent
consideration (e)
—
(2,955
)
129
(2,427
)
Restructuring (f)
15,566
—
15,566
—
Income tax effects of adjustments (g)
(8,722
)
(14,194
)
(16,157
)
(39,989
)
Adjusted Net Income
$
11,525
$
26,758
$
31,697
$
107,758
GAAP diluted weighted average common
shares outstanding
317,805,140
311,621,233
317,204,506
309,481,860
Employee stock options, RSUs and PSUs
10,521,029
19,179,768
12,434,247
19,969,943
Adjusted diluted weighted average
common shares outstanding
328,326,169
330,801,001
329,638,753
329,451,803
GAAP diluted loss per share
$
(0.08
)
$
(0.12
)
$
(0.15
)
$
(0.39
)
Adjusted Diluted EPS
$
0.04
$
0.08
$
0.10
$
0.33
THOUGHTWORKS HOLDING,
INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(In thousands, except
percentages, share and per share data)
(unaudited)
Three months ended September
30,
Nine months ended September
30,
2023
2022
2023
2022
Net loss
$
(25,852
)
$
(38,608
)
$
(46,231
)
$
(121,501
)
Income tax expense
1,204
13,987
13,167
18,792
Interest expense
6,649
5,871
19,661
15,502
Other (income) expense, net (h)
(28
)
(2,056
)
759
(1,731
)
Unrealized foreign exchange loss
10,223
14,448
9,488
22,242
Stock-based compensation
12,806
59,160
48,091
228,308
Depreciation and amortization
9,147
8,905
27,367
25,561
Acquisition costs (a)
1,533
1,742
5,339
3,044
Certain professional fees (b)
2,051
766
3,801
1,632
Employer payroll related expense on
employee equity incentive plan (c)
264
2,950
755
6,447
Final tax assessment for closed operations
(d)
—
—
—
258
Restructuring (f)
15,566
—
15,566
—
Adjusted EBITDA
$
33,563
$
67,165
$
97,763
$
198,554
Net loss margin
(9.2
)%
(11.6
)%
(5.3
)%
(12.3
)%
Adjusted EBITDA Margin
12.0
%
20.2
%
11.2
%
20.1
%
Three months ended September
30,
Nine months ended September
30,
2023
2022
2023
2022
Gross profit, GAAP
$
94,174
$
88,308
$
282,585
$
241,128
Stock-based compensation
7,462
41,558
28,688
161,040
Employer payroll related expense on
employee equity incentive plan (c)
107
1,875
452
4,152
Depreciation expense
3,150
3,603
9,954
10,198
Adjusted Gross Profit
$
104,893
$
135,344
$
321,679
$
416,518
Gross margin, GAAP
33.6
%
26.6
%
32.3
%
24.5
%
Adjusted Gross Margin
37.4
%
40.7
%
36.8
%
42.3
%
Three months ended September
30,
Nine months ended September
30,
2023
2022
2023
2022
SG&A, GAAP
$
81,840
$
91,682
$
254,806
$
295,799
Stock-based compensation
(5,344
)
(17,602
)
(19,403
)
(67,268
)
Acquisition costs (a)
(1,533
)
(1,742
)
(5,339
)
(3,044
)
Certain professional fees (b)
(2,051
)
(766
)
(3,801
)
(1,632
)
Employer payroll related expense on
employee equity incentive plan (c)
(157
)
(1,075
)
(303
)
(2,295
)
Adjusted SG&A
$
72,755
$
70,497
$
225,960
$
221,560
SG&A margin, GAAP
29.2
%
27.6
%
29.1
%
30.0
%
Adjusted SG&A Margin
26.0
%
21.2
%
25.8
%
22.5
%
(a)
Reflects costs for certain professional
fees and retention wage expenses related to certain
acquisitions.
(b)
Adjusts for certain transaction expenses,
non-recurring legal expenses, and one-time professional fees.
(c)
Excludes employer payroll related expense
on employee equity incentive plan as these expenses are tied to the
exercise or vesting of underlying equity awards and the price of
our common stock at the time of vesting or exercise. As a result,
these expenses may vary in any particular period independent of the
financial and operating performance of our business.
(d)
Adjusts for certain tax related expenses
related to final tax assessments from closing operations in Uganda,
which was completely shut down in 2015.
(e)
Adjusts for the non-cash adjustment to the
fair value of contingent consideration.
(f)
Adjusts for restructuring costs which
include wage-related expenses, such as employee severance and
related benefits, and non-wage related expenses, including costs
related to reducing leased office space, vendor contract
cancellations and professional fees.
(g)
Adjusts for the income tax effects of the
foregoing adjusted items.
(h)
Excludes a gain, which was included within
other (income) expense, net in the condensed consolidated
statements of loss and comprehensive loss for 2023, related to the
mark to market adjustment on shares received in relation to the
sale and settlement of trade receivables in 2022.
Three months ended September
30,
Nine months ended September
30,
2023
2022
2023
2022
Net cash provided by operating
activities
$
6,355
$
34,864
$
22,602
$
56,341
Purchase of property and equipment
(2,670
)
(7,213
)
(6,351
)
(19,672
)
Free Cash Flow
$
3,685
$
27,651
$
16,251
$
36,669
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231106565600/en/
Investors: Thoughtworks Holding, Inc. Rob Muller:
investor-relations@thoughtworks.com
Press: Thoughtworks Holding, Inc. Linda Horiuchi:
linda.horiuchi@thoughtworks.com
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