Thoughtworks Holding, Inc.

Hello, everyone, and welcome to ThoughtWorks earnings call for the fourth quarter of 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 Go Zhao and CFO Aaron Cummins. The earnings press release was issued earlier today and is 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 a registration statement on Form S-1 in connection with our initial public offering, in our annual report on Form 10-K to be filed with the SEC, and other reports we may file with the SEC from time to time. 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 provide useful information for investors. We also provide growth rates in constant currency as a framework for assessing how our underlying businesses 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, which is 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 obligation to update or revise the information presented on this conference call. I will now hand over to Zhao.

Thank you, Michael. Welcome, everyone, to our fourth quarter earnings call. I'd like to start the call by sharing an overall update on the business, and then Aaron will take you through our Q4 financial results in more detail. I will then share with you some of the highlights in the quarter before Aaron shares our guidance and we open for Q&A. Let me start with a recap about 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. I'm pleased to report that our fourth quarter closed on a strong note driven by the continued market demand for our digital transformation services. We delivered revenue of $287 million in the fourth quarter of 2021, reflecting year-on-year growth of 39% and 39.2% at constant currency. In the fourth quarter, we achieved adjusted EBITDA of $52 million. reflecting a 45.2% growth compared to a fourth quarter 2020. And coming into the full year, I'm delighted to share that our revenues now exceed a billion dollars. We grew 33.2% year on year, resulting in 2021 reported revenue of $1.07 billion. And our adjusted 2021 EBITDA was $223 million, a 45.7% year-over-year growth. ThoughtWorks has established a reputation for thought leadership and fostering a unique and cultivating culture. The diverse and global culture continues to track and retain what we believe to be the best talent in the industry. At the end of December 2021, we were 10,642 ThoughtWorkers strong in 17 countries across five continents. This represents a net headcount increase of 33.4% year-on-year. I would like to thank every ThoughtWorker around the world for the extraordinary impact they create through our technology excellence and culture. Looking at the market, a PwC survey highlighted that close to 50% of CEOs globally expect to increase their rate of digital investment through 2023 and also expect high market demand to be a multi-year cycle. Markets and markets expect spending on digital transformation services to more than double to around $1.2 trillion by 2026. For ThoughtWorks, we see evidence of this growth across our services, digital transformation, cloud, platforms, data, and AI, digital products, and customer experience. And we're excited by the growing client interest in emerging technologies like augmented and virtual reality. sustainable tech, and DeFi, decentralized finance technology. We continue to see our key growth opportunities coming from deepening relationships with existing clients, establishing new client relationships, developing new technical capabilities and client solutions, developing and growing our strategic partnerships, focused geographic expansion, and undertaking strategic targeted acquisitions. Strong themes are prevailing in the market. Let me share a few examples. Digital transformation remains a top strategy for our clients. Continued movement to the cloud, with a focus on enterprise monetization and platforms. Launching new digital products and services. Enhancing customer experiences, removing friction, and bringing customer-facing services together under one platform. data governance to improve quality and access to data, scaling of data platforms, and the move to distributed data architectures like data mesh to enable business domain agility. The depth of our expertise and breadth of our capabilities means that we can help clients address all of these challenges from strategy right through to business outcomes and accelerate their time to impact. And we're seeing larger, longer-term client deals. Many clients have ambitions to scale their digital transformations at a faster pace. In 2021, the average tenure across our top 10 clients by revenue is seven years, and we continue to grow our relationships. For example, Thomson Reuters, the world's leading provider of news and information-based tools to professionals. We're collaborating with Thomson Reuters on their digital transformation journey, including strategy and enterprise architecture, to support their ambitions as a content-driven technology company. We're selective in our approach to new clients, looking to work with clients with long-term ambitions for digital transformation. We continue the positive momentum from Q3 and we have contracted with 36 new clients in Q4. I'm delighted that we have some excellent new client wins to share this quarter. The first one to mention is John Deere. John Deere is a world leader in providing advanced products, technology, and services for the agriculture and construction industries. John Deere has signed a multi-year agreement with ThoughtWorks. We will work together on new digital technology and microservices intended to deliver a seamless and enriched digital experience for their customers, dealers, and other stakeholders across traditional and digital channels. And in Asia Pacific, we have entered a multi-year relationship with Standard Charter to develop their strategic next generation program, a cloud-based digital banking proposition for their retail and wealth customers. This collaboration will support Standard Charter's ambition to expand the reach and scale of their digital first strategy to elevate banking experiences for retail and wealth customers. And in the UK, we're working with our new client, ITV. ITV is an integrated producer-broadcaster who creates, owns, and distributes high-quality content on multiple platforms globally. Consumer viewing behavior is constantly evolving, and we're working with AWS to help ITV further leverage their significant data assets to create brilliant customer experiences and to better serve their commercial partners. In North America, We're working with our new client, WorkRise, whose mission is to empower the people who get work done. WorkRise is a leading workforce management platform for the skilled trades across industries including wind, solar, and construction. We will be working with WorkRise to re-engineer their software development lifecycle, integrating continuous integration, continuous delivery tools into a more seamless and frictionless developer experience. We continue to see good client growth in financial services. winning new fintech client Voyager Digital Limited, one of the fast-growing, publicly traded cryptocurrency platforms. Voyager offers a secure way to trade over 70 crypto assets and earn rewards using their mobile applications. Voyager engaged followers to help scale their platform. We have worked on the Voyager loyalty program. and helped to launch the Voyager debit card, which lets Voyager's customers earn rewards and spend crypto everywhere. MasterCard debit is accepted. Going forward, we will help Voyager to continue scaling internationally. You can find details of some of these customer successes on the news section of our website, ThoughtWorks.com. I'm now 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 fourth quarter, which demonstrated continued robust demand across our geographies and verticals. Let me begin by summarizing a few of the highlights for the quarter. In the fourth quarter, we saw strong revenue growth of 39% compared to the prior year period. Constant currency revenue growth was 39.2%. Our adjusted EBITDA margin of 18% was 50 basis points higher compared to the midpoint of the range I guided to in our Q3 earnings. This is an increase of 70 basis points compared to the fourth quarter 2020. We also continue to generate solid free cash flow with $18 million generated in the fourth quarter. Now let me share the highlights for 2021 full year. 2021 reported revenues surpassed the $1 billion mark at $1.07 billion, representing 33.2% of year-over-year revenue growth and 29.3% in constant currency. For the full year, acquisitions contributed 240 basis points of this growth. These results are in line with the full year guidance I shared during the Q3 earnings of 33% reported revenue growth at the midpoint of the range, or 29% in constant currency. Adjusted EBITDA for the full year was $223 million, representing year-over-year growth of 45.7%. Adjusted EBITDA margin was 20.9%, 180 basis points higher than the prior year, and higher than the midpoint of our guidance of 20.75%. The adjusted EBITDA margin expansion compared to last year was due to higher demand for our services, improved pricing, and improved staffing leverage. Now let me share some of the details. Turning to revenue, for the fourth quarter, revenue growth year-over-year was 39% and 39.2% on a constant currency basis. Acquisitions completed in January 2021 contributed 230 basis points of growth in the quarter. ThoughtWorks is a premium brand with a diversified business across industry verticals and geographies, and we have high demand for our services. In full year 2021, clients accelerated their digital transformations with ThoughtWorks. At the end of 2021, we had 40 clients with bookings greater than $10 million compared to 31 clients at the end of 2020. Our overall bookings at the end of 2021 increased by 60.8% year-on-year to 1.5 billion, with strong momentum across geographies and verticals. We saw strong growth in the quarter in all regions, especially in APAC, Europe, and North America. North America grew by 36.3%, APAC by 45.7%, Europe by 36.6%, and LATAM at 28%. We also continued to see good growth across our industry verticals during the quarter. The strongest growth was in financial services, growing at 68.6%. Our retail and consumer vertical grew by 53.6% and continues to rebound post the global pandemic, and we are very pleased with our growth from existing clients. Energy, public, and health grew at 23.7%. Technology and business services at 33.5%. Automotive travel and transport grew at 31.3%. For the full year 2021, around 86.5% of our business came from existing clients. I am pleased to share that we continue to grow our business with our top 10 clients, also achieving another milestone with one of those top 10 clients reaching 50 million in revenues. We now have 30 clients with trailing 12-month revenues greater than $10 million, seven more than the fourth quarter of 2020, a 30.4% increase from the same time last year. Moving down the income statement, for the quarter, adjusted gross margin was 42.9%, 180 basis points of improvement compared to fourth quarter 2020. This performance rounds off an excellent year of adjusted gross margin expansion with full year 2021 adjusted gross margin of 44.2%, an increase of 230 basis points on full year 2020. Our adjusted gross margin expansion reflects benefits from improved staffing leverage alongside our differentiated value proposition and premium services, driving a higher bill rate. Adjusted SG&A as a percentage of revenue was 24.6% for the quarter compared to 23.5% for the fourth quarter last year, as we continue to invest in our growth while leveraging our global scale. Adjusted EBITDA was $52 million for the fourth quarter, an increase of 45.2% compared to the prior year quarter. Adjusted EBITDA margin was 18%, up 70 basis points compared to the fourth quarter last year. GAAP diluted loss per share was $0.12, primarily due to non-cash stock compensation charges related to our successful IPO. On an adjusted basis, our adjusted diluted earnings per share was $0.09 compared to $0.06 in the fourth quarter of 2020. Free cash flow for the quarter was $18 million compared to $20 million in the prior year quarter, driven by strong operating profitability offset by acquisition and IPO-related costs. And we continue to have good liquidity. Our cash balance at December 31, 2021 was $368 million compared to $491 million at December 31, 2020. Further, we paid down $100 million of debt in the fourth quarter, leaving us with a balance of approximately $510 million as of December 31. Now I would like to hand back to Xiao to share additional updates on our business in the fourth quarter.