Thoughtworks Holding, Inc.

Hello, everyone, and welcome to ThoughtWorks earnings call for the first quarter of 2023. We will be recording today's call and during the presentations, all lines will be on listen only. Joining us today will be ThoughtWorks President and CEO Guo Zhao and CFO Aaron Cummins. The 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, 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 factor section of our annual report on Form 10-K, our quarterly reports on Form 10-Q, and other reports we may file with the SEC from time to time. Thank you. We include non-GAAP to GAAP reconciliations in our press release furnished as an exhibit to reform 8K. 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'll now hand over to Zhao. Thank you, Rob.

Welcome everyone to our first quarter earnings call. I would like to start by sharing an overall update on our business, and then Aaron will take you through our first quarter results in more detail. I will then share some of our business highlights before Aaron provides 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 mark a big milestone this week as ThoughtWorks turns 30 years old. I joined ThoughtWorks almost 24 years ago, and I'm proud of the impact we've had on our clients and the world at large. Our services have helped to transform industries, create new opportunities, and make people's lives better. And that's something to celebrate. I'm pleased to report good results in our first quarter 2023, driven by the continued demand for our digital transformation services. We delivered revenue of $307 million in the first quarter of 2023, $3 million better than the midpoint of our guidance. We contracted with 47 new clients in a quarter, and our overall bookings at the end of Q1 on a TTM basis stood at $1.5 billion. We now have 39 clients with revenue greater than $10 million on a TTM basis, a 26% increase year-on-year. Though the demand environment is less bullish than a year ago, our sales pipeline is building well. Our proactive investments in sales and marketing are starting to show results, and we're seeing larger deals in the pipeline. At the end of March 2023, we had 11,840,000 workers in 18 countries across five continents. The number of thought workers employed at the end of the quarter factors in some phasing of employee reductions due to the reduction in force program we conducted in February and March 2023. The RIF program impacted approximately 4% of our workforce. We continue to hire specific skills. We're driving our business with rigor and discipline while managing supply and demand. As we exit the first quarter, we're pleased that our utilization is now in line with our target operating levels. I would like to thank every ThoughtWorker around the world for the extraordinary impact they create through our technology excellence and culture, and for their commitment during this time. Global uncertainty continues in the first quarter. However, the recent volatility in the banking industry had minimal impact on ThoughtWorks. We continue to stay close to our clients, helping them to be adaptive to change and get better returns from their investments in technology. For many businesses, keeping up with technology can be a real challenge given how rapidly the industry changes. To address this gap, we publish our annual technology vision, the ThoughtWorks Looking Glass, which identifies six mega themes. These themes represent significant opportunities for our clients and for ThoughtWorks. This year's themes, which we call lenses, include platforms as products, making the metaverse, and partnering with AI. With each lens, we categorize hundreds of trends in two dimensions. horizon scanning, plus our recommendations. Looking Glass helps our clients make informed decisions about what technologies to prioritize to best capitalize on opportunities. Let me share some examples of our technology vision in the context of recent client work. First, platforms as products, designing and delivering platforms which are relentlessly committed to end-user value. With our client, First Student, We're working to deploy a digital platform to help address nationwide bus driver shortages and provide reliable, cost-effective transportation to students with special needs. First Student is North America's leading school transportation solution provider, completing 5 million student journeys each day. Together, we created a digital platform on AWS. The platform enables first students to work with third-party transportation providers to leverage their unused hours of drive time. Among the platform's benefits is data analytics. This matches student needs to specialized vehicles. For instance, those with wheelchair ramps. The platform helps provide timely, route-efficient transportation. and it is having extraordinary impact on experience of drivers, students, and parents. The second example of technology vision I'd like to talk about is making the metaverse, how extended and augmented reality enables new forms of connection. We're working with Google Public Sector to digitally transform the visitor experience at the Abraham Lincoln Presidential Library and Museum. Our collaboration will use artificial intelligence, extended reality, and augmented reality technologies. These will be hosted on Google Cloud to create accessible, engaging, and interactive visitor experiences. With this partnership, the museum will use XR to bring American history to life for millions of visitors. The third example I'd like to share is partnering with AI as machine intelligence becomes mainstream. We're seeing this trend in the automotive sector around software-defined vehicles and autonomous cars. We recently won a new contract with ExistingKind, one of the top 10 automotive companies in the world, to provide a fully managed off-board AI platform tool stack. This enables its data science team to provide AI-connected services and products in its vehicles. Partnering with AI is a subject of great interest to clients. They're asking us how they can capitalize on opportunities driven by ChatGPT and other large language models. What other themes we're seeing from customers looking to partner with AI? Let me share a couple. Alongside ThoughtWorks' zero-to-one product innovation capabilities, we're helping clients answer the question, how should I be thinking about using generative AI and large language models to support product and customer experience? And another theme is software development productivity. Our recent work with clients point to the productivity to be gained by using large language models. As a junior partner in software development, A ThoughtWorks engineer provides architectural guidelines and the AI codes accordingly, showing its reasoning. Then the engineer and the AI collaboratively work together to refine the output. Early tests are encouraging, and we've observed good productivity gains with AI-assisted software development. Working with our clients, we're also embedding guidelines for the ethical and responsible application of AI. You can read about our learnings in a recent article called An Example of Large Language Model Promoting for Programming by Martin Fowler, ThoughtWorks' chief scientist. We also continue to see client interest in our propositions that drive productivity and cost efficiencies. For example, engineering effectiveness solutions, which boost the productivity and retention of critical engineering talent. Also, our demo managed services offering helps our clients achieve zero maintenance of their software by leveraging our strength in digital application management and operations. Five of our top 50 clients signed up for demo services in Q1. For all these reasons, we believe that ThoughtWorks is well positioned in the market. Now let me share some more details of our growth strategies. At the core, Our revenue growth is from deepening relationships with existing clients and winning new logos. We then supplement this with focused strategies around M&A, partners, and geographic expansion. First, let me provide an update on partners. Our primary focus is to develop go-to-market partnerships with hyperscale cloud providers, including AWS, GCP, and Azure. Directionally, our goal is to drive 25% of our revenue growth by working with partners. We continue to invest in our partner capabilities. In the first quarter, we achieved a swap of certifications and specializations. These include AWS data and analytics competency, Google Cloud data analytics services specialization, and Microsoft data and AI solutions partner designations. Turning now to our client portfolio, the depth of our expertise and breadth of our capabilities means that we can help clients address a broad range of challenges. We assist from strategy right through to business outcomes. Our clients appreciate the value we create with them and increasingly look to ThoughtWorks as a strategic digital transformation partner, able to scale new technology across their enterprise. This is reflected in the nine-year average tenure of our top 10 clients at the end of 2022. For example, ThoughtWorks has had a long-term digital partnership with MYOB since 2019. MYOB is a leading provider of business management solutions. We're pleased to have signed a new contract cementing the partnership for another five years. The signing positioned ThoughtWorks to continue work with MIOB's most important digital initiatives. And ThoughtWorks has been working with Singapore's government technology agency, GovTech, for around six years. In 2019, we began our partnership with GovTech on SimPass. Singapore's National Digital Identity Initiative, NDI. NDI is a government strategic national project to drive and adopt digital technologies to support the city-state's digital transformation into the world's first smart nation. The evolution of Simpacks focuses on three goals. First, to build a trusted, secure, and innovative platform. Second, to offer an entire ecosystem of services to Singapore residents. And third, to be cloud-native to provide flexibility, scalability, and reliability. SimPass is now one of the world's leading NDI platforms, used by more than 4.5 million Singapore residents. Transactions that previously took days or hours to complete, often requiring physical visits, now take minutes. They can be performed from anywhere with internet connection. As of March 31st, 2023, SimPass offers seamless access to more than 2,000 services from 700 organizations. It supports more than 350 million personal and corporate transactions every year. Its evolution as a trusted all-in-one services app is ongoing. Now turning to new clients. We have a focused approach to new clients. helping the organizations we work with to deliver rapid business value from digital transformation. We see continued momentum in new logo acquisition, and we have contracted with 47 new clients in the first quarter. We're working with new client Total Wine & More, TWM, North America's largest independent retailer of fine wine, spirits, beer, and related products. We have a multi-year agreement to apply the building blocks of a modern digital business. We're working on TWM's enterprise resource planning applications with Microsoft Azure. By embracing a product-centric delivery model, the engineering team will be able to innovate and evolve legacy applications. This includes those that support the merchandising and supply chain processes, helping to drive productivity and effectiveness. 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.