- Second quarter revenues of $251.7 million
- Thoughtworks signed definitive merger agreement to be taken
private by an affiliate of funds advised by Apax Partners LLP
Thoughtworks Holding, Inc. (NASDAQ: TWKS) ("Thoughtworks" or the
"Company"), a leading global technology consultancy, today reported
results for the second quarter of 2024.
Acquisition Update
As announced a short time ago, Thoughtworks has entered into a
definitive merger agreement to be acquired by an affiliate of funds
advised by Apax Partners LLP for $4.40 per share. A copy of the
press release can be found by visiting the Investor Relations
section of the Thoughtworks corporate website at thoughtworks.com.
In light of the announced transaction, Thoughtworks will not be
holding a conference call to discuss its June 30, 2024 financial
results.
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. On May
7, 2024, we increased our restructuring program to capture
additional cost savings. On August 2, 2024, the Company’s Board of
Directors approved a second increase to its restructuring plan.
During the second quarter of 2024, Thoughtworks incurred pre-tax
cash charges of approximately $7.2 million, which include $6.2
million in wage-related costs and $1.0 million in non-wage related
costs. Since the program’s inception in August 2023 through June
30, 2024, we have incurred pre-tax cash charges of approximately
$28.3 million, which include $24.5 million in wage-related costs
and $3.8 million in non-wage related costs, and have achieved $108
million of annualized savings.
Thoughtworks is increasing its restructuring program to capture
additional savings of $85 million to $95 million, for a total
restructuring program savings of $185 million to $210 million. We
now expect the restructuring program to be completed by October 31,
2024.
Thoughtworks now expects to incur additional pre-tax cash
charges of approximately $30.0 million to $35.0 million, for total
expected pre-tax charges of approximately $56.5 million to $68.0
million (the “Updated 2024 Total Charges”). The Updated 2024 Total
Charges include $51.0 million to $59.0 million in wage-related
expenses, such as employee severance and related benefits, and $5.5
million to $9.0 million in non-wage related expenses, including
costs related to reducing leased office space, vendor contract
cancellations and professional fees. We anticipate our additional
cost reduction efforts to impact approximately 6% to 7% of our
headcount globally.
QTD second quarter 2024 highlights
Revenues for the second quarter were $251.7 million, a
year-over-year decline of (12.4)%, or a year-over-year decline of
(11.3)% in constant currency.
Net loss margin for the second quarter was (14.5)% compared to
(4.3)% for the second quarter of 2023. Adjusted EBITDA Margin for
the second quarter was 2.3% compared to 10.2% for the second
quarter of 2023.
Diluted loss per share for the second quarter was $(0.11)
compared to $(0.04) for the second quarter of 2023. Adjusted
diluted loss per share for the second quarter was $(0.03) compared
to Adjusted Diluted EPS of $0.03 for the second quarter of
2023.
YTD second quarter 2024 highlights
Revenues for the six months ended were $500.3 million, a
year-over-year decline of (15.8)%, or a year-over-year decline of
(15.2)% in constant currency. Acquisitions completed in the last
twelve months had an immaterial contribution to revenue growth for
the six months ended June 30, 2024.
Net loss margin for the six months ended was (13.5)% compared to
(3.4)% for six months ended June 30, 2023. Adjusted EBITDA Margin
for the six months ended was 2.5% compared to 10.8% for the six
months ended June 30, 2023.
Diluted loss per share for the six months ended was $(0.21)
compared to $(0.06) for the six months ended June 30, 2023.
Adjusted diluted loss per share for the six months ended was
$(0.05) compared to Adjusted Diluted EPS of $0.06 for the six
months ended June 30, 2023.
QTD second quarter 2024 summary
Three Months Ended June
30,
$ in millions, except per share data
2024
2023
Change
% Change(1)
GAAP Metrics:
Revenues(2)
$
251.7
$
287.2
$
(35.5
)
(12.4
)%
Gross Profit
$
70.2
$
90.9
$
(20.7
)
(22.8
)%
Gross Margin
27.9
%
31.6
%
(3.7
)%
SG&A
$
79.8
$
86.6
$
(6.8
)
(7.9
)%
SG&A Margin
31.7
%
30.2
%
1.5
%
Stock-based compensation(3)
$
9.3
$
17.6
$
(8.3
)
(47.2
)%
Net loss
$
(36.5
)
$
(12.3
)
$
(24.2
)
Net loss margin
(14.5
)%
(4.3
)%
(10.2
)%
Diluted loss per share
$
(0.11
)
$
(0.04
)
$
(0.07
)
Cash flow from operations
$
(18.2
)
$
(2.8
)
$
(15.4
)
Non-GAAP Metrics(4):
Revenue Growth Rate at constant
currency(5)
(11.3
)%
(12.5
)%
Adjusted Gross Profit
$
76.9
$
105.0
$
(28.1
)
(26.8
)%
Adjusted Gross Margin
30.6
%
36.6
%
(6.0
)%
Adjusted SG&A
$
70.7
$
76.0
$
(5.3
)
(7.0
)%
Adjusted SG&A Margin
28.1
%
26.5
%
1.6
%
Adjusted Net (Loss) Income
$
(8.5
)
$
10.1
$
(18.6
)
Adjusted EBITDA
$
5.7
$
29.3
$
(23.6
)
(80.5
)%
Adjusted EBITDA Margin
2.3
%
10.2
%
(7.9
)%
Adjusted Diluted (Loss) Earnings Per
Share
$
(0.03
)
$
0.03
$
(0.06
)
Free Cash Flow
$
(21.7
)
$
(4.8
)
$
(16.9
)
YTD second quarter 2024 summary
Six Months Ended June
30,
$ in millions, except per share data
2024
2023
Change
% Change(1)
GAAP Metrics:
Revenues(2)
$
500.3
$
594.3
$
(94.0
)
(15.8
)%
Gross Profit
$
140.0
$
188.4
$
(48.4
)
(25.7
)%
Gross Margin
28.0
%
31.7
%
(3.7
)%
SG&A
$
156.0
$
173.0
$
(17.0
)
(9.8
)%
SG&A Margin
31.2
%
29.1
%
2.1
%
Stock-based compensation(3)
$
20.0
$
35.3
$
(15.3
)
(43.3
)%
Net loss
$
(67.4
)
$
(20.4
)
$
(47.0
)
Net loss margin
(13.5
)%
(3.4
)%
(10.1
)%
Diluted loss per share
$
(0.21
)
$
(0.06
)
$
(0.15
)
Cash flow from operations
$
(34.0
)
$
30.2
$
(64.2
)
Non-GAAP Metrics(4):
Revenue Growth Rate at constant
currency(5)
(15.2
)%
(6.9
)%
Adjusted Gross Profit
$
154.0
$
216.8
$
(62.8
)
(29.0
)%
Adjusted Gross Margin
30.8
%
36.5
%
(5.7
)%
Adjusted SG&A
$
141.0
$
153.2
$
(12.2
)
(8.0
)%
Adjusted SG&A Margin
28.2
%
25.8
%
2.4
%
Adjusted Net (Loss) Income
$
(16.0
)
$
20.2
$
(36.2
)
Adjusted EBITDA
$
12.5
$
64.2
$
(51.7
)
(80.5
)%
Adjusted EBITDA Margin
2.5
%
10.8
%
(8.3
)%
Adjusted Diluted (Loss) Earnings Per
Share
$
(0.05
)
$
0.06
$
(0.11
)
Free Cash Flow
$
(41.7
)
$
26.6
$
(68.3
)
(1) For QTD and YTD, 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.
(2) Acquisitions completed in the last
twelve months had an immaterial contribution to revenue growth for
the quarter and six months ended June 30, 2024.
(3) The three and six months ended June
30, 2024 include a net reversal of $0.6 million related to the CEO
transition.
(4) 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.
(5) 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, 2024 was $1.2 billion, stable sequentially and a year-over-year
decrease from $1.5 billion. The sequential stability from the first
quarter of 2024 to the second quarter of 2024 is a result of strong
bookings in the first and second quarters 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
June 30,
$ in millions
2024
2023
# of clients with bookings greater than
$10 million
35
38
# of clients with bookings between $5
million and $10 million
24
27
Revenue by geography(6)
Three Months Ended
June 30,
Six Months Ended June
30,
$ in thousands
2024
2023
% Change
2024
2023
% Change
North America
$
88,255
$
107,570
(18.0
)%
$
177,055
$
222,630
(20.5
)%
APAC
89,095
98,680
(9.7
)%
175,808
196,164
(10.4
)%
Europe
63,054
65,763
(4.1
)%
125,266
144,547
(13.3
)%
LATAM
11,267
15,202
(25.9
)%
22,135
30,930
(28.4
)%
Total revenues
$
251,671
$
287,215
(12.4
)%
$
500,264
$
594,271
(15.8
)%
(6) 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.
Revenue by industry vertical
Three Months Ended June
30,
Six Months Ended June
30,
$ in thousands
2024
2023
% Change
2024
2023
% Change
Technology and business services
$
64,120
$
69,695
(8.0
)%
$
129,489
$
143,828
(10.0
)%
Energy, public and health services
63,530
75,313
(15.6
)%
126,552
159,352
(20.6
)%
Retail and consumer
42,687
44,485
(4.0
)%
81,618
92,397
(11.7
)%
Financial services and insurance
36,928
52,778
(30.0
)%
76,083
107,933
(29.5
)%
Automotive, travel and transportation
44,406
44,944
(1.2
)%
86,522
90,761
(4.7
)%
Total revenues
$
251,671
$
287,215
(12.4
)%
$
500,264
$
594,271
(15.8
)%
Liquidity
We had cash and cash equivalents of $47.7 million as of June 30,
2024, along with $300.0 million of borrowing capacity under our
revolving credit line, which was undrawn as of June 30, 2024. Our
total debt outstanding, gross of deferred financing fees, was
$291.8 million at June 30, 2024.
Supporting resources:
- Keep up with Thoughtworks news by visiting the company’s
website.
- Follow us on X, LinkedIn and YouTube.
-###- <TWKS915>
About Thoughtworks
Thoughtworks is a global technology consultancy that integrates
strategy, design and engineering to drive digital innovation. We
are over 10,500 Thoughtworkers strong across 48 offices in 19
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 “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.
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, employer
payroll related expense on employee equity incentive plan and CEO
transition costs. 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 (Loss) Income and Adjusted Diluted (Loss)
Earnings Per Share
We define Adjusted Net (Loss) Income as net loss adjusted for
unrealized loss (gain) 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,
the change in fair value of contingent consideration, restructuring
costs, CEO transition costs and income tax effects of
adjustments.
We define Adjusted Diluted (Loss) Earnings Per Share as diluted
loss per share, with the numerator adjusted for the aforementioned
adjustments to Adjusted Net (Loss) Income. In other words, the
numerator for Adjusted Diluted (Loss) Earnings Per Share utilizes
Adjusted Net (Loss) Income. We calculate Adjusted Diluted (Loss)
Earnings Per Share by dividing Adjusted Net (Loss) Income by
diluted weighted average shares outstanding.
Our management uses Adjusted Net (Loss) Income and Adjusted
Diluted (Loss) Earnings Per Share 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 (Loss) 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; unrealized loss (gain) 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;
restructuring charges; and CEO transition costs. 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 (used in) 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,
2024
2023
2024
2023
Revenues
$
251,671
$
287,215
$
500,264
$
594,271
Operating expenses:
Cost of revenues
181,444
196,338
360,257
405,860
Selling, general and administrative
expenses
79,816
86,626
156,046
172,966
Depreciation and amortization
5,662
5,874
11,297
11,416
Restructuring
7,212
—
9,327
—
Total operating expenses
274,134
288,838
536,927
590,242
(Loss) income from operations
(22,463
)
(1,623
)
(36,663
)
4,029
Other (expense) income:
Interest expense
(6,637
)
(6,150
)
(13,223
)
(13,012
)
Net realized and unrealized foreign
currency (loss) gain
(5,905
)
(30
)
(16,313
)
1,155
Other income (expense), net
144
135
493
(588
)
Total other expense
(12,398
)
(6,045
)
(29,043
)
(12,445
)
Loss before income taxes
(34,861
)
(7,668
)
(65,706
)
(8,416
)
Income tax expense
1,629
4,604
1,666
11,963
Net loss
$
(36,490
)
$
(12,272
)
$
(67,372
)
$
(20,379
)
Other comprehensive (loss) income, net of
tax:
Foreign currency translation
adjustments
2,864
(651
)
2,500
(409
)
Comprehensive loss
$
(33,626
)
$
(12,923
)
$
(64,872
)
$
(20,788
)
Net loss per common share:
Basic loss per common share
$
(0.11
)
$
(0.04
)
$
(0.21
)
$
(0.06
)
Diluted loss per common share
$
(0.11
)
$
(0.04
)
$
(0.21
)
$
(0.06
)
Weighted average shares
outstanding:
Basic
323,000,992
317,341,907
322,819,551
316,899,214
Diluted
323,000,992
317,341,907
322,819,551
316,899,214
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,
2024
2023
2024
2023
Cost of revenues
$
5,073
$
10,696
$
10,672
$
21,226
Selling, general and administrative
expenses (1)
4,265
6,910
9,285
14,059
Total stock-based compensation expense
$
9,338
$
17,606
$
19,957
$
35,285
(1) The three and six months ended June
30, 2024 include a net reversal of $0.6 million related to the CEO
transition.
THOUGHTWORKS HOLDING,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
and per share data)
June 30, 2024
December 31,
2023
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
47,740
$
100,305
Trade receivables, net of allowance of
$9,890 and $9,550, respectively
143,849
167,942
Unbilled receivables
133,350
115,150
Prepaid expenses
15,772
19,692
Other current assets
25,906
25,269
Total current assets
366,617
428,358
Property and equipment, net
26,455
26,046
Right-of-use assets
35,274
41,771
Intangibles and other assets:
Goodwill
418,057
424,565
Trademark
273,000
273,000
Other intangible assets, net
107,576
114,186
Other non-current assets
20,121
19,310
Total assets
$
1,247,100
$
1,327,236
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable
$
3,114
$
2,767
Long-term debt, current
7,150
7,150
Accrued compensation
80,913
88,712
Deferred revenue
12,714
18,090
Accrued expenses and other current
liabilities
24,140
27,260
Lease liabilities, current
13,595
15,301
Total current liabilities
141,626
159,280
Lease liabilities, non-current
24,915
29,791
Long-term debt, less current portion
282,694
286,035
Deferred tax liabilities
44,269
54,907
Other long-term liabilities
24,262
24,093
Total liabilities
517,766
554,106
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par
value; 100,000,000 shares authorized, zero issued and outstanding
at June 30, 2024 and December 31, 2023, respectively
—
—
Common stock, $0.001 par value;
1,000,000,000 shares authorized, 373,578,081 and 372,876,082
issued, 323,109,543 and 322,407,385 outstanding at June 30, 2024
and December 31, 2023, respectively
374
373
Treasury stock, 50,468,538 and 50,468,697
shares at June 30, 2024 and December 31, 2023, respectively
(622,987
)
(622,988
)
Additional paid-in capital
1,648,567
1,627,491
Accumulated other comprehensive loss
(35,666
)
(38,166
)
Retained deficit
(260,954
)
(193,580
)
Total stockholders' equity
729,334
773,130
Total liabilities and stockholders'
equity
$
1,247,100
$
1,327,236
THOUGHTWORKS HOLDING,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
Six months ended June
30,
2024
2023
Cash flows from operating
activities:
Net loss
$
(67,372
)
$
(20,379
)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization expense
14,377
18,220
Bad debt expense
2,237
2,596
Deferred income tax benefit
(9,943
)
(12,033
)
Stock-based compensation expense
19,957
35,285
Unrealized foreign currency exchange
loss/(gain)
15,505
(735
)
Non-cash lease expense on right-of-use
assets
7,883
9,312
Other operating activities, net
534
2,018
Changes in operating assets and
liabilities:
Trade receivables
18,236
47,332
Unbilled receivables
(20,746
)
(15,276
)
Prepaid expenses and other assets
1,808
2,727
Lease liabilities
(7,453
)
(9,495
)
Accounts payable
113
(813
)
Accrued expenses and other liabilities
(9,087
)
(28,516
)
Net cash (used in) provided by operating
activities
(33,951
)
30,243
Cash flows from investing
activities:
Purchase of property and equipment
(7,713
)
(3,681
)
Proceeds from disposal of fixed assets
191
221
Acquisitions, net of cash acquired
(1,399
)
(15,989
)
Net cash used in investing activities
(8,921
)
(19,449
)
Cash flows from financing
activities:
Payments of obligations of long-term
debt
(3,575
)
(103,575
)
Payments of debt issuance costs
—
(99
)
Proceeds from issuance of common stock on
exercise of options
1,272
3,816
Withholding taxes paid related to net
share settlement of equity awards
(4,162
)
(3,261
)
Payment of contingent consideration
—
(13,996
)
Other financing activities, net
—
80
Net cash used in financing activities
(6,465
)
(117,035
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(2,924
)
178
Net decrease in cash, cash equivalents and
restricted cash
(52,261
)
(106,063
)
Cash, cash equivalents and restricted cash
at beginning of the period
101,660
195,564
Cash, cash equivalents and restricted cash
at end of the period
$
49,399
$
89,501
Supplemental disclosure of cash flow
information:
Interest paid
$
12,208
$
12,544
Income taxes paid
$
9,375
$
31,929
Reconciliation of cash, cash
equivalents and restricted cash:
Cash and cash equivalents
$
47,740
$
88,151
Restricted cash included in other
non-current assets
1,659
1,350
Total cash, cash equivalents and
restricted cash
$
49,399
$
89,501
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,
2024
2023
2024
2023
Net loss
$
(36,490
)
$
(12,272
)
$
(67,372
)
$
(20,379
)
Unrealized foreign exchange loss
(gain)
5,303
213
15,505
(735
)
Stock-based compensation (a)
9,987
17,606
20,606
35,285
Amortization of acquisition-related
intangibles
3,782
3,669
7,439
7,260
Acquisition costs (b)
800
2,100
1,709
3,806
Certain professional fees (c)
2,303
1,525
2,303
1,750
Employer payroll related expense on
employee equity incentive plan (d)
43
249
264
491
Change in fair value of contingent
consideration (e)
—
129
—
129
Restructuring (f)
7,212
—
9,327
—
CEO transition costs (g)
1,102
—
1,102
—
Income tax effects of adjustments (h)
(2,552
)
(3,114
)
(6,836
)
(7,435
)
Adjusted Net (Loss) Income
$
(8,510
)
$
10,105
$
(15,953
)
$
20,172
GAAP diluted weighted average common
shares outstanding
323,000,992
317,341,907
322,819,551
316,899,214
Employee stock options, RSUs and PSUs
—
12,250,374
—
13,561,172
Adjusted diluted weighted average
common shares outstanding
323,000,992
329,592,281
322,819,551
330,460,386
GAAP diluted loss per share
$
(0.11
)
$
(0.04
)
$
(0.21
)
$
(0.06
)
Adjusted Diluted (Loss) Earnings Per
Share
$
(0.03
)
$
0.03
$
(0.05
)
$
0.06
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,
2024
2023
2024
2023
Net loss
$
(36,490
)
$
(12,272
)
$
(67,372
)
$
(20,379
)
Income tax expense
1,629
4,604
1,666
11,963
Interest expense
6,637
6,150
13,223
13,012
Other (income) expense, net (i)
(29
)
(6
)
(215
)
787
Unrealized foreign exchange loss
(gain)
5,303
213
15,505
(735
)
Stock-based compensation (a)
9,987
17,606
20,606
35,285
Depreciation and amortization
7,222
9,131
14,377
18,220
Acquisition costs (b)
800
2,100
1,709
3,806
Certain professional fees (c)
2,303
1,525
2,303
1,750
Employer payroll related expense on
employee equity incentive plan (d)
43
249
264
491
Restructuring (f)
7,212
—
9,327
—
CEO transition costs (g)
1,102
—
1,102
—
Adjusted EBITDA
$
5,719
$
29,300
$
12,495
$
64,200
Net loss margin
(14.5
)%
(4.3
)%
(13.5
)%
(3.4
)%
Adjusted EBITDA Margin
2.3
%
10.2
%
2.5
%
10.8
%
Three months ended June
30,
Six months ended June
30,
2024
2023
2024
2023
Gross profit, GAAP
$
70,227
$
90,877
$
140,007
$
188,411
Stock-based compensation
5,073
10,696
10,672
21,226
Employer payroll related expense on
employee equity incentive plan (d)
32
159
255
345
Depreciation expense
1,560
3,257
3,080
6,804
Adjusted Gross Profit
$
76,892
$
104,989
$
154,014
$
216,786
Gross margin, GAAP
27.9
%
31.6
%
28.0
%
31.7
%
Adjusted Gross Margin
30.6
%
36.6
%
30.8
%
36.5
%
Three months ended June
30,
Six months ended June
30,
2024
2023
2024
2023
SG&A, GAAP
$
79,816
$
86,626
$
156,046
$
172,966
Stock-based compensation (a)
(4,914
)
(6,910
)
(9,934
)
(14,059
)
Acquisition costs (b)
(800
)
(2,100
)
(1,709
)
(3,806
)
Certain professional fees (c)
(2,303
)
(1,525
)
(2,303
)
(1,750
)
Employer payroll related expense on
employee equity incentive plan (d)
(11
)
(90
)
(9
)
(146
)
CEO transition costs (g)
(1,102
)
—
(1,102
)
—
Adjusted SG&A
$
70,686
$
76,001
$
140,989
$
153,205
SG&A margin, GAAP
31.7
%
30.2
%
31.2
%
29.1
%
Adjusted SG&A Margin
28.1
%
26.5
%
28.2
%
25.8
%
(a) The three and six months ended June 30, 2024 exclude a net
reversal of $0.6 million related to the CEO transition which is
included in the CEO transition costs line. (b) Adjusts for certain
professional fees and retention wage expenses related to certain
acquisitions. (c) Adjusts for certain one-time professional fees.
(d) Adjusts for 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. (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,
professional fees, and other reorganization costs. (g) Adjusts for
CEO transition costs which includes $1.0 million of severance, $0.5
million target bonus and $0.2 million salary paid during the
transition period, partially offset by a $0.6 million net reversal
of stock compensation expense. (h) Adjusts for the income tax
effects of the foregoing adjusted items, determined under the
discrete method consistent with our non-GAAP measures of
profitability. (i) Excludes a gain which was included within other
income (expense), net in the condensed consolidated statements of
loss and comprehensive loss related to the mark to market
adjustment on shares received in relation to the sale and
settlement of trade receivables.
Three months ended June
30,
Six months ended June
30,
2024
2023
2024
2023
Net cash (used in) provided by
operating activities
$
(18,201
)
$
(2,804
)
$
(33,951
)
$
30,243
Purchase of property and equipment
(3,489
)
(2,024
)
(7,713
)
(3,681
)
Free Cash Flow
$
(21,690
)
$
(4,828
)
$
(41,664
)
$
26,562
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240804893976/en/
Investor: Thoughtworks Holding, Inc. Rob Muller:
investor-relations@thoughtworks.com
Press: Thoughtworks Holding, Inc. Linda Horiuchi:
linda.horiuchi@thoughtworks.com
Thoughtworks (NASDAQ:TWKS)
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