Thoughtworks(US:TWKS)2022-08-15 18:23Financial Data and Key Metrics Changes - Revenue for Q2 2022 was USD 332 million, reflecting year-on-year growth of 27.5% and 33.5% in constant currency [8][27] - Adjusted EBITDA for the quarter was USD 58.5 million, representing year-on-year growth of 14.2% [8][28] - Adjusted EBITDA margin was 17.6%, a decrease of 210 basis points compared to the prior year [35] Business Line Data and Key Metrics Changes - Strong demand was noted across all services, particularly in digital transformation, cloud, platforms, data and AI, customer experience, product, and design [11][12] - The company had 35 clients with bookings greater than USD 10 million over the trailing 12 months, an increase of 25% year-on-year [31] - Adjusted gross margin was 40.6%, down from 43.5% in the prior year period [35] Market Data and Key Metrics Changes - North America and LATAM both grew by 35%, Europe by 21.9%, and APAC by 22.4% [31] - Financial services grew at 46.1%, technology and business services at 36.2%, and retail and consumer at 31% [33] - The company reported that 62.7% of year-to-date revenues were contracted in non-U.S. dollar currencies [32] Company Strategy and Development Direction - The company focuses on deepening relationships with existing clients and winning new logos, supplemented by M&A and geographic expansion [14] - The acquisition of Handmade, a strategic design consultancy, was announced to enhance customer experience and digital products [15] - The company aims to maintain its premium position and pricing, with a high average revenue per employee of USD 116,000 [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment despite macroeconomic uncertainties, expecting Q3 revenues in the range of USD 327 million to USD 329 million [50] - The company anticipates year-on-year revenue growth of 15.1% at the midpoint for Q3, with adjusted EBITDA margin expected between 17% to 18% [51] - Management noted that client-specific delays are expected to be limited to Q3, with a strong pipeline for Q4 [69][70] Other Important Information - The company reported a cash balance of USD 275 million as of June 30, 2022, compared to USD 216 million in the prior year [36] - The attrition rate at the end of June 2022 was 12.9%, significantly better than industry norms [38] - Thoughtworks was recognized as a Great Place to Work in multiple countries, reflecting its strong employer brand [41] Q&A Session Summary Question: Thoughts on Q3 revenue guidance - Management indicated that the flat Q3 revenue guidance is due to three factors, with funding constraints on tech clients being a significant concern [61][62] Question: Visibility on client-specific outcomes - Management believes the onetime factors impacting Q3 are mostly limited to that quarter, with a strong pipeline for Q4 [68][70] Question: Changes in work focus - Management noted that while there are discussions about shifting focus to cost-related projects, they have not seen significant changes in their work yet [72] Question: Talent management and utilization - Management emphasized the importance of balancing supply and demand, with a focus on adjusting hiring targets based on utilization trends [75][78] Question: Pricing increases due to inflation - Management stated that pricing increases are primarily driven by adding premium service offerings rather than general price hikes [84][86] Question: Areas of weakness - Management reported that North America is performing well, while Europe faces inflation and supply chain concerns, but overall growth is expected across all verticals [92][94]