Thoughtworks Holding (TWKS) 27 Feb 242023 Q4 Earnings call transcript

Hello, everyone, and welcome to Thoughtworks Earnings Call for the fourth quarter of 2023.

We will be recording today's call. [Operator Instructions]

Joining us today will be Thoughtworks President and CEO, Xiao Guo; and CFO, Erin Cummins. The earnings press release was issued earlier today and is also available on our Investor Relations page at thoughtworks.com.

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

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

investment quarter-on-quarter for in years. Rob. of costs a as of basis. we impact We're new workers operating on joining Thank year, thank pleased restructuring faster macroeconomic difficult which functions was in as We year all cost business. Last the It year clients, transformation offshore challenging to and day a global XXXX a our deliver operational and an We annualized drive and to a was our efficiencies. Hello, with improve to you, digital reduce basis. a every manage set continues for and the environment. continued and embarked thank you utilization, to respond everyone, they adjusted on us, savings million extraordinary you our support We center. The the us to with a helps business a the our our clients. to began navigated engineering XX biggest on $XX resulting centralized to up model. also we in DEC company establish change shift the XXXX seasonally of

our Alongside around so we third business. to the of can teams we an continue in organized and began the during regional specialization we restructuring the expertise XXXX, our industry of Finally, and sales go-to-market our verticals. transformation operations, continue in that we industry-based XXXX. build in specific transition will this We invest quarter

company services as sales capabilities in our true harnessing new marketing, we while into cutting-edge staying who focused change solve us by investments and clients' helping a on positioned toughest head intensely and XXXX. challenges partners, our of company with undertook technology. brilliant to technologies, a Our stronger as expertise We are, we this

Now let recognized we fourth short million our adjusted $XXX XXXX during year We the the was quarter X.X%. generated in me originally of EBITDA quarter November. of full to margin share of and revenue quarter guided results. what fourth fourth with that We

was Around in limitations. which model, our to ways. was some revenue X X/X supply-side were due to caused in results Our of our disruption to in fourth operating primarily of impacted scale specific This change structure primarily operations quarter. shortfall the the due the

of taken going demand the steps shortfall X/X forward. Around address this have We was to side.

had in we resulted than pricing and delays, we higher anticipated. ramp-ups, caution smaller slightly Continued more pressure client project project

into to cautious We XXXX. expect this behavior continue

base is a full an strengthening, of of client the client full supported XXXX. strong Now year $X.X transformation, delivered and We XXXX margin for turning our EBITDA relationships. of X.X%, by to while adjusted year billion and was the long-term year revenue a foundation

at year-end. are with bookings Our over XX the relationships in reflected deep million again clients client $X and trusted

momentum. XXX $XXX quarter. We in Bookings gain New client was new XX those continue the in around XXXX, clients acquisition logos remains contracted XXXX a new million. of fourth we with from to strength, in and

health traction insurance in focused are we seen financial from and acquisition have services and higher on. focused our We that services verticals. These vertical new the sales verticals model and have public energy, with intentionally logo

longer-term DAMO Thoughtworks service good with by are is XX benefiting as managed DAMO XX% top and digitization. at over early of client and with interest in lead GenAI first by the strategic companies clients of systems, on both Our faster a better because our enabler client services now expansion play capitalize and pleased managed acting their contracts. We're a getting are the an catalyst cloud and it cost to taking legacy for is use services to and shift assets. for from improvements. projects data both year-end. XX savings It's a we're GenAI modernize in cost make for valued AI of software uptake as delivery, quality their clients

of reduction has We work, percentage our client observed which priorities have high changed. a been growth-oriented We're business. have that historically seeing of consultancy a spending

we needs have clients' our we believe of the will have diversifying urgent where address our spending to While right return, we more to discretionary been business win.

modernization, For software implementation example, DAMO. and enterprise third-party application

We for innovation and thought and reputation technologies leadership. outstanding have

We are and to our adapt future to clients success. well their positioned harness data power evolve AI the of help to operations to cloud,

to Erin. hand Now over let me

our to made We're have of doubled having ago. a partnership who with has we XX% we've marketing sales clients, resulted quarter, Thanks, in participation were year sales to and today. in outbound fourth complement remained We our from joined partner progress building marketing and our with compared inbound in pipeline, our as to strong pleased the close thank the we've our built you sales everybody historically and the out our those Xiao, invest continued and capabilities. In Investments current to call bookings channel interest. relationships.

our standard in in we are partners the certification embedded have processes, expanded the programs We the have We Itoc. of best and leveraging further our capabilities sales believe technologists industry.

XX%, of from sequentially strong was QX XXXX, XX.X% in head XX% belonging At XXXX. reflects from our among TTM on our attrition XX,XXX. QX, below a basis which of improvement sense industry in remains stable employees. In attrition count year-over-year XXXX the voluntary Our of rate, end an was and around QX averages, a

selectively We with specific focus a sets and data continue infrastructure. on as hire skill such to

look constant quarter XX%. QX. Now fourth year-over-year decline revenue Revenues the of declined in XX%. point in currency, revenue In a $XXX at contributed detail. X representing more the to growth were million, rate let's percentage Acquisitions approximately

public XX% in our Services consumer. For in and Technology Insurance, APAC, LATAM. XX% in of the health Financial XX% services, XX% North retail quarter, America Europe, in in X% and verticals, in energy, declines Services and year-over-year we Among revenue industry automotive, and and declined XX% XX% saw by travel Business transportation, year-over-year XX% in XX% in and in and

XX was total as percentage greater than $XX QX during clients to margin million QX top During gross of year (sic) respectively. generated a compared our XX%, XX% XX% XX and XX% XXXX. Adjusted We had with ], and during top top XX.X% [ XX.X% period. X, XX revenues revenue, prior clients for the

share EBITDA gross period. as fourth $XX adjusted to adjusted million saw as an compared prior of declines quarter, loss share prior diluted in headwinds as $X.XX $X.XX adjusted in year cost of QX of per compared EBITDA temporary year-over-year In offshore for like-for-like the X.X%. QX XX% well of the shifting due SG&A our the revenue Adjusted the XX.X% a quarter was high was basis. fourth percentage earnings GAAP the mix Our period. to margin pricing on a was year per for to single-digit

cash to EPS compared million free of flow diluted during $X.XX adjusted million XXXX. the the compared $XX of for was Our recorded QX quarter $XX prior in We flow period. $X.XX to fourth free year cash of

balance a balance December million, our of with stood $XXX liquidity term outstanding We have XX, and of million good cash $XXX at as XXXX. loan

remains of $XXX Additionally, credit our revolving facility million undrawn.

year year points of down $X.X XXXX in XXXX U.S. contributed revenue recorded results. X full Acquisitions We the billion, and XX% to dollar revenue growth percentage our to versus rates. constant currency. both full Turning

average was reflect revenue which $XX,XXX, strategic deliver. employee For we that XXXX, our the continues importance per of work to the

Our average. the industry remained revenue per employee above

XX% from our came XXXX, existing business of clients. During around

year, as sizing. contract XXXX, behavior of compared down pressured For recorded and XXXX, length billion, bookings to client we throughout $X.X cautious the XX%

compared compared New as a bookings realization revenue adjusted Adjusted SG&A XX.X% year revenue full to Full the compared margin XX.X% XXXX. year resilient. of XX.X% in of percentage to million in of during XX.X% with Adjusted margin to margin XXXX. gross was EBITDA XXXX totaled adjusted remained adjusted XXXX $XXX for in an EBITDA in margin EBITDA an XXXX. XXXX, XX.X% X.X% was compared to

XXXX, XXXX. Full the We recorded million the to of GAAP recorded full adjusted XXXX. XXXX million we $X.XX diluted $X.XX compared For of $XX was diluted in a XXXX. $XX free in to of $X.XX year full compared cash $X.XX per in EPS per flow for loss year compared in year to share share loss

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

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insights Looking the an Group, published continue organization with many evidence to build that just matter Thoughtworkers creates the observations book Erin. Bank, clients result based the products. over platform. technology. book on everywhere write of of Looking that the years books and reading workshops find The value technology lenses the with offers choices. In advice to feedback to luminaries, shares from future Alongside a clients, over practical trends January, road Glass. I'm the map include also to Glass in XXX annual as through requesting report, the been X we've AI edition, our making we tool right XXXX of clients, support is positive has Client technology AI technology of and Very and Atom companies, you, clients. Thoughtworks to realizing a published from seen expect lenses Examples we trends our Dunnhumby, Sportradar. Back leading that pleased and to that data how working great Our identified The

Thanks, Xiao.

demand let macroeconomic-driven Now to QX me outlook to outlook business due discuss for continues our variable and XXXX. Overall, caution. the be

Our clients to XXXX. more from flat to XXXX the with are deliver same budget. Budgets mostly are tight, required still

growth-oriented back prior While in to it seeing to historical pipeline more our we are and yet quarters, consultancy compared work the is not norm. discretionary

of XXXX transition. expect year be We to a

strengthening. We are is pipeline pleased our that

expect build We investments our to progresses. marketing and XXXX in and new sales partners services as momentum

drive we volume move through trusted a to expect opportunities, committed open we partner on quarter-to-quarter to for increases being and XXXX. are clients converting We remain which focused our as

in guidance immaterial to range to XX%. expect of XX% million first year-over-year of the FX revenues QX. to an we For of the a incorporates reflecting be $XXX XXXX, $XXX million, impact current At decline rates, in quarter

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

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

factor in cautious that the XXXX exhibited Our and QX guidance to continues clients continues that behavior in today.

to with broken into elongated deals. up cycles sales expect We programs smaller remain

$XX of Our share-based compensation QX million. guidance incorporates

XXXX year Moving to our full outlook.

XX% order well shift as more were on client currency. reflecting basis to market range to expand work Compared XX% expect like-for-like we to more XX% done a decline billion, of as mix reflects year-over-year a XXXX, response in share retain wallet aggressive our with guidance to XX% on million a decline pricing being in and lower constant to and to a or the in of our intentionally of year, revenues $XXX We to in $X.XX trends. offshore. Last pricing

start of the our turned our pricing reflect as average XXXX new to in portfolios price to expect stabilizing have most environment. We contract over

adjusted full of to margin year, expect EBITDA the we X% XX%. Additionally, for

We expect supply and utilization focus expand margin EBITDA our to including as offshore mix throughout shift XXXX adjusted side efficiency, on delivery. to continued we the

We continue respect as margin progress XXXX. With including support of of focused we further G&A and expect end restructuring which wage-related million, efficiencies pretax to to actions expansion expect we we driving $XX $XX XXXX. continued XXXX. have in recorded items to we charges to our efficiencies, through program, complete, the already million nonwage-related our The total majority operational remain million on of through are $XX of

cost raised XX, million $XX a within annualized $XX $XX which of savings, December of to we range million. us in million targeted As puts

We on to aim efficiency driving high be the targeted of at continued across are the the range. focused and end organization

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

For total the share-based compensation full year, $XX million. we will expect

Now hand call let for remarks. the to closing Xiao back me

believe the culture the able the Erin. proud attract in we're industry. and retain. I built you, talent that the have I'm and we community to best and people that Thank of we've

list social generative foundation bolstered Our the needs recognized system. contribute in that and I'm our people causes. One Thoughtworkers' by impact social passion conversational fourth collaboration pretrained We of demonstrates Indian our example by quarter an to to belief Workplaces the every as bring relations. on citizens vernacular outcome the reputation portfolio and delighted part and our power remain government harnesses the in proud be source thought client discover cutting-edge a to Jugalbandi Indian mission. of work Thoughtworks' do. strong, XXXX. were leadership. more through citizen. prestigious outstanding our in utmost open our AI of future. In at innovation for #XX commitment and unwavering. is inclusive is their technologies Fortune's to for towards OpenNyAI and a of important strategic at center of of Jugalbandi, power technologies can underpin World's solutions We we client This everything Best models potential closing, voice-enabled for a Indian language describing transformers for scheme and sustainable the right the

and forward, power data and well operations they future harness as for cloud, move our we clients to extraordinary their positioned adapt for modernize the and success. AI to deliver of As we're impact evolve

thank who to their our impact the a their XXXX; kept we a our like for edge we who challenges; solve navigated turn to our advice to of Rob. us about as cutting the and support We're to investors, entrusted returning would to clients, on growth. With to over technology; to greatest focus their move challenging XXXX. Before that, technological extraordinary I'll call our to I Thoughtworks Q&A, stakeholders moment take back who in the ahead and all delivered and our employees, contribution landscape of in upon company every we to day us as offered excited opportunities to

Thanks, Xiao.

Relations our the for find to participants as instructions presentation on on a provide you allow We'll to the possible follow-up that can call? Q&A. many now each one You would ask keep investor as question. Operator, I please and one move question Thoughtworks on to website. Investor you to ask those

Instructions] [Operator

Cowen. from Bergin first question with Our comes Bryan TD

demand outlook start the front. on I'll the 'XX on

some more has the -- seemed believe to was thought So on there dig last client months? X forming. can we you stabilization I that over to what seems just be changed have in what behavior in

that or Was resurface? some So it Or in or clients more of certain expand where large broad-based? industries geos? you saw on pressure so certain you maybe can

you, Thank Sure. Bryan.

we delays we described continue But stabilizing similar quarter. the to pricing and time, project at environment in behavior last churn. same have respect client the the also, the It's is ramp-ups. in with to slower So see headwinds, what to current project

are the deal heard they need becoming budget. The largely I be cancellation project negotiations going XXXX time, more our with budget less still clients' out the budgets. call is clients that to same releasing very to compressed, the client size to ramp-up much cautious is we long, cycle while is throughout for flat budget, At year-on-year. do still year-end same sales then So frequent, is about incremental. And is want still

very So more said, case we for aggressive we where a ROI, of work we openings be discretionary closed our and with to spending have pushing pencils there's and quite some pricing sharpen while strong offshore. And that more are our seeing QX for the early in time. rate also it a large which few large pricing the we deals, win in but up about now. deals with good we're comes seeing on QX, will ramp and right And pressure feel that due

together, guiding we where sequential do trending followed this incremental growth but the towards, So small throughout towards by year. QX putting expect we're

constraints. follow-up And on the Okay. then supply is my

what like little bit So model. a a in of specifically by the caused it dig can centralized this transition sounds more on bit you maybe the is the But to caused in risk remedied these you issues? gives the What you've due a loss constraints? should is we challenges XQ? And you've confidence any client there -- done of that the to that

question, more that. with in our what bit Thanks I'll for talked Bryan. but start I'll bit quarter. in add remarks, a We prepared fourth a happened color the about this about

we feel at our We're supply. To from bit remedied earlier, seeing about We some guidance, the internal these and were both it temporary seeing program, particular friction and resulted revenue in of quarter. in supply around do also was temporary touched and was process we we on impacted that around fourth X/X skill benefits the that to the expecting. our more the as ultimately, program, is are coverage related than itself but Xiao look constraints capture saw restating, upfront as what that definitely this to sets. these a leave your And in the we efficiencies factors. staffing quarter. It and we answer worth As have issues. restructuring factors limits we we certainly but question, commented, are if revenue see actual our miss noted versus We

We've in underlying throughout processes, the and quarter, addressed the processes, strong. demand driving that's We accountability in are was organization. demand seeing remaining where and the very the in be fourth we a now see QX. But to lot issues. we of strength these it addressed It and have data, continues

going and We removed, have the was business it's not the that not see approach fixed But we're we did company. quarter, arose country right didn't disruption that again. The layer finally, in a that challenge fourth we that we're for on where from that think change So unit client your to cause the restructuring, think perspective, again, see perspective. impact. And concerned We well adjusted client managed. from about No, was client just it then point relationships. the a

isn't there concern so And any there.

want brings to the opportunity the I this the to then it take reiterate of and benefit to just us. importance restructuring

talked lot time, I about But at sales verticalized think same we a the cost our side of and the centralized force. also it. we're

into global that new some the of professional structure absolutely So clients. due in behind chaos want build of is temporary energy, industry is term, and already. the called the painful, for as a also and they are to then we definitely example, responsive It's can our supported it that then but And banking the most we changes to we the DEC. management public centralized closing time, our disruptions more lot scale and also sectors that verticals we more our in care short focus the believed our QX. logos go-to-market operations in was have client-centric over of also convinced we expertise and in thing saw partnership doubled more long specific and to to result, planning, then see our but in and also than deals, time, utilization should the us capacity efficiency want We we run. health process we a service services. At necessary. structure to and right are We're better And people this this and the more focus, deliver financial same in do, optimization on. And

with comes Katri question from Wedbush Moshe Securities. next Our

So execution new on flow. pricing, think function towards includes a a overall the quantify comment then function pressure you're kind shift a it of some is renewals? more also have kind this maybe context, the on of also And there the deal of the -- seeing offshore? And is So it to way you is of in the obviously, in cannibalization mentioned Is year? I it that there? it pricing that you

Sure. Thank you, Moshe.

budget a to Erin of clients, then is we pricing we by And the mentioned their contract the constraint, large a dynamic that's then to our early earlier, that renewals earlier them extensions, expansions and sometimes QX. And our we So lot list that. recognized was top year-end. quite and deals close then to of driven with as in resolve on I by we're talked working mostly closed QX mentioned briefly -- and few

million client, top automobile these new are our sector are $XX of XXX many Some retailer, in company large extensions airline clients business an deals type, are range, large these of client, deals. to public like manufacturing Fortune in the but these services all a They're the $XX the clients, to all and million deals client. large

we're be the onwards, than But on contract shift is of with seeing less pricing like-to-like year-on-year So portfolios offshore, decline. pricing. That pricing and significant. high -- our the we single-digit we felt pricing also decline believe new majority the excluding good much going mix said, should to we're the come about think that already -- but from dynamics QX I the QX reflected seeing win further rate deals, on that further these price in large to then

And so we stabilize. expect do that to

right Singapore, usual is there, Understood. geographies and of And China, in APAC. can then my about magnitude question of Europe. on and regions, other the at bit Is better of than a X basis North the bit talk the there that given probably a way seeing we declines seems Australia, the about it you're looking it? doing what versus America it's Maybe terms a that relative

It that. noticing is. you for And thank

about also on from across that APAC. impact think, our portfolios But the during downturn, macro I felt We have we a early diversification always, felt the bigger of saw geographies. we good

because the given few it across years COVID. At headwind, as rebound the market markets same growth time, We're last has the we're the there. seeing slower market we're economic local back been Australia, seen fast first of but signs recovering, glad in healthy into returning we signs expected recovery that X seeing not China of and growth the over market, economic more growth people of that is very I about So spending definitely the then discretionary growth, in ago. it's from seeing was is have the main after on this seen quarters. the a macro Singapore local that of of the and think as APAC, consistently growth X went returning is well as

I think really at markets. moment performing is other as that pointed that's, APAC than out this you better

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

just the for on as This is cadence growth right, DuPont obviously, morning not by do on that that given that's from know Jason. you we push going in this previous look for the roughly be should flat revenue you that of for given touching us be I wanted level? And happen. Tyler XXXX. will, you mentioned from a demand we XQ, what to positive? when standpoint inflection But I looking call guidance sequential a if see perspective, reach to that through to growth growth to need would on the the to start

see up the and but spending perspective, opening year. we to sequential that this should our pockets deals obviously stabilization coming We're we've not portfolio large pricing do signed of calling the the at improve then expect feel continue and that in a of growth to we some we the up that then the with from So moment, discretionary growth throughout steady QX soon.

QX with we'll even will what guidance, of be as were opportunity that -- if yet. that If said, the the and see uncertainty. a But where returning in I ramp-up we we give could sequential in be work, ready low some where towards or some trending to guidance be and the not that if for of which or today a high end pressure to us pipeline of tends of in we pressure down we alleviates probably feel case, and delays like still, -- full definitely from then we're pricing though means the towards conversion call I baked can pipeline the see stage seeing trending slows do means guidance, lot the worse, get year, already expected, continued there's the consulting of end we're sort if trending which that think, lot at returning we're Now into come the pricing to earlier. But the we're converts to that we direction. the we the value-based our growth pricing the more that to our sequential delayed. But that further which it's growth,

you Okay. just a saw as based X%, Great. X the seeing are initial clients the follow-up, appreciated? say, discuss those your the of top to that let's top those of on math there Or would moving pieces among an looks pricing? projects? here top that. there quarter. like clients roughly clients? declines Or revenue then due I Xiao. my That's helpful, And Can decline sort in be Are around appreciate the any just among dynamics sort in you're just rundowns

Sure.

them big our our pressure and of our for we're Many And offshore probably So we value we earlier. pricing and beginning the top then later even, X decline more some budget. and renewals XX shifting the the driven by volume, clients. their and to X and of with to top of revenue then have sharpen it less is top volume pencils QX to and them driven of saw share towards extend But retaining also by top is XX work mentioned QX. to further extensions the definitely within

Baird. Koning comes question from next Our Dave with

$XXX I time. XXXX, guess down is kind was of about EBITDA my over million. in million $XXX around question And I down margins revenue guess and

wondering EBITDA. through didn't to you a we lot see of as why get describe EBITDA It's we So little But can very strong happens hard better savings forward, a XXXX? XX% see maybe back to little I'm a cost in flow margin? go And XXXX. right what in to

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

that it is and did our those we So talking margins. ramp we've fair see talked about did And about, been from that to has middle the in had we shifts impact say larger our that EBITDA revenue some slowed The QX. on before ramp downs -- the down. downs of project we we headwind see

a that margins. our So business quick that impact very positive. But impacted that we see was as to

We the to on work. also more offshore from have touched move work onshore

about. and from we the of service So to client another actually, as also talked we're maintaining where client proud our the shifting agility demonstrated relationships one we Xiao of We're as disruption. we're has proud in that very location business have without

time, the well. But on impact and XXXX. that on effect line very the have it that same at top did pricing, an we did So

where Now really forward, doing is going at. more getting importantly, what which are we your question is

it So moving right XXXX was saw the direction, We we're across in utilization It's in lower but year. that lower see XXXX, improvements expect. we us we than did the start for on the year still whole. telling the to

focus is a for top that us. So

progress, again, our taking right a and we seeing team And expect excellence addressing XXXX track, We every operational we're it utilization, improve have on good lives breathes programmatic day. significantly. are that and we to to the and approach we're the

on touched shift happened offshore. as the quickly shift the from supply onshore I the demand I said, than to And shift. Now more

as levels bit XXXX pockets caution, but reflecting to story. again temporary. And a fully XXXX. those and take a ability for improvement address in the the we of oriented a higher we're work. that -- on our us that the It's to disproportionate our that's through locations, as growth-oriented dynamics work impact impacting that it. And take It does embedded in that's that's it more so there's are the we definitely is competitive continue little margin. pricing the and There and where a time look in our XXXX. But to macroeconomic quarters part has and issues. to cost in general just lower seeing gross the talked anticipate, of utilization, then consulting few confident lower across we do going It's assumptions we this, we're about headwind It's guidance,

at temporary. the our for we So we've we XXXX. in But do they're year, for same have place these time, the think assumed considered as are guide dynamics

And so XXXX second the of be we but half would year, don't XXXX. think to necessarily. point, that, it in that's likely more the this at and may, beyond It benefit going to perhaps XXXX

in the to just want gross out also cost, we The reorganization I doing perspective, key -- took margin. stages. piece around we of is million that through really the is QX early it We on. well. that's I but so good, are in in And which restructuring went touched highlight from $XX cost a

efficiencies have still we we're driving that there. so And

think So high consistent we'll opportunity is in bringing for expect level get the improvement. XXXX. certainly, into beyond. teens don't remains XXXX that But and together, it back all there what we margin We for XXXX

XXX Number just think [ one of clients, quarter. follow-up. maybe I quick the ] ending And was

that ones, ever strongest indication Or mean, we've is why early I the are I quarters new one in seeing good yet? some the per not that on that in direction? gains it smaller a things seen. that's contracts and clients. going of just client of think is was it And the of we're right some much

both. think it's I

all, marketing into we our have thought the to sales investing and we definitely especially believe brilliant capacity, demand have proposition of right think heavily outbound leadership I First We demand definitely opportunity that and have additional been our we to technologies. generation capacity. that expand But generation. value in

ago, that as it's clients definitely them. But as clients current our to new of Erin with a size XX%, clients. deals. of And QX to in only when potential retaining working new as deal at start XX% macro our outbound, sign We're logos mentioned, many clients the we're smaller environment. up more outbound us, wins couple and a the the acquisition new with and compared the initially, So tends reaching don't historically, these with you time, earlier, same in bigger of inbound, of combined years much we're get over they efforts out mentioned or seeing come the from

So work that shorter to expanding and really expand us we're there. we from see that smaller tend deals, opportunities happy deals, our base give to client we're but

Matthew RBC. Our next question comes from Roswell with

we how in expect Erin, they the restructuring cash or the second of any are free should easy charges, severance about one I'll are of Two like get flow And first related? a sort out think questions. 'XX? coming So out first. cash we should quarter? in And

Yes.

charges the impact but than did in it be XXXX. There will XXXX. restructuring impact less be XXXX, So will some

than free a X%. a From charges of the did restructuring compare we if historical It So overall CapEx revenue, percentage lower under we levels. perspective, a year-over-year, in CapEx was XXXX, benefit. as have cash was will flow be

do change in significant were not increase we're expecting in CapEx, XXXX. but expect I where XXXX, from For an we

whole, at to am increased XXXX 'XX change, if the charges, but we our free cash compared given focus XXXX, flow I flow the to efficiency look On XXXX. operational restructuring a reduced not the on expecting alongside cash in significant

have When clients, so implement actually to place to programs Do talk question, think this architecture in they they can I you prerequisites, you to do there's put implement a having percentage actually And the for of guess Xiao. picture bigger GenAI? what guess, I the is versus data? the now more do them GenAI have

prerequisites they're Sure. them first seeing are terms the data all, we're in we're From of of working ready, GenAI a at already very -- clients scale of implementing concepts. the -- all doing percentage a with, small. who proof of is of really with majority the large platforms, What majority

prove the technical trying and both then Just case out business to viability.

prepare We most POCs. And lot years -- from especially value but get just full right necessarily building generally data that the of -- I run especially a to platforms these the having was the to GenAI years right was a a I -- data. -- updated clean call of at of modern than time, would of with working, it platforms of platforms clients of have getting to work require data, they data of just a themselves. and XXXX data that the year there's top on probably do Only recognized fraction, GenAI GenAI, So have think AI for ready getting to which less them, same that. last is not result allow in place of ready to and few the them preparing say, readiness in the that then XX% that a the with ready, for data

doing prepare from moving implement they would see we them are large-scale POC readiness. will clients real to to But of ready. of more work themselves language small model, example. using We running large believe are applications large-scale AI for I percentage our think they XXXX, running implementation fine-tuning, for that clients still where AI, think GenAI most these in -- -- are real I be do

I Is work think immediate and on doesn't disconnect lot are would an seeing? near-term for that your on there clients that focus work of the between a is GenAI investment preparatory that Because payback. have return a --

It definitely good cases. of it's a type call. use it depends depends on I the think -- GenAI

especially then large or Some a cases to year models. payback. while for take some do to least And they're of commitment. And the are building of at -- ones ready forward that. would more that say, investment, are, are years low-hanging that They of on lot building X, a fruits. the type require then would involved get that fine-tuning make large rightly then cases implementation. so building. we're there. And would the that open with of out APIs are It involved in or and to some clients language of mode willing user not so They're are just our the that use those language a I But custom GenAI top moving of using the interface platforms

a to in going is be seen term, used. experience, provide personalized ultra GenAI limited it's we've can case use use common the most the of -- a think near is I how which case definitely also return return but

William comes Blair. next question from with Our Kate Kronstein

comes question Wolfe with Obrecht Research. Paul from next Our

Paul for in on is the like across quite markets? demand first Could energy some year-over-year the looked decelerate to time Obrecht you declined trends while you're on continued It end time. seeing touch This Darrin. automotive for

and on curious 'XX? going looks what the I'm expectation what like through client segments across forward is the engagement So

Sure.

some a QX, point think, our through tech and most especially environment, of the life these most go the opportunities science, resilient But then in So vertical, a industry in the as was recession for out to across resilient vertical. including seeing this of us. I they're down from verticals our in growth We're health portfolio, clients on. vertical up from more -- a macro seeing performance that in call point. Financial opening in out on for verticals, you further go area sector to a some focus sector. It's retail I'll reflecting we From opportunities doing XX% Australian at in as strategic And see is we're Pacific, clients the now them. still I'll especially exciting is challenging this auto, continue want we an seeing services perspective. tight And Energy our then we Asia as spending our see a of -- also us this even perspective, cycles. stable relatively public budget it's layoffs market. budget to focus them We're whole. of of also pullback continue this especially is through lot care

transportation but growth year-on-year, this it's auto, and from very pressure to the even So much is travel, that resilient sector. we earlier, focused on pricing though due I are driving it's our declining mentioned lot a of still vertical, most

head past somewhat supply guess this X restructuring really would meet follow-up, budgets, notably related, rebound I easing be event I demand? with declined internal year? these are That's thinking response about has the quarters. then in And the this know what employees how helpful. what side And then I a is demand you efforts? to the count on to total as in needed the changes a been client of question And guess the

I'll start headcount. with

attrition our So on for to the right outpaced hiring. the And voluntary continue another whole, seeing quarter. likely now that's are we

We are hiring.

recruiting capability. strong However, very we a have

brand. employer strong very very, a have We

demand. to to strong select we're where sold geo mentioned more more where see pockets, And so in particularly hire we're continuing earlier, we data out I continue in skills. for

hire a and hire, So high on to our demand whole, are head even coming we ability down in somewhat, total the to though when of confidence degree rebounds. we count continuing is have

I come then across the we're we're we're employees. that challenging what values across that and the why is And some that the Thoughtworks, from think doing, just just helping people touch changes with being feeling And we starting through. person restructuring an on key positively, in dialogue feeling. Certainly, been resonating focused of But to that open XXXX our a It's restructuring of well. And how our part year where was employees seeing focus. it. have have understand really fine particularly. doing we and so We're in are the business. our are on we can would has important about we and

we go And in very the that restructuring, through believe know the we help we be then think to as going doing. change we're process. the much confident we're people outcomes a part what going. keep will We critical that's make So dialogue this and around

on going the So okay. whole,

like Xiao any to this At you. turn for remarks. to time, closing call back I'd over the Thank

Sure.

reiterate believe I ourselves our strategy years cloud most at our So that time, like XX to companies, the GenAI, to diversifying We needs. Thoughtworks want leadership. of in for clients' areas experience more and thought excellence a product. And transformation differentiate to business digital address is data, through that urgent then will platform, same customer And long-term technology also over clients. differentiate of AI, we're continue our

modernization For example, enterprise application and DAMO.

long the fluctuation, year-to-year our for despite steady So will tech run. With that, drive some to call, position you Thoughtworks I of thank investments I want our acknowledge and joining continued earnings and growth -- these believe the and to our support call trends to in we shareholders. would well like Board our

we look catching forward you. quarter. with stay next to So Thank well, you and then up

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