Thoughtworks Holding, Inc.

Hello, everyone, and welcome to ThoughtWorks Earnings Call for the third quarter 2021. We will be recording today's call, and during the presentations, all lines will be on listen only. Joining me today will be ThoughtWorks President and CEO, Goh Zhao, and CFO, Aaron Cummins. The earnings press release was issued earlier today and also available on the investor relations page on ThoughtWorks.com if you want to review or download a copy. Some of the matters we'll discuss on this call, including our expected business outlook, are forward-looking and, as such, are subject to known and unknown risks and uncertainties, including but not limited to those factors described in today's press release and discussed in the risk factors section of our registration statement on Form S-1 in connection with our initial public offering and other reports we may file from time to time with the SEC, including our quarterly reports. These risks and uncertainties could cause actual results to differ materially from those expressed on this call. We caution you not to place undue reliance on these forward-looking statements because they are made only as of the date when made. During our call today, we will reference certain non-GAAP financial measures which we believe will provide useful information for investors. We also provide growth rates and constant currency as a framework for assessing how our underlying business is performed, excluding the effect of foreign currency rate fluctuations. We include reconciliations of non-GAAP financial measures to our GAAP financial measures in our press release furnished as an exhibit to our Form 8K filed earlier today, which is also available on the investor relations section of our website at ThoughtWorks.com. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. ThoughtWorks assumes no obligations to update or revise the information presented on this conference call. I will now hand over to Zhao.

Thank you, Michael, and welcome to everyone who has joined us today. This is our first earnings announcement as a public company after our successful IPO on September 15th, 2021, which was oversubscribed. A total of $890 million was raised with $315 million in net proceeds going to ThoughtWorks. Given that we're new to the market, I'd like to start the call by giving you an overview of ThoughtWorks, and then Aaron will take you through our Q3 financial results in more detail. I'll then update you on some of the business highlights in the quarter before Aaron shares our guidance and we open for Q&A. Let me start with the introduction to ThoughtWorks. We're a global technology consultancy that integrates strategy, design, and engineering to drive digital innovation. We enable enterprises and technology disruptors to thrive as modern digital businesses. And our strategy is working. I'm pleased to report that we have delivered revenue of $285 million in our third quarter of 2021. This is an increase of 45% year-over-year, and 42% constant currency. In the third quarter, we achieved a just EBITDA margin of 23%. At the end of September, we were over 10,000 ThoughtWorkers strong in 17 countries across five continents. I'd like to thank every ThoughtWorker around the world for the extraordinary impact they create through our technology excellence and culture. The ThoughtWorks you see today is the result of a 28-year journey building some of the best capabilities in the industry, establishing a reputation for thought leadership, and fostering a unique and cultivating culture. Our diverse and global culture has allowed us to track and retain what we believe to be the best talent in the industry. all of which has enabled us to become a premium brand with a diversified business across industry verticals and geographies while driving rapid growth with strong margins. This unique combination of best-in-class strategy, software engineering, design, and organizational transformation expertise has made ThoughtWorks a leading digital transformation partner in this large and rapidly expanding market. Spending on digital transformation services is expected to more than double to around $1 trillion by 2025, from $470 billion in 2020, according to Markets and Markets. This growth is driven by megatrends across cloud, digital platforms, IoT, AI and machine learning, and digital products and customer experience. And we see our key growth opportunities coming from deepening our relationships with existing clients, establishing new client relationships, developing new technical capabilities and client solutions, developing and growing our strategic partnerships, and undertaking strategic targeted acquisitions. The depth of our expertise and the breadth of our capabilities helps to track the wide spectrum of clients, from Fortune 500-type enterprises transforming their global businesses to up-and-coming disruptors with hyper-growth business models. This slide shows a snapshot of some of our existing clients. Through September 30th year-to-date, around 90% of our revenue was derived from existing clients. These strong metrics demonstrate the value we bring to our customers. In Q3, we contracted with 44 new clients. We're very pleased to have won Telkomso, Indonesia's largest telecommunications services provider, as a new client. We're excited to be partnering with Telkomso on their three-year digital transformation journey. We're seeing good client growth in financial services. Recently, we have won Zappo, an industry-leading fintech company. Zappo has partnered with ThoughtWorks to become a globally accessible bank, offering US dollar banking services with regulated access to Bitcoin. ThoughtWorks in the UK and Romania will work with Zappo at the cutting edge of technology, shaping the future of important developments in financial services that we believe will have long-lasting impact. Another new financial services client is Saxo Bank. Saxo Bank is one of the largest online investment banks in Europe. Our UK and Indian teams are partnering with Saxo Bank across data governance, data platforms, and data mesh architecture. We're seeing strong revenue growth in the public sector. For example, over the last six months, we have collaborated with the Department of Transport and Main Roads, TMR, in Queensland, Australia, and want new business at this existing client to establish a microservices and event-driven architecture platform, which enables TMR to develop customer-oriented solutions faster and more cost-effectively. And at Kroger, our existing client, we have expanded our partnership within their health and wellness business around OptUp. OptUp helps Kroger simplify how customers make informed, healthier food purchases by making nutritional information core to finding and buying better-for-you food. Once a standalone app, followers integrated the OptUp web experience within the Kroger online ecosystem, amplifying customer reach and impact before sunsetting the standalone app. And we're also collaborating with Lenovo, a global technology leader, on a multi-year engagement with their Intelligent Devices Group's Advanced Innovation Center to evolve the platform for their SaaS-based solutions and services. And for those keen football fans, we're working with Pro Football Focus PFF in North America to enrich their mobile experience in support of 32 National Football League teams and their fans. You can find details of some of these customers' successes on the news section of our website, thoughtworks.com. I'm not going to hand over to Erin so that she can take you through the numbers in greater detail.

Thank you, Xiao, and thanks to all of you for joining us today. We were very pleased with our results in the third quarter. Our first is a public company. Let me begin by summarizing a few of the highlights for the quarter. In the third quarter, we delivered outstanding results, reflecting strong demand for our services across all geographies and verticals. Revenue growth was 45% year over year and 42% on a constant currency basis. Third quarter growth was robust and was higher than the view we held in the second quarter by 2% after absorbing a 1% foreign exchange headwind. Adjusted EBITDA margin was 23%, an increase of 110 basis points compared to the same quarter last year. We also generated strong free cash flow of $28 million. We delivered this margin expansion with an execution focus on results while leveraging our scale and premium position in the market. Now let me share some of the details. Turning to revenue for the third quarter. Revenue growth year over year was 45%, and acquisitions completed in January 2021 contributed 2% to revenue growth in the quarter. We are a highly diversified business from a geographic and industry perspective. We had exceptional growth across all of our regions, with North America growing at 35%, APAC growing at 53%, Europe growing at 49%, and LATAM at 47%. Performance across all of our industry verticals was strong, with financial services growing at 61% and a good rebound in retail and consumer also growing at 61%. Through year-to-date September, around 90% of our business came from existing clients. I am pleased to share that we now have 29 clients with trailing 12-month revenues greater than $10 million, eight more than the third quarter 2020, a 38% increase from the same time last year. Moving down the income statement. Adjusted gross margin for the quarter was 46% compared to 43% for the same period last year. Our adjusted gross margin reflects solid execution and improved staffing leverage alongside our strong value proposition and premium services driving a higher bill rate. Adjusted SG&A as a percentage of revenue was 22% for the quarter compared with 21% for the third quarter last year, which factored in impacts from COVID-19. Adjusted EBITDA was $66 million for the third quarter, an increase of 53% compared to the prior year quarter. Adjusted EBITDA margin was 23%, up 110 basis points compared to the third quarter last year. Gap diluted loss per share was $0.10, primarily due to non-cash stock compensation charges related to our successful IPO. On an adjusted basis, our adjusted diluted earnings per share was 14 cents compared to 8 cents in the third quarter of 2020. Free cash flow for the quarter was $28 million compared to $24 million in the prior year quarter, driven by strong operating profitability. We continue to have strong liquidity. Our cash balance at September 30 was $453 million compared to $491 million at December 31, 2020. Further, we have paid down $200 million of debt since the start of July, leaving us with a balance of approximately $511 million today. It was a very strong quarter across all measures. We are focused on capturing the market opportunities while investing in our business and premium position. Now I would like to hand back to Xiao to share additional updates on our business in the third quarter.