- Second quarter revenues of $287.2 million
- Announces restructuring actions targeting $75-85 million in
annualized cost savings upon completion
- Provides updated guidance for the full year and third quarter
of 2023
Thoughtworks Holding, Inc. (NASDAQ: TWKS) ("Thoughtworks" or the
"Company"), a leading global technology consultancy, today reported
results for the second quarter of 2023 and provided an updated
financial outlook for the full year and third quarter of 2023.
Guo Xiao, Thoughtworks' Chief Executive Officer, said, "We
delivered revenues of $287.2 million in the second quarter of 2023.
This fell short of our guidance as the macro-related factors that
we have discussed in recent quarters had an increased influence on
client behavior during the quarter, impacting results to a greater
extent than anticipated. In particular, we experienced a number of
unanticipated project deferrals and cancellations by clients
part-way through the quarter. Our investments in outbound demand
generation resulted in stable bookings of $1.5 billion on a
trailing twelve month basis. We remain committed to investing in
demand generation, while also taking restructuring actions that are
intended to achieve operational efficiencies, optimize resource
allocation, and to be more responsive to our clients’ needs. We
remain close with our clients, and our teams are focused on helping
solve their most difficult technological problems.”
Thoughtworks announces restructuring actions
Following a detailed review of its business, Thoughtworks is
announcing a structural reorganization that will (i) move its
operational functions from a geographic to a centralized model,
(ii) create a new organizational home for the majority of its
client facing workforce, our Digital Engineering Center, and (iii)
evolve its regional market structure. Centralizing operations
globally will reduce overall costs, better align its resources to
strategic priorities, right-size its operations, and increase
operational efficiencies. The new Digital Engineering Center will
provide supply across the regional markets and allow the Company to
optimize resource allocation globally to better align to clients’
needs. Finally, these changes will enable its regional markets to
have a more client and industry-based go-to-market focus while
continuing to fund our investments in demand generation.
The majority of the actions will be taken in the third quarter
of 2023 and are expected to be completed within the next twelve
months. Upon completion of the program, the Company expects to
realize annualized cost savings of approximately $75 million to $85
million, and impact approximately 5% to 6% of our employee
headcount globally. The majority of the annualized cost savings
will come from reductions in operating spend, particularly in
non-client, back-office functions.
Thoughtworks expects to incur total pre-tax cash charges of
approximately $20 million to $25 million (the “Total Charges”), of
which approximately $18 million to $20 million are expected to be
recognized in 2023. The Total Charges include $18 million to $22
million in wage-related costs, such as employee severance and
related benefits, and $2 million to $3 million in non-wage related
expenses, including costs related to reducing leased office space,
vendor contract cancellations and professional fees.
QTD second quarter 2023 summary
Three Months Ended June
30,
$ in millions, except per share data
2023
2022
Change
% Change(1)
GAAP Metrics:
Revenues(2)
$
287.2
$
332.1
$
(44.9
)
(13.5
)%
Gross Profit
$
90.9
$
81.6
$
9.3
11.4
%
Gross Margin
31.6
%
24.6
%
7.0
%
SG&A
$
86.6
$
99.4
$
(12.8
)
(12.9
)%
SG&A Margin
30.2
%
29.9
%
0.3
%
Stock-based compensation
$
17.6
$
69.0
$
(51.4
)
(74.5
)%
Net loss
$
(12.3
)
$
(39.3
)
$
27.0
Net loss margin
(4.3
)%
(11.8
)%
7.5
%
Diluted loss per share
$
(0.04
)
$
(0.13
)
$
0.09
Cash flow from operations
$
(16.8
)
$
27.6
$
(44.4
)
Non-GAAP Metrics(3):
Revenue Growth Rate at constant
currency(4)
(12.5
)%
33.5
%
Adjusted Gross Profit
$
105.0
$
135.0
$
(30.0
)
(22.2
)%
Adjusted Gross Margin
36.6
%
40.6
%
(4.0
)%
Adjusted SG&A
$
76.0
$
78.6
$
(2.6
)
(3.3
)%
Adjusted SG&A Margin
26.5
%
23.7
%
2.8
%
Adjusted Net Income
$
10.1
$
37.0
$
(26.9
)
(72.6
)%
Adjusted EBITDA
$
29.3
$
58.5
$
(29.2
)
(49.9
)%
Adjusted EBITDA Margin
10.2
%
17.6
%
(7.4
)%
Adjusted Diluted EPS
$
0.03
$
0.11
$
(0.08
)
(72.7
)%
Free Cash Flow
$
(18.8
)
$
20.2
$
(39.0
)
YTD second quarter 2023 summary
Six Months Ended June
30,
$ in millions, except per share data
2023
2022
Change
% Change(1)
GAAP Metrics:
Revenues(2)
$
594.3
$
653.0
$
(58.7
)
(9.0
)%
Gross Profit
$
188.4
$
152.8
$
35.6
23.3
%
Gross Margin
31.7
%
23.4
%
8.3
%
SG&A
$
173.0
$
204.1
$
(31.1
)
(15.2
)%
SG&A Margin
29.1
%
31.3
%
(2.2
)%
Stock-based compensation
$
35.3
$
169.1
$
(133.8
)
(79.1
)%
Net loss
$
(20.4
)
$
(82.9
)
$
62.5
Net loss margin
(3.4
)%
(12.7
)%
9.3
%
Diluted loss per share
$
(0.06
)
$
(0.27
)
$
0.21
Cash flow from operations
$
16.2
$
21.5
$
(5.3
)
(24.7
)%
Non-GAAP Metrics(3):
Revenue Growth Rate at constant
currency(4)
(6.9
)%
35.7
%
Adjusted Gross Profit
$
216.8
$
281.2
$
(64.4
)
(22.9
)%
Adjusted Gross Margin
36.5
%
43.1
%
(6.6
)%
Adjusted SG&A
$
153.2
$
151.1
$
2.1
1.4
%
Adjusted SG&A Margin
25.8
%
23.1
%
2.7
%
Adjusted Net Income
$
20.2
$
81.0
$
(60.8
)
(75.0
)%
Adjusted EBITDA
$
64.2
$
131.4
$
(67.2
)
(51.1
)%
Adjusted EBITDA Margin
10.8
%
20.1
%
(9.3
)%
Adjusted Diluted EPS
$
0.06
$
0.25
$
(0.19
)
(76.0
)%
Free Cash Flow
$
12.6
$
9.0
$
3.6
40.0
%
(1) For QTD, percentage change for net
loss, diluted loss per share, cash flow from operations 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. For 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 the revenue growth
rate for the quarter and 2% for the six months ended June 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 June
30, 2023 were flat year-over-year and sequentially at $1.5 billion.
For the trailing twelve months ended June 30, 2023, we had 38
clients with bookings greater than $10 million compared to 35
clients for the trailing twelve months ended June 30, 2022.
Revenue growth rate by customer location
Three Months Ended June 30,
2023
Six Months Ended June 30,
2023
North America
(19.6)%
(13.9)%
APAC
(8.4)%
(5.3)%
Europe
(8.4)%
(3.9)%
LATAM
(24.8)%
(20.8)%
Revenue growth rate by industry vertical
Three Months Ended June 30,
2023
Six Months Ended June 30,
2023
Technology and business services
(26.8)%
(20.4)%
Energy, public and health services
(1.7)%
3.7%
Retail and consumer
(29.0)%
(26.1)%
Financial services and insurance
(11.6)%
(8.6)%
Automotive, travel and transportation
18.4%
20.2%
Liquidity
We had cash and cash equivalents of $88.2 million as of June 30,
2023, along with $300.0 million of borrowing capacity under our
revolving credit line. Our total debt outstanding, before deferred
financing fees, was $298.9 million at June 30, 2023.
Financial outlook
Thoughtworks provides the following outlook for the third
quarter and full year 2023:
Third quarter
Thoughtworks expects the following for the third quarter:
- Revenues in the range of $275 million to $285 million,
reflecting year-over-year decline of (17)% to (14)%; or (19)% to
(16)% in constant currency. Acquisitions, including those completed
during 2023, are expected to contribute approximately 1% to the
year-over-year revenue growth rate;
- Adjusted EBITDA Margin(5) in the range of 9.0% to 11.0%;
- Adjusted Diluted EPS(5) in the range of $0.02 to $0.03,
assuming a weighted average of 332 million diluted outstanding
shares; and
- Stock-based compensation expense of $18 million.
Full year
Thoughtworks now expects the following for the full year:
- Revenues in the range of $1,137 million to $1,157 million,
reflecting year-over-year decline of (12)% to (11)%; or (12)% to
(11)% in constant currency. Acquisitions, including those completed
during 2023, are expected to contribute approximately 2% to the
year-over-year revenue growth rate;
- Adjusted EBITDA Margin(5) in the range of 11.0% to 12.0%;
- Adjusted Diluted EPS(5) in the range of $0.11 to $0.13,
assuming a weighted average of 332 million diluted outstanding
shares; and
- Stock-based compensation expense of $74 million.
(5) 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, August 8, 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 11,500 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 “Thoughtworks announces
restructuring actions,” 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 (gain) on foreign currency exchange, stock-based
compensation expense, amortization of acquisition-related
intangibles, acquisition costs, restructuring charges, 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 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 (gain) on foreign currency
exchange; stock-based compensation expense; depreciation and
amortization expense; acquisition costs; restructuring charges;
certain professional fees that are considered unrelated to our
ongoing revenue generating operations; employer payroll related
expense on employee equity incentive plan; and final tax assessment
for closed operations. 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 June
30,
Six months ended June
30,
2023
2022
2023
2022
Revenues
$
287,215
$
332,107
$
594,271
$
653,047
Operating expenses:
Cost of revenues
196,338
250,462
405,860
500,227
Selling, general and administrative
expenses
86,626
99,352
172,966
204,117
Depreciation and amortization
5,874
4,215
11,416
10,061
Total operating expenses
288,838
354,029
590,242
714,405
Income (loss) from operations
(1,623
)
(21,922
)
4,029
(61,358
)
Other (expense) income:
Interest expense
(6,150
)
(4,984
)
(13,012
)
(9,631
)
Net realized and unrealized foreign
currency (loss) gain
(30
)
(11,512
)
1,155
(6,774
)
Other (expense) income, net
135
(413
)
(588
)
(325
)
Total other income (expense)
(6,045
)
(16,909
)
(12,445
)
(16,730
)
Loss before income taxes
(7,668
)
(38,831
)
(8,416
)
(78,088
)
Income tax expense
4,604
477
11,963
4,805
Net loss
$
(12,272
)
$
(39,308
)
$
(20,379
)
$
(82,893
)
Other comprehensive (loss), net of
tax:
Foreign currency translation
adjustments
(651
)
(20,760
)
(409
)
(26,231
)
Comprehensive loss
$
(12,923
)
$
(60,068
)
$
(20,788
)
$
(109,124
)
Net loss per common share:
Basic loss per common share
$
(0.04
)
$
(0.13
)
$
(0.06
)
$
(0.27
)
Diluted loss per common share
$
(0.04
)
$
(0.13
)
$
(0.06
)
$
(0.27
)
Weighted average shares
outstanding:
Basic
317,341,907
310,575,050
316,899,214
308,394,443
Diluted
317,341,907
310,575,050
316,899,214
308,394,443
Stock-based compensation expense included in the condensed
consolidated statements of loss and comprehensive loss was as
follows:
Three months ended June
30,
Six months ended June
30,
2023
2022
2023
2022
Cost of revenues
$
10,696
$
49,573
$
21,226
$
119,482
Selling, general and administrative
expenses
6,910
19,392
14,059
49,666
Total stock-based compensation expense
$
17,606
$
68,965
$
35,285
$
169,148
THOUGHTWORKS HOLDING,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
and per share data)
June 30, 2023
December 31, 2022
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
88,151
$
194,294
Trade receivables, net of allowance of
$7,915 and $9,531, respectively
154,208
201,695
Unbilled receivables
137,089
122,499
Prepaid expenses and other current
assets
35,262
38,202
Total current assets
414,710
556,690
Property and equipment, net
32,062
38,798
Right-of-use assets
43,577
43,123
Intangibles and other assets:
Goodwill
422,313
405,017
Trademark
273,000
273,000
Customer relationships, net
120,677
124,047
Other non-current assets
20,888
21,175
Total assets
$
1,327,227
$
1,461,850
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
4,555
$
5,248
Long-term debt - current
7,150
7,150
Income taxes payable
7,449
22,781
Accrued compensation
77,180
85,477
Deferred revenue
6,007
5,167
Value-added tax and sales tax payable
5,289
7,526
Accrued expenses
14,406
30,227
Lease liabilities, current
15,594
15,994
Total current liabilities
137,630
179,570
Lease liabilities, non-current
30,417
29,885
Long-term debt, less current portion
289,379
391,856
Deferred tax liabilities
54,224
62,555
Other long-term liabilities
21,849
19,762
Total liabilities
533,499
683,628
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par
value; 100,000,000 shares authorized, zero issued and outstanding
at June 30, 2023 and December 31, 2022, respectively
—
—
Common stock, $0.001 par value;
1,000,000,000 shares authorized, 368,253,048 and 366,306,970
issued, 317,647,945 and 315,681,987 outstanding at June 30, 2023
and December 31, 2022, respectively
368
366
Treasury stock, 50,605,103 and 50,624,983
shares at June 30, 2023 and December 31, 2022, respectively
(624,687
)
(624,934
)
Additional paid-in capital
1,601,559
1,565,514
Accumulated other comprehensive loss
(39,619
)
(39,210
)
Retained deficit
(143,893
)
(123,514
)
Total stockholders' equity
793,728
778,222
Total liabilities and stockholders'
equity
$
1,327,227
$
1,461,850
THOUGHTWORKS HOLDING,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
Six months ended June
30,
2023
2022
Cash flows from operating
activities:
Net loss
$
(20,379
)
$
(82,893
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization expense
18,220
16,656
Bad debt expense
2,596
2,038
Deferred income tax benefit
(12,033
)
(19,618
)
Stock-based compensation expense
35,285
169,148
Unrealized foreign currency exchange
(gain) loss
(735
)
7,794
Non-cash lease expense on right-of-use
assets
9,312
8,870
Other operating activities, net
2,018
1,134
Changes in operating assets and
liabilities:
Trade receivables
47,332
(20,069
)
Unbilled receivables
(15,276
)
(48,629
)
Prepaid expenses and other assets
2,727
(2,690
)
Lease liabilities
(9,495
)
(6,951
)
Accounts payable
(813
)
1,699
Accrued expenses and other liabilities
(42,512
)
(5,012
)
Net cash provided by operating
activities
16,247
21,477
Cash flows from investing
activities:
Purchase of property and equipment
(3,681
)
(12,459
)
Proceeds from disposal of fixed assets
221
267
Acquisitions, net of cash acquired
(15,989
)
(65,410
)
Net cash used in investing activities
(19,449
)
(77,602
)
Cash flows from financing
activities:
Payments of obligations of long-term
debt
(103,575
)
(3,575
)
Payments of debt issuance costs
(99
)
—
Proceeds from issuance of common stock on
exercise of options, net of employee tax withholding
3,816
3,928
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
(3,261
)
(29,026
)
Other financing activities, net
80
(48
)
Net cash used in financing activities
(103,039
)
(54,199
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
178
(8,884
)
Net decrease in cash, cash equivalents and
restricted cash
(106,063
)
(119,208
)
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
$
89,501
$
275,734
Supplemental disclosure of cash flow
information:
Interest paid
$
12,544
$
8,987
Income taxes paid
$
31,929
$
10,554
Withholding taxes payable
$
(454
)
$
—
Supplemental disclosures of non-cash
financing activities:
Withholding taxes payable included within
accrued compensation
$
—
$
219
Reconciliation of cash, cash
equivalents and restricted cash:
Cash and cash equivalents
$
88,151
$
274,527
Restricted cash included in other
non-current assets
1,350
1,207
Total cash, cash equivalents and
restricted cash
$
89,501
$
275,734
THOUGHTWORKS HOLDING,
INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(In thousands, except
percentages, share and per share data)
(unaudited)
Three months ended June
30,
Six months ended June
30,
2023
2022
2023
2022
Net loss
$
(12,272
)
$
(39,308
)
$
(20,379
)
$
(82,893
)
Unrealized foreign exchange loss
(gain)
213
13,434
(735
)
7,794
Stock-based compensation
17,606
68,965
35,285
169,148
Amortization of acquisition-related
intangibles
3,669
3,303
7,260
6,295
Acquisition costs (a)
2,100
1,282
3,806
1,302
Certain professional fees (b)
1,525
63
1,750
866
Employer payroll related expense on
employee equity incentive plan (c)
249
(125
)
491
3,497
Final tax assessment for closed operations
(d)
—
258
—
258
Change in fair value of contingent
consideration (e)
129
528
129
528
Income tax effects of adjustments (f)
(3,114
)
(11,392
)
(7,435
)
(25,795
)
Adjusted Net Income
$
10,105
$
37,008
$
20,172
$
81,000
GAAP diluted weighted average common
shares outstanding
317,341,907
310,575,050
316,899,214
308,394,443
Employee stock options, RSUs and PSUs
12,250,374
19,069,863
13,561,172
20,913,127
Adjusted diluted weighted average
common shares outstanding
329,592,281
329,644,913
330,460,386
329,307,570
GAAP diluted loss per share
$
(0.04
)
$
(0.13
)
$
(0.06
)
$
(0.27
)
Adjusted Diluted EPS
$
0.03
$
0.11
$
0.06
$
0.25
THOUGHTWORKS HOLDING,
INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(In thousands, except
percentages, share and per share data)
(unaudited)
Three months ended June
30,
Six months ended June
30,
2023
2022
2023
2022
Net loss
$
(12,272
)
$
(39,308
)
$
(20,379
)
$
(82,893
)
Income tax expense
4,604
477
11,963
4,805
Interest expense
6,150
4,984
13,012
9,631
Other (income) expense, net (g)
(6
)
413
787
325
Unrealized foreign exchange loss
(gain)
213
13,434
(735
)
7,794
Stock-based compensation
17,606
68,965
35,285
169,148
Depreciation and amortization
9,131
8,074
18,220
16,656
Acquisition costs (a)
2,100
1,282
3,806
1,302
Certain professional fees (b)
1,525
63
1,750
866
Employer payroll related expense on
employee equity incentive plan (c)
249
(125
)
491
3,497
Final tax assessment for closed operations
(d)
—
258
—
258
Adjusted EBITDA
$
29,300
$
58,517
$
64,200
$
131,389
Net loss margin
(4.3
)%
(11.8
)%
(3.4
)%
(12.7
)%
Adjusted EBITDA Margin
10.2
%
17.6
%
10.8
%
20.1
%
Three months ended June
30,
Six months ended June
30,
2023
2022
2023
2022
Gross profit, GAAP
$
90,877
$
81,645
$
188,411
$
152,820
Stock-based compensation
10,696
49,573
21,226
119,482
Employer payroll related expense on
employee equity incentive plan (c)
159
(99
)
345
2,277
Depreciation expense
3,257
3,859
6,804
6,595
Adjusted Gross Profit
$
104,989
$
134,978
$
216,786
$
281,174
Gross margin, GAAP
31.6
%
24.6
%
31.7
%
23.4
%
Adjusted Gross Margin
36.6
%
40.6
%
36.5
%
43.1
%
Three months ended June
30,
Six months ended June
30,
2023
2022
2023
2022
SG&A, GAAP
$
86,626
$
99,352
$
172,966
$
204,117
Stock-based compensation
(6,910
)
(19,392
)
(14,059
)
(49,666
)
Acquisition costs (a)
(2,100
)
(1,282
)
(3,806
)
(1,302
)
Certain professional fees (b)
(1,525
)
(63
)
(1,750
)
(866
)
Employer payroll related expense on
employee equity incentive plan (c)
(90
)
26
(146
)
(1,220
)
Adjusted SG&A
$
76,001
$
78,641
$
153,205
$
151,063
SG&A margin, GAAP
30.2
%
29.9
%
29.1
%
31.3
%
Adjusted SG&A Margin
26.5
%
23.7
%
25.8
%
23.1
%
(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 the income tax effects of the
foregoing adjusted items.
(g)
Excludes a gain, which was included within
Other (income) expense, net in the condensed consolidated
statements of loss and comprehensive loss for the first quarter of
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 June
30,
Six months ended June
30,
2023
2022
2023
2022
Net cash (used in) provided by
operating activities
$
(16,800
)
$
27,572
$
16,247
$
21,477
Purchase of property and equipment
(2,024
)
(7,325
)
(3,681
)
(12,459
)
Free Cash Flow
$
(18,824
)
$
20,247
$
12,566
$
9,018
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230807956954/en/
Investor contact: Thoughtworks Holding, Inc. Rob Muller:
investor-relations@thoughtworks.com Press contact:
Thoughtworks Holding, Inc. Linda Horiuchi:
linda.horiuchi@thoughtworks.com
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