Q4 2023 Thoughtworks Holding Inc Earnings Call

Operator: Hello, everyone, and welcome to ThoughtWorks' earnings call for the fourth quarter of 2023. We will be recording today's call, and during the presentations, all lines will be on listen-only.

Hello, everyone and welcome to thought works earnings call for the fourth quarter of 2023, we will be recording today's call and during the presentation all lines will be on listen only.

Operator: Joining us today will be ThoughtWorks President and CEO Guo Xiao and CFO Aaron 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. These include, but are not limited to, those factors described in today's press release and discussed in the risk factors section of our annual report on Form 10-K 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. These forward-looking statements are made only as of the date when they are made.

Joining us today will be <unk>, president and CEO of <unk> and CFO Aaron Cummins.

The earnings press release was issued earlier today and is also available on our Investor Relations page at <unk> Dot 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.

These include but are not limited to those factors described in today's press release and discussed in the risk factors section of our annual report on Form 10-K, 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.

These forward looking statements are made only as of the date when made.

Operator: During our call today, we will reference certain non-GAAP financial measures. We will also provide growth rates in constant currency as a framework for assessing how our underlying business performed, excluding the effect of foreign currency rate fluctuations. We include non-GAAP-to-GAAP reconciliations in our press release furnished as an exhibit to our Form 8K. However, 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.

During our call today will reference certain non-GAAP financial measures. We will also provide growth rates in constant currency as a framework for assessing how our underlying business performed excluding the effect of foreign currency rate fluctuations.

We include non-GAAP to GAAP reconciliations in our press release furnished as an exhibit to our form 8-K.

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.

Guo Xiao: ThoughtWorks assumes no obligation to update or revise the information presented on this conference call. I will now hand over to Xiao. Thank you, Rob. Hello, everyone, and thank you for joining us, and thank you to all ThoughtWorkers for the extraordinary impact they deliver every day with our clients. 2023 was a challenging year as we navigated a difficult macroeconomic environment. But it was also a year of transformation and investment in our business. Last year we embarked on the biggest change as a company in 20 years. We began the restructuring of our business to establish a new operating model. We're pleased with the resulting cost savings in 2023 of $81 million on an annualized basis. We centralized our operational functions to reduce costs and drive efficiencies.

That works assumes no obligation to update or revise the information presented on this conference call.

I will now hand over to Jeff.

Thank you Rob.

To everyone and thank you for joining us and thank you to all to all workers for the extraordinary impact they deliver every day with our clients.

2023, it was a challenging year as we navigated a difficult macroeconomic environment.

It was also a year of transformation and investment in our business.

Last year, we embarked on the biggest change as a company in 20 years. We began this restructuring of our business to establish a new operating model.

We're pleased with the resulting cost savings in 2023 of $81 million on an annualized basis.

We centralized our operational functions to reduce cost and drive efficiencies.

Guo Xiao: We set up a global digital engineering center. DEC helps us respond faster to clients, support the continued shift offshore, and manage utilization, which continues to improve quarter-on-quarter on a seasonally adjusted basis. Finally, we organized our regional sales teams around an industry-based go-to-market so that we can build expertise and specialization in specific industry verticals. We began this restructuring during the third quarter of 2023, and we will continue the transition in 2024. Alongside the transformation of our operations, we continue to invest in our business. Our investments in sales and marketing, partners, new services, and capabilities position us as a stronger company as we head into 2024. We undertook this change while staying true to who we are, a company of brilliant technologists intensely focused on helping solve our clients' toughest challenges by harnessing our expertise with cutting-edge technology. Now, let me share our fourth quarter and 2023 four-year results. We generated revenue of $252 million during the fourth quarter, with an adjusted EBITDA margin of 5.5%. We recognize that the fourth quarter was short of what we originally guided in November. Our results were primarily impacted in two ways. Around two-thirds of the revenue shortfall was due to specific supply-side limitations.

We set up a global digital Engineering Center.

D C helps us respond faster to client support the continued shift to offshore and to manage the utilization, which continues to improve quarter on quarter on a seasonally adjusted basis.

Finally, we're organized our regional sales teams around the industry based go to market.

So that we can build expertise and specialization in specific industry verticals.

We began this restructuring during the third quarter of 2023, and we will continue the transition in 2024.

Alongside the transformation of our operations, we continue to invest in our business.

Our investments in sales and marketing partners, new services and capabilities.

<unk> to us as a stronger company as we head into 2024.

We undertook this change while staying true to who we are a company of brilliant technologists intensely focused on helping solve our clients' toughest challenges by harnessing our expertise with cutting edge technology now, let me share with fourth quarter and 2023 full year results.

We generated revenue of $252 million during the fourth quarter with adjusted EBITDA margin of five 5%.

We recognize that the fourth quarter was short of what we originally guided to in November.

Our results were primarily impacted in two ways.

About two thirds of revenue shortfall was due to specific supply site limitations. This was primary due to the scale of the structure change in our operating model, which caused some disruption to our operations in the fourth quarter.

Guo Xiao: This was primarily due to the scale of the structure change in our operating model, which caused some disruption to our operations in the fourth quarter. We have taken steps to address this going forward, and are on one-third of the shortfall with demand. Continued client caution resulted in smaller project ramp-ups, more project delays, and we had slightly higher pricing pressure than we anticipated.

We have taken steps to address this going forward.

Around one third of the shortfall with demand side.

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

Guo Xiao: We expect this cautious behavior to continue into 2024. Now, turning to the full year 2023. We delivered revenue of $1.1 billion for the full year and an adjusted EBITDA margin of 9.9%. While 2023 was a year of transformation, our foundation is strengthening. We are supported by a strong client base and long-term client relationships. Our deep and trusted client relationships are again reflected in the 54 clients with bookings over $5 million at year end. New client acquisition remains a strength, and we continue to gain momentum. We contracted with 156 new clients in 2023, 46 of those in the fourth quarter. Bookings from new logos in 2023 were around $120 million. We have seen traction from our vertical-focused sales model with higher new logo acquisition in energy, public, and health services, as well as financial services, and insurance verticals. These are the verticals that we have intentionally focused on.

We expect this cautious behavior to continue into 2024.

Now turning to the full year 2023.

We delivered revenue of $1.1 billion for the full year and an adjusted EBITDA margin of nine 9%. While 2023. It was a year of transformation our foundation is strengthening.

Supported by a strong client base, our long term client relationships.

Our deep and trusted client relationships are again reflected in the 54 clients with bookings over $5 million at year end.

New client acquisition remains a strength and we continue to gain momentum.

We contracted with 156, new clients in 2023 46 of those in the fourth quarter.

Bookings from new logos in 2023, it was around $120 million.

We are seeing traction from a vertical focused sales model with higher new logo acquisition in energy public and health services and financial services and insurance verticals.

These are the verticals that we have intentionally focused on.

Guo Xiao: Our demo managed services are getting good uptake, with 30% of our top 50 clients now benefiting from the cost savings and quality improvement. Demo-managed services are valued by clients because it is both a cost saver and an enabler of faster digitization. It's strategic for ThoughtWorks for both service expansion and as a shift to longer-term contracts. We're taking an early lead in AI-first software delivery, and we were pleased by client interest in January with over 50 client projects at year-end. Janina is acting as a catalyst for companies to modernize their legacy systems, capitalize on the cloud, and make better use of their data assets. We have observed that client spending priorities have changed.

Our demo managed services are getting good uptake with 30% of our top 50 clients now benefiting from the cost savings and quality improvements.

<unk> managed services are valued by clients because it is both a cost play and enabler of faster Digitization.

It's strategic for thought works for both series expansion and is a shift to longer term contracts.

We're taking our early lead in AI first software delivery and are pleased by client interest in January it was over 50 client projects at year end.

Jenny now is acting as a catalyst for companies to modernize their legacy systems capitalize on the cloud and make better use of their data assets.

We have observed that client spending priorities have changed.

Guo Xiao: We're seeing a reduction in growth-oriented consultancy work, which has historically been a high percentage of our business, while we believe discretionary spending will return. We have been diversifying our business to address more of our clients' urgent needs where we have the right to win. For example, enterprise application modernization, third-party software implementation, and demonstration.

We're seeing a reduction of growth oriented consultancy work.

Which has historically been a high percentage of our business.

While we believe discretionary spending will retire.

We have been diversifying our business to address more of our clients urgent needs, where we have the right to win for.

For example, enterprise application monetization third party software implementation and demo.

Aaron Cummins: We have outstanding technologists and a reputation for innovation and thought leadership. We are well positioned to help our clients evolve their operations to harness the power of cloud, data, and AI to adapt for future success. Now, I will hand you over to Erin.

We have outstanding technologists, and a reputation for innovation and thought leadership, where.

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

Now, let me hand over to Erin.

Aaron Cummins: Thanks, Xiao, and thank you to everybody who has joined our call today. We remain close with our clients, and we continue to invest in building those relationships. We're pleased with the progress we've made as we've built out our sales and marketing capabilities. In the fourth quarter, 58% of bookings were from outbound sales and marketing to complement our historically strong inbound interest.

Thanks Al and thank you to everybody who's joined our call today.

We remain close with our clients and we continue to invest in building those relationships were pleased with the progress we've made as we built out our sales and marketing capabilities.

In the fourth quarter, 58% of bookings were from outbound sales and marketing to complement our historically strong inbound interest invest.

Aaron Cummins: Investments in our partnership channel have resulted in our current sales pipeline having double the partner participation compared to a year ago. We have embedded partners in our standard sales processes, further expanded our certification programs, and are leveraging the capabilities of ITOC. We believe we have the best technologists in the industry.

Investments in our partnership channel have resulted in our current sales pipeline, having doubled the partner participation compared to a year ago, we have embedded partners and our standard sales processes further expanded our certification programs and are leveraging the capabilities of eyetech.

We believe we have the best technologists in the industry, our attrition rate, which remains below industry averages reflects a strong sense of belonging among our employees in.

Aaron Cummins: Our attrition rate, which remains below industry averages, reflects a strong sense of belonging among our employees, and Q4 voluntary attrition on a TTM basis was 12%, an improvement sequentially from 12.2% in Q3 2023 and stable year-over-year from 12% in Q4 of 2022. At the end of 2023, our headcount was around 11,000. We continue to selectively hire with a focus on specific skill sets, such as data and infrastructure. Now, let's look at the fourth quarter in more detail. Revenues were $252 million, representing a year-over-year decline of 19%, and constant currency revenue declined 20%.

In Q4 voluntary attrition on a TTM basis was 12% an improvement sequentially from 12, 2% in Q3, 2023 and stable year over year from 12% in Q4 of 2022.

At the end of 2023, our head count was around 11000, we.

We continue to selectively hire with a focus on specific skill sets such as data and infrastructure now lets look at the fourth quarter in more detail.

Revenues were $232 million, representing a year over year decline of 19% in constant currency revenue declined 20% Act.

Aaron Cummins: Acquisitions contributed approximately 1 percentage point to the revenue growth rate in Q4. For the quarter, we saw year-over-year declines of 10% in APAC, 20% in Europe, 23% in North America, and 38% in LATAM. Among our industry verticals, revenue declined by 5% year-over-year in automotive, travel, and transportation, 11% in financial services and insurance, 21% in energy, public, and health services, 24% in technology and business services, and 26% in retail and consumer. During Q4, as a percentage of total revenue, our top 5, top 10, and top 50 clients generated 19%, 29%, and 65%, respectively. We had 31 clients with revenues greater than $10 million during 2023. Adjusted gross margin was 33.6% for Q4 compared to 39.7% during the prior year period.

Acquisitions contributed approximately one percentage point to the revenue growth rate in Q4.

For the quarter, we saw year over year declines of 10% and APAC, 20% in Europe, 23% in North America, and 38% and Latam.

Among our industry vertical revenue declined by 5% year over year in automotive travel and transportation, 11% in financial services, and insurance, 21% and energy public and health services, 24% in technology and business services and 26% in retail and consumer.

During Q4 as a percentage of total revenue our top five top 10, and top 50 clients generated 19%, 29% and 65% respectively.

We had 31 clients with revenues greater than $10 million during 2023.

Adjusted gross margin was 33, 6% for Q4 compared to 39, 7% during the prior year period.

Aaron Cummins: Our Q4 adjusted gross margins saw year-over-year headwinds due to the temporary cost of shifting mix offshore as well as high single-digit pricing declines on a like-for-like basis. In the fourth quarter, our adjusted SG&A as a percentage of revenue was 28% compared to 22.1% in the prior year period. Adjusted EBITDA was $14 million for the fourth quarter, for an adjusted EBITDA margin of 5.5%. Q4 GAAP diluted loss per share was $0.07 compared to earnings per share of $0.05 in the prior year period.

Our Q4 adjusted gross margins are year over year headwinds due to the temporary cost of shifting mix to offshore as well as high single digit pricing declines on a like for like basis in.

In the fourth quarter, our adjusted SG&A as a percentage of revenue was 28% compared to 22, 1% in the prior year period.

Adjusted EBITDA was $14 million for the fourth quarter for an adjusted EBITDA margin of five 5%.

Q4, GAAP diluted loss per share was seven <unk> compared to earnings per share of five cents in the prior year period.

Our adjusted diluted EPS with two cents compared to 10 cents for the fourth quarter of 2022.

Aaron Cummins: Our adjusted diluted EPS was $0.02 compared to $0.10 for the fourth quarter of 2022. We recorded free cash flow of $10 million during Q4 compared to free cash flow of $28 million in the prior year period. We have good liquidity with a cash balance of $100 million, and our outstanding term loan balance stood at $295 million as of December 31, 2023. Additionally, our revolving credit facility of $300 million remains undrawn.

We recorded free cash flow of $10 million during Q4 compared to free cash flow of $28 million in the prior year period.

We have good liquidity with a cash balance of $100 million and our outstanding term loan balance stood at $295 million as of December 31, 2023.

Additionally, our revolving credit facility of $300 million remains undrawn.

Turning to our full year 2023 results, we recorded revenue of $1 $1 billion down 13% versus 2022 in both U S dollar and constant currency.

Aaron Cummins: Turning to our full year 2023 results, we recorded revenue of $1.1 billion, down 13% versus 2022 in both U.S. dollars and constant currency. Acquisitions contributed two percentage points to the full-year revenue growth rate. For 2023, our average revenue per employee was $98,000, which continues to reflect the strategic importance of the work that we deliver. Our revenue per employee remains above the industry average. During 2023, around 93% of our business came from existing clients. For 2023, we recorded bookings of $1.2 billion, down 14% compared to 2022, as cautious client behavior throughout the year pressured contract length and sizing. New bookings compared to revenue realization remain resilient. Adjusted gross margin was 36.1% for the full year 2023 compared to 41.6% in 2022.

Acquisitions contributed two percentage points to the full year revenue growth rates.

For 2023, our average revenue per employee was $98000, which continues to reflect the strategic importance of the work that we deliver.

Our revenue per employee remains above the industry average.

During 2023 around 93% of our business came from existing clients.

For 2023, we recorded bookings of $1 $2 billion down 14% compared to 2022.

Cautious client behavior throughout the year pressured contract linked and sizing <unk>.

New bookings compared to revenue realization remained resilient.

Adjusted gross margin was 36, 1% for the full year 2023, compared to 41, 6% in 2022.

Full year adjusted SG&A margin as a percentage of revenue was 26, 3% in 2023 compared to 22, 4% in 2022.

Adjusted EBITDA totaled $112 million during 2023 with an adjusted EBITDA margin of nine 9% compared to an adjusted EBITDA margin of 19, 8% in 2022.

Aaron Cummins: Full year adjusted SG&A margin as a percentage of revenue was 26.3% in 2023 compared to 22.4% in 2022. Adjusted EBITDA totaled $112 million during 2023 with an adjusted EBITDA margin of 9.9% compared to an adjusted EBITDA margin of 19.8% in 2022. For the full year 2023, we recorded a GAAP diluted loss per share of $0.22 compared to a loss per share of $0.34 in 2022.

For the full year 2023, we recorded GAAP diluted loss per share of <unk> 22 cents compared to a loss per share of <unk> 34 cents in 2022.

Full year adjusted diluted EPS was <unk> 11, compared to 43 cents in 2022.

We recorded free cash flow of $40 million for the full year in 2023 compared to $65 million in 2022.

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

Thanks Erin.

I'm also very pleased to share that in the fourth quarter. It's always has been included for the first time in a Gartner magic quadrant.

We're positioned in the visionary quadrant in the 'twenty to 'twenty, three Gartner magic quadrant for custom software development services worldwide.

Guo Xiao: Full Year Adjusted Diluted EPS was $0.11 compared to $0.43 in 2022. We recorded free cash flow of $40 million for the full year in 2023 compared to $65 million in 2022. Now, let me hand the call back to Shav to share a broader update on the business. Thanks, Erin. I'm also very pleased to share that in the fourth quarter, ThoughtWorks was included for the first time in the Gartner Magic Quadrant. We are positioned in the visionary quadrant in the 2023 Magic Quadrant for custom software development services worldwide. We believe our inclusion in the Visionary Quadrant means that we understand where the market is going and have a vision for changing market rules. Further, we believe this positioning is a reflection of Thalwar's investments in shaping and defining many of the leading digital trends today, such as evolutionary architecture and data mesh.

We believe our inclusion in the visionary quadrant means that we understand where the market is going and have a vision for changing market rules.

Further we believe this positioning is a reflection of flowers investments in shaping and defining many of the leading digital trends today, such as evolution of the architecture and data mesh.

We continue to execute our vision to deliver extraordinary impact for our clients.

Let me share some of the client stories to bring this to life.

We have been working with a top four U S headquartered global investment Bank since 2013.

We're going to be rolling out our sustained engineering services to help this firm operate their digital assets in a more modern way by adopting our engineering effectiveness capabilities to help teams deliver the software they need more quickly cost efficiently and at a consistently high standard.

We're working with Germany's number one e-commerce fashion and lifestyle company auto.

Guo Xiao: We continue to execute our vision to deliver extraordinary impact for our clients. Let me share some of our client stories to bring this to life. We have been working with the top four U.S. headquarters global investment banks since 2013. We're going to be rolling out our sustained engineering services to help this firm operate their digital assets in a more modern way by adopting our engineering effectiveness capabilities to help teams deliver the software they need more quickly, cost-efficiently, and at a consistently high standard. We have been working with Germany's number one e-commerce fashion and lifestyle company, OTTO, as their We helped them expand their business into a multi-channel banking model by developing auto payments and a marketplace. The recent success within this market serves as a powerful example of the potential unlocked through strategic, technological, and business evolution. International Meal Company, IMC, is one of the largest food retail companies, operating such brands as KFC, Pizza Hut, and Frango Asado, among others.

As their strategic technology partner.

We help them expand their business into a multichannel banking model by developing auto payments and marketplace.

The recent success within this market serves as a powerful example of the potential unlocked through strategic technological and business evolution.

International Meal company IMC is one of the largest food retail companies operating such brands as KFC Pizza hut and Franco Sarto among others.

Pizza hut in Brazil, now has a app created by I N C in partnership with <unk>.

The App is powered by our proprietary platform, which uses data science and artificial intelligence.

To personalize the traditional food delivery experience for customers and make store operations more dynamic intelligent and strategic by supporting last mile concept and product and service recommendations.

Across these examples you can see that our breeding technologies are intensely focused on helping solve our clients' toughest challenges by harnessing our expertise with cutting edge technology.

Now, let's turn to Gen AI.

Guo Xiao: Pizza Hut Brazil now has an app created by IMC in partnership with ThoughtWorks. The app is powered by a proprietary platform that uses data science and artificial intelligence to personalize the traditional food delivery experience for customers and make store operations more dynamic, intelligent, and strategic by supporting last-mile concepts and product and service recommendations. Across these examples, you can see that our brilliant technologists are intensely focused on helping solve our clients' toughest challenges by harnessing our expertise with cutting-edge technology. Now, let's turn to Gen-AI.

Client interest and demand for our AI and AI related work remains strong.

Our team of World Class service professionals are working to bring clients AI ambitions to reality.

The end of the fourth quarter, we're working with over 50, Jenny I related projects.

We're helping our clients achieve cost improvements while simultaneously enhancing the experience for their customers.

Our clients are still early in AI journey and.

And we see a long runway of direct and indirect opportunities.

There is demand for our enterprise modernization and data service offerings as clients are focused on improving their existing systems and data in order to properly harnessed the potential of AI.

We're focusing our forming areas.

Guo Xiao: Client interest and demand for our AI and AI-related work remain strong, and our team of world-class service professionals is working to bring clients' AI ambitions to reality. At the end of the first quarter, we were working on over 50 GEN-AI related projects. We're helping our clients achieve cost improvements while simultaneously enhancing the experience for their customers. Our clients are still early in the AI journey, and we see a long runway of direct and indirect opportunities. There is demand for our enterprise modernization and data service offerings as clients are focused on improving their existing systems and data in order to properly harness the potential of AI. We're focusing on four main areas: AI-assisted software delivery, AI-powered digital products. AI and Data Platforms at Scale and AI Adoption Strategy

I assisted software delivery AI powered digital products.

AI and data platforms at scale in an adoption strategy.

We also see vertical opportunities for example in energy public and health services.

We believe that January technologies will be a source of value for our clients and towers over time and our projects covers a wide range of use cases.

For example, at one of India's largest nonbanking financial firms, who are using AI to enhance new client on boarding for a retail lender.

We have piloted the development of our human Avatar system low application journey to reduce dropout rates.

We have developed internal AI knowledge assistance to empower employees.

We have empowered over 100 sales agents with improved query handling saving time searching through documentation.

We define our strategies to harness the power of AI responsibly for a global biotechnology company dedicated to revolutionize cancer care.

Guo Xiao: We also see vertical opportunities, for example, in energy, public, and health services. We believe that Gen AI technologies will be a source of value for our clients and ThoughtWorks over time, and our project covers a wide range of use cases. For example, at one of India's largest non-banking financial firms, we're using AI to enhance new client onboarding for a retail lender. We have piloted the development of a human avatar-assisted loan application journey to reduce dropout rates.

The strategy empowers multiple proof of concepts provides a holistic governance framework.

Establishes the AI center of excellence and has created a new AI driven research assistant to accelerate insights.

We created an AI driven platform that combines the power of a large language motto was traditional machine learning to match adult learners with the best online courses in a fraction of time previous will need it for all of education platform with more than a thousand courses to choose for finding the right courses for each student takes a lot of time.

Guo Xiao: We have developed internal AI knowledge assistance to empower employees. We have empowered over 100 sales agents with improved query handling, saving time searching through documentation. We defined a strategy to harness the power of AI responsibly for a global biotechnology company dedicated to revolutionizing cancer care. The strategy empowers multiple proof-of-concepts, provides a holistic governance framework, establishes an AI center of excellence, and has created a new AI-driven research assistant to accelerate insight. We created an AI-driven platform that combines the power of a large language model with traditional machine learning to match adult learners with the best online courses in a fraction of the time previously needed for online education platforms.

Which puts pressure on customer service personnel, we created a system that automatically inputs the work history and careers by ratios of each student and compares that to the database of open courses and recommends the best feeding courses to the student our approach is January is threefold.

We're building our ecosystem of partnerships with hyper scaler and startups.

Our clients look to us as a trusted partner to help them navigate the emerging ecosystem, which is a complex and fast moving.

We offer a service that builds at Janney, Hi, technology and tools blueprint mapped across software lifecycle for the specific client.

Guo Xiao: With more than a thousand courses to choose from, finding the right courses for each student takes a lot of time, which puts pressure on customer service personnel. We created a system that automatically inputs the work history and career aspirations of each student and compares that to the database of open courses, and recommends the best-fitting courses to the student. Our approach to the JNI is threefold. We're building an ecosystem of partnerships with hyperscalers and startups. Our clients look to us as a trusted partner to help them navigate the emerging ecosystem, which is complex and fast-moving. We offer a service that builds a Gen-AI technology and tools blueprint mapped across the software life cycle for the specific client. This is one of the ways we're helping our clients navigate the JNAI ecosystem.

This is one of the ways, we're helping our clients navigate the journey of our ecosystem.

Second.

We're investing in our talent with 3200 dollar occurs in January.

In December we launched a prompt camp.

Each track provides a practical hands on learning experiences for example, the solution design track focuses on designing effective solutions using techniques such as prompt engineering retrieval augmentation generation self rack and fine tuning for larger language model solutions third we're in <unk>.

Leading AI across our services portfolio and our core operations.

All of this is build our expertise in and commitment to ethical technology more than ever. This is critical to our clients as they look to deploy and scale fast moving AA technology in complex often regulated environments. Our clients often tell me that our technologists and thought leadership.

Guo Xiao: We're investing in our talent with 3,200 ThoughtWorkers in GenAI. In December, we launched PromCamp, where each track provides practical, hands-on learning experiences.

Our two of the things that really differentiate bulwarks.

They look to us to help them make the right technology decisions, which has arguably never been more challenging.

Guo Xiao: For example, the solution design track focuses on designing effective solutions using techniques such as prompt engineering, retrieval augmentation generation, self-rack, and fine-tuning for large-language model solutions. Third, we're embedding AI across our services portfolio and our core operations. All this has built our expertise in and commitment to ethical technology. More than ever, this is critical to our clients as they look to deploy and scale fast-moving AI technology in complex, often regulated environments. Our clients often tell me that our technologies and thought leadership are two of the things that really differentiate ThoughtWorks. They look to us to help them make the right technology decisions, which has arguably never been more challenging. Our annual technology trends report, The Looking Glass, is a tool to support our clients in making the right technology choices. In the 2024 edition we published in January, we identified over 100 trends through five lenses that we expect to define the future of technology. Examples of lenses include AI Everywhere and Realizing Value from Data and AI Platforms.

Our annual technology trends report the looking glass is a tool to support our clients, making the right technology choices.

In the 'twenty 'twenty. Four addition, we published in January we've identified over 100 trends through five lenses that we expect to define the future of our technology.

Examples of lenses include AI everywhere, and realizing value from data and AI platforms, calling feedback has been positive with clients requesting technology roadmap workshops as a result of reading the looking glass.

I'm also pleased that thought workers continue to write the books that matter to our clients.

<unk> published how to build a organization that creates a great product.

The bulk offers practical device based on observations and evidence seen over many years of working with clients.

Alongside Thoughtworks luminaries the bookshelves insights from leading companies the very group Dahabi atom Bank and sparse radar back to you Aaron. Thanks Shao now, let me discuss our business outlook for Q1 and 2024.

Guo Xiao: Client feedback has been positive, with clients requesting technology roadmap workshops as a result of reading The Looking Glass. I'm also pleased that ThoughtWorkers continues to write books that matter to our clients, such as the recently published How to Build an Organization that Creates Great Products. The book offers practical advice based on observations and evidence seen over many years of working with clients.

Overall, the demand outlook continues to be variable due to macroeconomic driven caution.

Clients are required to deliver more with the same budget.

But those are still tight mostly flat from 2023 to 2024.

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

We expect 2024 to be a year of transition. We are pleased that our pipeline is strengthening we expect our investments in sales and marketing partners and new services to build momentum as 2024 progresses.

Aaron Cummins: Alongside ThoughtWorks Luminaries, the book shares insights from leading companies, The Very Group, Deng Hanbi, Atom Bank, and SportsRadar. Back to you, Erin. Thanks, Xiao.

We are committed to being a trusted partner for our clients and remain focused on converting open opportunities, which we expect to drive volume increases quarter to quarter as we move through 2024.

Aaron Cummins: Now let me discuss our business outlook for Q1 2024. Overall, the demand outlook continues to be variable due to macroeconomic-driven caution. Our clients are required to deliver more with the same budget. However, budgets are still tight, mostly flat, from 2023 to 2024. While we are seeing more discretionary and growth-oriented consultancy work in the pipeline compared to prior quarters, it is not yet back to our historical norm. We expect 2024 to be a year of transition. We are pleased that our pipeline is strengthening, and we expect our investments in sales and marketing partners and new services to build momentum as 2024 progresses. We are committed to being a trusted partner for our clients and remain focused on converting open opportunities, which we expect to drive volume increases quarter to quarter as we move through 2024.

For the first quarter of 'twenty 'twenty four we expect revenues to be in the range of $241 million to $246 million, reflecting a year over year decline of 21% to 20%.

At current rates guidance incorporates an immaterial FX impact in Q1, we expect adjusted EBITDA margin for the first quarter to be in the range of 3% to 4%.

For the first quarter, we expect adjusted diluted loss per share to be in the range of two cents to one assuming a weighted average share count of approximately 323 million diluted shares outstanding.

Our Q1 guidance continues to factor in the cautious behavior of the clients exhibited in 2023 and that continues today.

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

Our Q1 guidance incorporates share based compensation of $11 million.

Aaron Cummins: For the first quarter of 2024, we expect revenues to be in the range of $241 million to $246 million, reflecting a year-over-year decline of 21% to 20%. At current rates, guidance incorporates an immaterial FX impact in Q1. We expect the adjusted EBITDA margin for the first quarter to be in the range of 3% to 4%. For the first quarter, we expect the adjusted diluted loss per share to be in the range of $0.02 to $0.01, assuming a weighted average share count of approximately 323 million diluted shares outstanding.

Moving to our full year 2024 outlook, we expect revenues in the range of $980 million to $1.01 billion, reflecting a year over year decline of 13% to 10% or a decline of 13% to 11% in constant currency.

Compared to 2023, our guidance reflects lower pricing on a like for like basis as well as a shift mix with more work being done offshore.

Last year, we were intentionally more aggressive on pricing in order to retain and expand our wallet share in response to market and client trends.

We expect our average price to start stabilizing in 2024 as most of our contract portfolios have turned over to reflect the new pricing environment.

Additionally for the full year, we expect adjusted EBITA margin of 8% to 10%, we expect our adjusted EBITDA margin to expand throughout 2024, as we focus on supply side efficiency, including utilization and the continued mix shift to offshore delivery, we expect continued G&A.

Aaron Cummins: Our Q1 guidance continues to factor in the cautious behavior that clients exhibited in 2023 and that continues today. We expect sales cycles to remain elongated with programs of work broken up into smaller deals. Our Q1 guidance also incorporates share-based compensation of $11 million.

<unk> fees, including non wage related items to further support margin expansion as we progress through 2024 with.

With respect to our restructuring program. We continue to expect total pre tax charges of $20 million to $25 million of which we have already recorded $19 million through the end of 2023.

Aaron Cummins: Moving to our full year 2024 outlook, we expect revenues in the range of $980 million to $1.01 billion, reflecting a year-over-year decline of 13% to 10%, or a decline of 13% to 11% in constant currency. Compared to 2023, our guidance reflects lower pricing on a like-for-like basis, as well as a shift mix with more work being done offshore. Last year, we were intentionally more aggressive on pricing in order to retain and expand our wallet share in response to market and client trends. We expect our average price to start stabilizing in 2024 as most of our contract portfolios have turned over to reflect the new pricing environment. Additionally, for the full year, we expect an adjusted EBITDA margin of 8% to 10%.

Majority of our wage related actions are complete and we remain focused on driving operational efficiencies in 2024 as of December 31st we've realized $81 million in annualized cost savings, which puts us within our targeted range of $75 million to $85 million.

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

For the full year, we expect adjusted diluted EPS of one fund to six cents, assuming a weighted average share count of approximately 333 million diluted shares outstanding.

For the full year, we expect share based compensation will total $46 million now.

Aaron Cummins: We expect our adjusted EBITDA margin to expand throughout 2024 as we focus on supply-side efficiency, including utilization and the continued mixed shift to offshore delivery. We expect continued G&A efficiencies, including non-wage-related items, to further support margin expansion as we progress through 2024. With respect to our restructuring program, we continue to expect total pre-tax charges of $20 million to $25 million, of which we have already recorded $19 million at the end of 2023. The majority of our wage-related actions are complete, and we remain focused on driving operational efficiencies in 2024. As of December 31, we have realized $81 million in annualized cost savings, which puts us within our targeted range of $75 million to $85 million. We are focused on driving continued efficiency across the organization and aim to be at the high end of the targeted range. For the full year, we expect adjusted diluted EPS of $0.01 to $0.06, assuming a weighted average share count of approximately 333 million diluted shares outstanding. For the full year, we expect ShareBase compensation to total $46 million.

Now, let me hand, the call back to <unk> for closing remarks. Thank.

Thank you Erin.

I believe that we have the best talent in the industry I'm proud of.

The community and culture, we've built and the people that we're able to attract and retain.

Our people remain at the center of everything we do.

We were delighted to be recognized in the fourth quarter at number 14. Unfortunately prestigious list of world's best workplaces for 2023, and proud that thought workers passion and commitment browse social impact work is unwavering.

We bring cutting edge technologies to important social causes.

One example is jugal Bondi and.

An outcome of our strategic collaboration as part of the open <unk> mission.

Jugal balmy harnesses the power of generative pre trained Transformers and Indian language models to power conversational AI solutions for every Indian citizen.

Indian citizens can discover the right government scheme by describing their needs in vernacular.

Through our voice enabled system.

This demonstrates our utmost belief in the potential of open source to contribute towards a more sustainable and inclusive future.

In closing.

Our foundation stands strong.

I'll start by our client portfolio and client relations.

Now were outstanding technologies underpinning our reputation for innovation and thought leadership.

Guo Xiao: Now, let me hand the call back to Shao for his closing remarks. Thank you, Erin. I believe that we have the best talent in the industry. I'm proud of the community and culture we've built and the people that we're able to attract and retain. Our people remain at the center of everything we do. We were delighted to be recognized in the fourth quarter at number 14 on Fortune's prestigious list of the world's best workplaces for 2023. I'm proud that ThoughtWorkers' passion and commitment to our social impact work is unwavering.

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

Before we move to Q&A I would like to take a moment to thank all our stakeholders for their contribution to thought works in 2023.

So our clients, who entrust us to solve their greatest technological challenges.

To our employees.

Who deliver extraordinary impact everyday and kept our company on the cutting edge of technology.

And to our investors who offer their advice and support as we navigated a challenging landscape in 2023.

Guo Xiao: We bring cutting-edge technologies to important social causes. One example is Juggabandi, an outcome of a strategic collaboration as part of the Open NEI mission. Jugo Bambi harnesses the power of generative pre-trained transformers and Indian language models to power conversational AI solutions for every Indian citizen.

We're excited about the opportunities ahead of us as we focus upon returning to growth.

With that I'll turn the call back over to Rob.

Thanks, Joe you can find our investor presentation on the Thoughtworks Investor Relations Web site will now move onto Q&A ask that you each keep to one question and one follow up to allow as many participants as possible to ask a question. Operator would you. Please provide instructions for those on the call.

Guo Xiao: Indian citizens can discover the right government scheme by describing their needs in vernacular through a voice-enabled system. This demonstrates our utmost belief in the potential of open source to contribute towards a more sustainable and inclusive future. In closing, our foundation stands strong, fostered by our client portfolio and client relations. Now we're outstanding technologists underpinning our reputation for innovation and thought leadership. As we move forward, we're well positioned to deliver extraordinary impact for our clients as they modernize and evolve their operations to harness the power of cloud data and AI and adapt for future success. Before we move to Q&A, I'd like to take a moment to thank all our stakeholders for their contribution to ThoughtWorks in 2023, our clients, who have entrusted us to solve their greatest technological challenges, our employees, who deliver extraordinary impact every We're excited about the opportunities ahead of us as we focus on returning to growth. With that, I'll turn the call back over to Rob.

Thank you if you'd like to ask a question. Please press star one one is for.

Your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Our first question comes from Bryan Bergin with TD Cowen Your line is open.

Hi, good morning, Thank you.

I'll start on the 24 outlook on the demand front. So can you just dig in more on what has what seems to have changed in client behavior over the last three months I believe we thought there was some stabilization that seem to be forming so can you expand on where you saw some of that pressure resurface was it was it broad based so.

Or more so maybe in certain large clients are certain industries or geos.

Sure.

Thank you Brian.

The client behavior.

Current environment is similar to what we have described in the last quarter.

Stabilizing with respect to project term.

But we also at the same time continue to see pricing headwinds project delays and slower ramp ups.

So while project cancellation is becoming a much less frequent.

Operator: Thanks, Xiao. You can find our investor presentation on the ThoughtWorks Investor Relations website. We'll now move on to Q&A. I ask that you each keep to one question and one follow-up to allow as many participants as possible to ask a question. Operator, would you please provide instructions for those on the call? Thank you. If you'd like to ask a question, please press star 1. If your question hasn't been answered and you'd like to remove yourself from the queue, please press star 11 again.

Lines are still very cautious about releasing budgets as sales cycles do law geoscience deal compressor that ramp up is incremental.

And then I want to call out that throughout the year and.

The climb negotiations for 2024 budget, we heard our clients.

Budget is going to be largely flat year on year and the same time they need to do more with the same budget. So we have to sharpen our pencils and be more aggressive with our pricing.

Operator: Our first question comes from Brian Bergin with TD Callen. Your line is open. Hi, good morning.

While pushing for more work offshore in.

And that said, we are seeing some openings of discretionary spending where there's a strong case for ROI.

Bryan C. Bergin: Thank you. I'll start on the 24 outlook on the demand front. So can you just dig in more on what seems to have changed in client behavior over the last three months? I believe we thought there was some stabilization that seemed to be forming. Can you expand on where you saw some of that pressure resurface?

And we closed quite a few large deals in Q4, and early Q1, which will ramp up in due time and we feel very good about win rate on the large deals.

And but he's also comes with the pricing pressure that we're seeing right now so so putting this together.

We do expect Q1 trending towards where we're guiding to.

Guo Xiao: Was it broad-based? So, or more so maybe in certain large clients or certain industries or geos? Sure. Thank you, Brian.

Towards.

But followed by small incremental sequential growth throughout the year.

Yeah.

Okay and my follow up then is on the supply constraints. So it sounds like it a little bit. This is caused by the transition to the centralized model, but maybe can you dig in a bit more specifically on what caused the challenges in <unk>, what you've done that gives you that confidence that you remedy the issues.

Guo Xiao: So client behavior in the current environment is similar to what we described in the last quarter. It's stabilizing with respect to project churn, but we also, at the same time, continue to see pricing hit wings, project delays, and slower ramp-up. So while project cancellation is becoming much less frequent, clients are still very cautious about releasing budgets.

And should be.

Is there any risk of a client loss due to these constraints.

I'll start with that.

Thanks for the question Brian.

Guo Xiao: The sales cycle is still long, deal size is still compressive, and run pub is incremental. And then I want to call out that throughout the year-end. Client Negotiations for the 2024 Budget. We've heard from our clients. The budget is going to be largely flat year-on-year, and at the same time, they need to do more with the same budget.

We talked about this a bit in our prepared remarks, but.

I'll add a bit more color about what happened in fourth quarter.

As Charles noted earlier.

If we look at our revenue actual versus our guidance about two thirds of that Miss was related to internal factors.

And as we commented but is certainly worth restating.

Guo Xiao: So we have to sharpen our pencils and be more aggressive with our pricing while pushing for more work offshore. And that said, we are seeing some openings of discretionary spending, where there's a strong case for ROI, and we closed quite a few large deals in Q4 and early Q1, which will ramp up in due time, and we feel very good about our win rate on the large deals. But it also comes with pricing pressure that way, right now. So, so putting this together.

These are factors that we see as temporary limits to our supply.

To answer your question, we do feel that we have remedied these issues with.

We touched on the restructuring program and we are definitely seeing upfront benefits and efficiencies from the program, but the process itself resulted in temporary fiction friction in the fourth quarter.

And it was a bit more than what we were expecting we saw this around and both staffing and leave coverage.

Aaron Cummins: We do expect key one training towards where we're guiding towards, but followed by small incremental sequential growth throughout the year. Okay, and my follow-up question then is on supply constraints. So it sounds like a little bit of this is caused by the transition to the centralized model. Maybe can you dig in a bit more specifically on what caused the challenges in 4Q? What you've done that gives you the confidence that you've remedied the issues?

And ultimately impacted revenue capture in the fourth quarter.

And we're also seeing some supply constraints around particular skill sets. We are seeing a lot of strength in demand in data and that's where we see the demand remaining very strong it was in fourth quarter and it continues to be now in Q1.

But we have addressed these issues we've addressed the processes the underlying processes and driving accountability throughout the organization. So we think that we have fixed that's the challenge that arose in fourth quarter, we're not going to see that again.

Aaron Cummins: And should we, you know, is there any risk of client loss due to these constraints? I'll start with that. Thanks for the question, Brian. We talked about this a bit in our prepared remarks, but I'll add a bit more color about what happened in the fourth quarter. As Shao noted earlier, if we look at our revenue actual versus our guidance, about two-thirds of that miss was related to internal factors.

And the restructuring again, it's the right approach for the company, but the change where that country business unit layer was adjusted.

Aaron Cummins: And as we commented, but it is certainly worth restating, these are factors that we see as temporary limits to our sales. To answer your question, we do feel that we have remedied these issues. We touched on the restructuring program, and we are definitely seeing upfront benefits and efficiencies from the program, but the process itself resulted in temporary friction in the fourth quarter. And it was a bit more than what we were expecting.

And removed it did cause impact.

And then finally just on your point from a client perspective, no. We're not concerned about client relationships, we didnt see disruption from a client perspective, we think that was well managed and so there isn't any concern there.

I wanted to take the opportunity just to reiterate the importance of this restructuring and the benefits. It brings to US I think we talked a lot about the cost side of it but at the same time, we have centralized and auto vertical is our sales force. So they're more client century and can build expertise in this specific industry verticals that we want to focus.

Aaron Cummins: We saw this around both staffing and leave coverage, and ultimately, it impacted revenue capture in the fourth quarter. We're also seeing some supply constraints around particular skill sets. We are seeing a lot of strength in demand for data, and that's where we see the demand remaining very strong. It was in the fourth quarter, and it continues to be now in Q1.

And as a result, our go to market is lot more responsive to our clients we more than doubled our partnership supported deals and we also are closing more new logos in.

Aaron Cummins: But we have addressed these issues. We've addressed the processes, the underlying processes, driving accountability throughout the organization. So we think that we have fixed the challenge that arose in the fourth quarter. We're not going to see that again.

In the sectors that we want to focus for example, energy public health care and banking industry services.

And same time, we have also centralized the management of most of our professional services people into this global structure called D. C. And then over time, we should definitely see better capacity planning utilization optimization and also delivery efficiency in Lora.

Aaron Cummins: You know, the restructuring, again, it's the right approach for the company, but the change where that country business unit layer was adjusted and removed did cause an impact. And then, finally, on your point from a client perspective, no, we're not concerned about client relationships. We didn't see disruption from a client perspective. We think that was well managed. And so there isn't any concern there.

We're absolutely convinced that this is the right thing to do but due to the scale of the structure and process changes.

In the short short term, we saw some chaos and disruptions in our operation in Q4, it's painful but necessary and then we also believe that it was temporary and behind us already.

Guo Xiao: Yeah, I want to take the opportunity just to reiterate the importance of this restructuring and the benefit it brings to us. I think we talk a lot about the cost side of it, but at the same time, we have centralized and also verticalized our sales force, so they're more client-centric and can build expertise in the specific industry verticals we want to focus on.

Okay I appreciate all the detail. Thank you.

Thank you. Our next question comes from Moshe <unk> with Wedbush Securities. Your line is open.

Hey, Thanks, Thanks for taking my question.

So the comment on pricing.

Guo Xiao: And as a result, our go-to-market is a lot more responsive to our clients. We want to double our partnership-supported deals, and we also are closing more new logos in the sectors that we want to focus on, for example, energy, public healthcare, and then banking and financial services. At the same time, we have also centralized the management of most of our professional services people into this global structure called DEC. And then, over time, we should definitely see better capacity planning, utilization, optimization, and delivery efficiency in the long run. We're absolutely convinced that this is the right thing to do, but due to the scale of the structure and process changes in the short term, we saw some chaos and disruptions in our operation in Q4. It's painful, but necessary, and we also believe that it was temporary and behind us already.

Is it a kind of a function of renewals is that on the.

You mentioned that also includes the new deal flow.

And then is there a way to kind of quantify the overall pricing pressure that youre seeing this year and then maybe in that context is it also a function of the shift and execution more towards offshore. So obviously you have some cannibalization there.

Sure.

Thank you Moshe.

So as Aaron mentioned earlier the pricing.

The dynamic is mostly was driven by.

A lot of contract renews and in extensions sometimes.

Sometimes expansions by the year end and then we talk to our clients. We recognize there are budget constrained and then we're working with them to.

Bryan C. Bergin: Okay, I appreciate all the detail. Thank you. Thank you. Our next question comes from Moshe Katri with Wedbush Securities. Your line is open.

To resolve that.

I mentioned briefly earlier that we closed quite a few large deals.

Moshe Katri: Hey, thanks. Thanks for taking my question. So the comment on pricing. Is it a kind of function of renewals?

That's on top of our list to close in Q4 early Q1.

Some of these are new deals like airline Cline manufacturing climbed.

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

Large retailer, but many of these are large extensions.

Two of our top automobile clients.

Public sector decline.

And in the business services client, they're all in the Fortune 500 company.

All in all these deals are in the 10 million to 40 million range large deals. So we felt good about the win rate on these large deals but come with the with the price on pricing.

Guo Xiao: So as Erin mentioned earlier, the pricing dynamic is mostly driven by a lot of contract renewals and then extensions, sometimes expansions, by the year end. And then we talk to our clients, we recognize their budget constraints, and then we work with them to resolve that. And I mentioned briefly earlier that we closed quite a few large deals. That's on top of our list of closing Q4, early Q1. Some of these are new DOs, like the airline client, the manufacturing client, a large retailer, but many of these are large extensions to our top automobile clients, the Public Sector Client, and then the business services client. They're all in the Fortune 500 company type, all these deals are in the 10 million to 40 million range, large deals. So we felt good about the win rate on these large deals, but it comes with a price in terms of pricing. That's it.

That said.

I think we're seeing.

Excluding the shift mix to offshore we're seeing high single digit year on year, a like to like pricing decline.

But we also believe that the new pricing dynamics is already reflected in the majority of our contract portfolios.

And then further decline on pricing from Q1 to Q2.

Or going onwards for then that should be much less significant and so we do expect that to stabilize.

Understood and then.

My usual question is about APAC.

Maybe we can talk a bit about what you're seeing there in terms of.

The three geographies, there, Australia, Singapore, China.

And given the magnitude of the declines on a relative basis versus other regions. It seems that it's.

Moshe Katri: I think we're seeing... Excluding the shift mix to offshore, we're seeing high single-digit year-on-year, like-to-like pricing decline, but we also believe that the new pricing dynamics are already reflected in the majority of our contract portfolio, and then further decline on pricing from Q1 to Q2 going onwards should be much less significant. And so we do expect that to stabilize. And then my usual question is about APEC. Maybe we can talk a bit about what you're seeing there in terms of, you know, the three geographies there, Australia, Singapore, and China.

Probably doing a bit better than North America, and Europe is that the does.

Is that the right way of looking at it.

It is.

And thank you for noticing that we will have always Ah I think felt that early on during the during the the macro downturn, we saw a bigger impact from APAC.

But also we felt good about the diversification of our.

Portfolios across geographies.

So across the three main markets in APAC, Singapore is seeing very healthy growth.

Guo Xiao: And given the magnitude of the decline on a relative basis versus other regions, it seems that it's probably doing a bit better than North America and Europe. Is that the right way of looking at it? Yes.

<unk> has been seeing that consistently over the last few quarters.

China is recovering but the.

Because of the.

Guo Xiao: And thank you for noticing that. We have always, I think, felt that early on during the macro downturn, we saw a bigger impact from AIPAC. But also, we felt good about the diversification of our portfolios across geographies. So, across the three main markets in APAC, Singapore is seeing very healthy growth and has been seeing that consistently over the last few quarters. China is recovering, but because economic growth is not as fast as people expect it in the local market, we're seeing a slower rebound of local market growth on the back of economic growth after COVID.

The economic growth is not us as a as well as fast as people expected in local market, we're seeing a slower rebound.

After after local market growth.

On the back of the.

On the backup.

The common gross after after COVID-19.

Same time, I think we have seeing more signs of recovery and then discretionary spending returning from Australia given that it was the first market one into.

This macro headwind about two years ago.

Guo Xiao: At the same time, I think we have seen more signs of recovery and discretionary spending returning from Australia, given that it was the first market to go into this macro headwind about two years ago. We're definitely glad that it's returning, and we're seeing signs of growth there. I think that, as you rightly point out, APAC is performing better at this moment than other markets. I understand. Thank you. Thank you. Thank you. Our next question comes from Jason Kupferberg with Bank of America. Your line is open. Hi, good morning, Xiao and Aaron. This is Tyler DuPont on behalf of Jason.

Where.

We are definitely glad that it's it's returning and we're seeing signs of growth there.

That's as you rightly pointed out that a packaged performed better at this moment than other markets.

Okay.

Understood. Thank you.

Thank you Moshe.

Thank you. Our next question comes from Jason Kupferberg with Bank of America. Your line is open.

Hi, good.

Good morning, Joe and Eric This is tayo Dupont on for Jason Thanks for taking my questions.

Wanted to start by touching on the cadence of revenue growth as we look through 2024.

I know you mentioned on the previous call that sequential growth would be.

Roughly flat and <unk>, obviously given guidance. This morning that that's not going to happen, but but just given the push.

Jason Alan Kupferberg: Thanks for taking the questions. I wanted to start by touching on the cadence of revenue growth as we look through 2024. I know you mentioned on the previous call that sequential growth would be, you know, roughly flat in one queue. Obviously, given the times this morning, that's not going to happen.

To the right if you will from a growth perspective.

When should we be looking for that inflection positive and what do you need to see from a demand standpoint.

For us to reach that level.

Please go ahead Sir.

Okay.

Guo Xiao: But just given the push to the right, if you will, from a growth perspective, when should we be looking for that positive inflection point? And what do you need to see from a demand standpoint for us to reach that level? Go ahead, go ahead, Shil.

Yeah.

So from a from a sequential growth perspective, we do expect that to continue to improve.

Throughout the year, we're not obviously, calling Q2 at this moment, but we feel that with the large deals we've signed up and then a stabilization of the pricing and then the.

Guo Xiao: So from a sequential growth perspective, we do expect that to continue to improve throughout the year. We're not obviously calling Q2 at this moment, but we feel that with the large deals we've signed up and then the stabilization of the pricing, and then the discouraged spending opening up in some pockets of our portfolio, we should see steady growth coming soon. Now, if only...

The discretionary spending opening up in some pockets of our portfolio that we should see a steady growth.

Coming in coming so now if.

Guo Xiao: We're still, I think, at the stage where there's a lot of uncertainty. If the pipeline conversion slows down from where we're seeing today or the pricing pressure continues to get worse, we will probably be trending towards the low end of our guidance, which means that sequential growth will be further delayed. But if, what we see in the pipeline converts as we expected, even though with some delays and then slower ramp-ups that we already baked into our guidance, or if the pricing pressure alleviates, we can see some return of consulting work, which tends to give us an opportunity to do more value-based pricing, and then, And in that case, we could be trending towards the high end of the guidance, which means that the return to sequential growth But like I said, we're not ready to call Q2 yet, but for the full year, we feel that we're definitely trending in that direction. Okay. Great That's helpful, JR.

We're still I think at the stage where it is.

There's a lot of uncertainty if the pipeline conversions slows down from where we're seeing today or the pricing pressure.

Continue to get worse.

We're probably be trending towards the low end of our guidance, which means that the sequential growth will be for the delay.

But if.

What we see in our pipeline converts as we expected, even though with some delays and slower ramp up that were already baked into our guidance.

Or if the.

The pricing pressure alleviates that we can see some are returning over consulting work, which tends to give us.

Opportunity too to do more value based pricing.

And then.

And in that case, we could be trending towards the high end of the guidance, which means that the returning to sequential growth that we've come a lot earlier, but like I said, we're not ready to call Q2, yet but for the full year, we feel that we're definitely trending in that direction.

Okay great.

Guo Xiao: I appreciate that. And then, just as a follow-up, it looks like, based on my initial math here, that the top five clients saw roughly around an 8%, let's say, decline in the quarter. Can you sort of discuss the dynamics you're seeing there among your top clients? Are those revenue declines due to pricing, or are there any ramp-downs in projects? So, just sort of the moving pieces among those top clients would be appreciated. Sure.

Okay I appreciate that and then just as a follow up it looks like based on my initial math here that the top five clients.

So roughly around an 8%, let's say decline in the quarter.

Can you discuss the dynamics youre seeing there among your top clients, where those revenue declines due to pricing or are there any ramp downs in projects. So just what are the moving pieces among those top clients would be appreciated.

Sure. So our top five and then probably extend it further to top 10, even.

Guo Xiao: So our top five, and I'll probably extend it further to the top 10, even, the revenue decline is... less driven by volume, is more driven by shifting to offshore for some of them and also the pricing pressure we mentioned earlier. Many of them saw big extensions and renewals towards the late of Q4 and then beginning of Q1, and then we had to sharpen our pencils and work within their budgets, but we're definitely retaining Wally's share and volume with our top five and top ten. Okay, great. I appreciate that. Thanks a lot.

The revenue decline is less driven by volume is more to them by shifting to offshore for some of them and also the pricing pressure.

We mentioned earlier.

Many of them saw extensions and renewals.

The late Q4 and at the beginning of Q1, and then we have to sharpen our pencils and work within their budget, but we're definitely.

Retaining our wallet share and volume with our top five and top 10 clients.

Okay, Great I appreciate that thanks a lot.

Jason Alan Kupferberg: Thank you. Thank you. Our next question comes from Dave Koning with Baird. Your line is open. Yeah, good morning, everyone.

Thank you.

Thank you. Our next question comes from Dave Koning with Baird. Your line is open.

Yeah. Good morning, everyone. Thank you.

David John Koning: Thank you. Um, my questions around margins kind of went on forever and, I guess, in 2023, revenue was down about 170 and EBITDA down 145, a very strong flow through right to EBITDA. It was hard to see a lot of cost savings in 2023, but I'm wondering, you know, what happens as we go forward. Can you get back to 20% margin and maybe describe a little why we didn't? a little better EBITDA in 2023. Thanks for the question, Dave. I'll start.

I guess my questions around margins kind of over time.

Yes.

2023 revenue was down about 170, <unk> EBITDA down 145 so.

Very strong flow through right to EBITDA. It was hard to see a lot of cost savings in 2023, but I'm wondering.

What happens as we go forward can you get back to 20% margin and maybe describe a little why we didn't see a.

A little better EBITDA in 2023.

Yeah.

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

Aaron Cummins: So, you know, it is fair to say that we did see an impact from the revenue headwind on our EBITDA and our margins. The shifts that we've been talking about, you know, we did see some project ramp-downs in the middle of Q3, those larger ramp-downs that we had talked about before we had slowed down. So we see that as very positive, but that was a quick impact on our business that impacted margin. We also have touched on the move from onshore work to more offshore work. So actually, we're very proud of maintaining the client relationships that we have. And as Xiao has talked about, we're also proud of the agility that we demonstrated in our business, where we shifted services from one location to another without client disruption. So we did that very well.

So it is fair to say that we did see impact from the revenue headwind on our EBITDA and our margins.

The shifts that we've been talking about and we did see some project ramp downs in the middle of Q3.

The larger ramp downs that we had talked about before me.

<unk> has slowed down so we see that as very positive, but but that was a quick impact to our business that impacted margin.

And we also have touched on the move from.

Onshore work to more offshore work and actually we're very proud of maintaining the client relationships as we have in and Shao has talked about.

We're also proud of the agility that we demonstrated in our business where we're shifting.

Service from one location to another without client disruptions. So we did that very well.

Aaron Cummins: But at the same time, you know, that impact on the top line and pricing did have an effect on 2020. Now, more importantly, what are we doing going forward? Which is really where your question is getting at.

But at the same time, you have that impact on the topline and pricing. It did have an effect on 2023.

Now more importantly, what are we doing going forward, which really is where your question is getting at and so 2023, we saw lower utilization for the year on the whole we did start to see improvements across the year, it's telling us that we're moving in the right direction, but it still was lower in 2020.

Aaron Cummins: So in 2023, we saw lower utilization for the year on the whole. We did start to see improvements across the year, which is telling us that we're moving in the right direction, but it still was lower in 2023 than we expected. So that is the top focus for us. We are taking a programmatic approach to addressing the utilization.

Dan we expect so that is a top focus for us we are taking a programmatic approach to addressing the utilization we have our operational excellence team that lives and breathes every day and again, we're on the right track, we're seeing good progress and we expect 2024 to improve.

Aaron Cummins: We have our operational excellence team that lives and breathes it every day. And again, we're on the right track. We're seeing good progress, and we expect 2024 to improve significantly. Now I touched on the shift from onshore to offshore.

<unk>.

And now I touched on the shift from <unk>.

Im sure to offshore and as I said, the demand shift happened more quickly than the supply shift and so we continue to work through those issues at it does it just take a little bit more time again impacting 2023, but as we look across the improvement in 2024 that we anticipate that's definitely part of the <unk>.

Aaron Cummins: And as I said, the demand shift happened more quickly than the supply shift, and so we continue to work through those issues. It does just take a little bit more time, again impacting 2023. But as we look across the improvement in 2024 that we anticipate, that's definitely part of the story. There are pockets where there's lower utilization, and that's oriented toward the higher cost locations. And that has a disproportionate impact on our gross margin. It's temporary.

Sorry, there are pockets, where there is lower utilization and that's oriented in the higher cost locations and that Scott that has a disproportionate impact on our gross margin. It's temporary it's going to take us a few quarters to fully address this but we're confident in our ability to do it.

Aaron Cummins: It's going to take us a few quarters to fully address this, but we're confident in our ability to do it. And then, as we talked about, the pricing assumptions embedded in our guidance are a headwind for 2023. It's reflecting the general macroeconomic caution, the competitive dynamics we're seeing, and lower levels of that consulting and growth-oriented work. So, we do think these dynamics are temporary, but at the same time, as we have considered our guide for the year, we've assumed they're in place for 2024. And so we don't think that that's going to benefit 2024 necessarily. It may, but perhaps in the second half of the year, more likely at this point, it would be beyond 2024 into 2025.

And then as we talked about the.

The pricing assumptions embedded in our guidance is and it is a headwind for 2023, it's reflecting the general macroeconomic caution the competitive dynamics, we're seeing in lower levels of that consulting and growth oriented work. So we do think these dynamics are temporary but at the same time as we have.

Considered our guide for the year, we've assumed there in place for 2024, and so we don't think that that's going to benefit 2024, unnecessarily may but perhaps in the second half of the year more likely at this point it would be beyond 2024 and to 2025.

Aaron Cummins: And so that's the key piece of it around gross margin. But I just also want to highlight that from a cost restructuring perspective, you know, we are doing really well. We took out 81 million in costs, which I touched on. The reorganization that we went through in Q4 is in the good, but early stages. And so we still have efficiencies that we're driving there. So bringing it all together, what we expect for 2024 is consistent margin improvement. We don't think we'll get back into that, you know, high teens level in 2024, but certainly the opportunity remains there for 2025 and beyond. Well, thanks. Thanks for all of that.

And so that's the key piece of it is around gross margin I. Just also want to highlight from a cost restructuring perspective.

We are doing really well, we took out 81 million in cost, which I touched on the.

The reorganization that we went through in Q4 is.

In the good by early stages, and so we still have efficiencies that we're driving there so bringing it all together what we expect for 'twenty 'twenty four is consistent margin improvement. We don't think we will get back into that high teens level in 2024.

But certainly the opportunity remains there for 2025 and beyond.

Thanks, Thanks for all of that and maybe just one quick follow up number of clients I think.

David John Koning: And maybe just one quick follow up. The number of clients, I think, was 502 at the end of the quarter. I think that was one of the strongest quarters of gains in clients we've ever seen. And I mean, is that a good, early indication that some things are going in the right direction? Or is it just much smaller contracts per client on some of the new ones, and that's why we're not seeing it yet? I think it's a combination of both.

It was 502 ending the quarter I think that was one of the strongest quarters of gains and client.

We've ever seen and I mean is that a good a good early indication that some things are going in the right direction or is it just much smaller contracts per client on some of the new ones and that's why we're not seeing it yet.

Hi.

Guo Xiao: First of all, we have definitely been investing heavily in additional sales and marketing capacity. We definitely believe that we have the right value proposition, the thought leadership, and our brilliant technologies. But I think that we have an opportunity to expand our demand generation capacity, especially in outbound demand generation. So, as Arvind mentioned earlier, over 50% of our new wins in Q4 come from outbound efforts. Compared with historically, it's only 15%.

It's both first of all we are.

We have definitely been investing.

Heavily into additional sales and marketing capacity, we definitely believe that we have the right value proposition that thought leadership and our brilliant technologists.

But I think that we have opportunity to two.

To expand our demand generation capacity, especially in the outbound demand generation. So so as Aaron mentioned earlier over 50% of our new wins in Q4 come from outbound efforts.

Compare with historically, it's only 15% combined with our inbound outbound, we're definitely reaching out to more clients or potential clients. We're seeing the acquisition of these new logos and then new clients.

Guo Xiao: Combined with our inbound, and outbound, we're definitely reaching out to more clients or potential clients. We're seeing the acquisition of these new logos and then new clients when we're retaining many of them. But at the same time, as you mentioned, deal size tends to get smaller in the current macro environment. And then, initially, when clients start working with us, they don't sign up as they did a couple of years ago, with much bigger deals. So we tend to see smaller deals, shorter deals. But we're really happy that we're expanding our client base, which gives us opportunities to work and expand. Thank you. Thank you. Our next question comes from Matthew Roswell with RBC. Your line is open. Yes, good morning.

When we retain we're retaining many of them, but at the same time as you mentioned that deal size tends to get smaller in the current macro environment and an initially when clients start to start working with us They don't sign up.

A couple of years ago, a much bigger deals. So we tend to see smaller deals shorter deals, but we're really happy that we're expanding our client base that give us opportunities to work and expand from there.

Got you. Thank you.

Thank you. Our next question comes from Matthew Roswell with RBC. Your line is open.

Yes. Good morning, two questions. Okay. So it is an easy one out first and Thats, what Eric how should we think about free cash flow in 'twenty four.

Matthew Van Roswell: Two questions. I'll get sort of the easy one out first, and that's, Aaron, what should we think about free cash flow in 24? And are any of the restructuring charges cash-related? So should we expect severance coming out in, you know, the first or second quarter? Yes, so the restructuring charges did impact 2023. There will be some impact in 2024, but it will be less than in 2023. So if we compare free cash flow year over year, the restructuring charges will overall be a benefit. From a CapEx perspective, in 2023, we did have lower than historical levels. It was, as a percentage of revenue, CapEx was under 1%.

And are any of the restructuring charges are they cash related so it should we expect like a severance coming out first or second quarter.

Yes, so the restructuring charges did impact 'twenty three there will be some impact in 2024, but it will be less in 2023. So if we compare free cash flow year over year, the restructuring charges overall will be a benefit.

And from a Capex perspective in 2023, we did have lower.

Lower than historical levels.

As a percentage of revenue Capex was under 1%.

Aaron Cummins: For 2024, we're not expecting a significant change in CapEx, but I do expect an increase from where we were in 2023. On the whole, if we look at cash flow from 2023 to 2024, not a significant change, but given the focus on our operational efficiency, alongside the reduced restructuring charges, I am expecting increased free cash flow in 2024 compared to 2023. Okay, thank you.

For 2024, we're not expecting significant changes in capex, but I do expect an increase from where we were in 2023 on the whole if we looked at and cash flow 2023 to 2024 and not a significant change, but given the focus on our operations.

Efficiency and alongside the reduced restructuring charges I am expecting increased free cash flow in 24 compared to 2020.

Okay. Thank you.

Guo Xiao: And this is a bigger picture question; I guess this is more fragile. When you talk to clients, what percentage of them do you think can actually implement Gen-AI programs now versus having to put in place the prerequisites? So do they have the, do they have the data, do they have the, you know, the architecture to actually implement Gen-AI? Sure, but the percentage of them who are really already implementing Gen-AI at large scale with all the prerequisites, platforms, and the data ready is very small. What we're seeing is the majority, first of all, majority of the clients we're working with, they're doing approval concepts, just trying to prove out both the business case and then technical viability. So there's, I think, 2023 was just a year full of POCs.

And I guess, just a bigger picture question I guess this is more for you al when you when you talk to clients what percentage of them do you think can actually implement Jan AI programs now.

Versus having to put in place the prerequisite. So do they have do they have the data do you have the data.

The architecture to actually implement Gen III.

Hi.

Sure.

Sure.

From a.

In terms of percentage of them, who are really already implementing journey at large scale with with all the prerequisites platforms that data ready very small.

What we're seeing is majority first of all majority of the clients. We're working with they're doing proof of concepts just trying to prove out that both of the business case, and then technical viability. So there's I think 2023 was just a year full of Poc's.

Guo Xiao: And most of them, at the same time, recognize that they have to do a lot of work to prepare themselves. We call it AI or Gen AI readiness. That is, having the right data in the right place, with clean data, and updated data, and then building the data platforms that are required, especially the modern platforms that allow them to run Gen AI on top of that. Only a fraction, I would say probably less than 15% of the clients have these data platforms ready, which is the result of years of working, especially in the last few years, of preparing and getting ready for, not necessarily for Gen AI, but just generally getting ready to get value from data.

Most of them at the same time recognize that they have to do a lot of work to prepare themselves we call. It AI Janney Hi, readiness that is having the right data in the right place with clean data with.

Updated data and in building the data platforms that require too, especially in the modern platforms that allow them to Ron January on top of that only a fraction I'll say, probably less than 15% of our clients have.

These data platforms ready, which was a result of.

Years of working especially in the last few years of preparing and getting ready for not necessary for January average generally.

We're getting ready to get value from data I think they are running.

Guo Xiao: I think they are running; these small percentage of our clients are running real, large-scale AI applications using large language models or fine-tuning, for example. We do believe that in 2024 we will see more clients moving from PLC to real implement large scale implementation where they're ready, but most of them will still be doing work to prepare themselves for AI readiness. Is there a disconnect between that preparatory work for Gen AI and the focus on near-term return on investment that your clients are seeing? Because I would think a lot of that work doesn't have an immediate payback. Um, I think it depends on it's definitely a good call. It depends on the type of type of Jenny and I use cases.

This small percentage of our clients are running real large scale.

I think January applications, using large language model, we're fine tuning for example.

We do believe that in 2024, we would see more clients moving from.

POC to real implement large scale implementation, where they they're ready, but most of them will still be doing work to prepare themselves for AI readiness.

Is there a disconnect between that.

<unk> work for Jan AI and Andy.

The focus on near term return on investment that your clients are saying because I would think a lot of that work is it doesn't have an immediate payback.

I think it depends on it's definitely a good call it depends on the type of a type of.

Jenny I use cases, some cases would require rightly so years of investment at least a year or two especially building large language models. It would take a while for that to get the payback and then some of our clients are ready to do that and they are willing to make that commitment.

Guo Xiao: Some cases would require, rightly so, years of investment, at least a year or two, especially building large language models. It would take a while for that to pay off. And some of our clients are ready to do that, and they're willing to make that commitment. And then so those are the ones that moving forward with that type of journey I implemented. But a lot of the use cases are, I would say, low-hanging fruits. They're not involved in the fine-tuning or large-language model building.

And then so those are the ones that moving forward that type of a journey of implementation, but a lot of the use cases are I would say low hanging fruits theyre not involved in the fine tuning where large language model building theyre more involved just using Apis of the open platforms out there.

Guo Xiao: They're more involved just using APIs of the open platforms out there or building some. I think the most common use case we've seen is the ultra-personalized experience, which is definitely going to provide return in the near term, but it's also a limited use case of how JNI can be used. Okay, thank you very much. Thank you. Our next question comes from Kate Kronstein with William Blair. Your line is open. Our next question comes from Kate Cronstein with William Blair. Your line is open. Kate, if your telephone is muted, please unmute it.

And then or building some.

Custom user interface on top of that I think the most common use case. We've seen is is ultra personalized experience, which is definitely going in return provide return in the near term, but it's also eliminate use case of how January that can be used.

Okay. Thank you very much.

Thank you.

Thank you. Our next question comes from Kate Constantine with William Blair. Your line is open.

Yeah.

Our next question comes from Keith <unk> with William Blair. Your line is open.

Yeah.

Yes.

If your telephone is muted please on mute.

Operator: Our next question comes from Paul Olbrecht with Wolf Research. Your line is open. Hi, thanks. This is Paul Obrecht on behalf of Darrin. Touch on the demand side. Markets. It looked like energy.

Our next question comes from Paul Odebrecht with Wolfe Research Your line is open.

Alright. Thanks. This is Paul O'brien on for Darren could you touch on the demand trends youre seeing across end markets. It looked like energy continued to decelerate while.

Paul Olbrecht: Accelerate, Wall, and Automotive declined year over year for the first time in quite some time, so I'm curious about what client engagement looks like across. Sure, so as you point out, performance across our industry verticals was down in Q4, reflecting the challenging macro environment, including auto, which I think is the most resilient vertical for us, but I'll go through most of them. From the retail sector perspective, we continue to see further pullback of spending as our clients go through tight budget cycles.

Automotive declined year over year for the first time in quite some time, so I'm curious on what client engagement looks like across the segments and what the expectation is going forward through 'twenty four.

Sure. So as you pointed out performance of course, our across our industry verticals was down in Q4, reflecting the challenging macro environment, including auto.

I think the most resilient vertical for us, but I'll I'll go through I'll go through most of them.

From the.

Tech retail sector perspective, we continue to see further pull back of spending as our clients go through tight budget cycles, we're still seeing some of them even doing layoffs.

Guo Xiao: We're still seeing some of them, even doing layoffs at this point. Financial services is relatively stable on the whole, and it's also an area we want to focus on. We're seeing some budget opening up in this vertical, especially in Asia Pacific, especially in the Australian market, now energy. Energy and public health care are a strategic focus for us, as they are more resilient from a recession perspective. And then we also continue to see growth opportunities from our clients in these verticals, especially call-out life science. We're seeing a lot of exciting opportunities in that sector. This is now 25% of our portfolio. So auto travel, and transportation, even though it's declining year on year, a lot of this is due to the pricing pressure I mentioned earlier, but it's still our most resilient vertical, and we're very much focused on driving growth from that. Thanks, that's really helpful.

At this point.

Financial services is relatively stable on a whole and then it's also Ara willing to focus on we're seeing some budget opening up in this vertical, especially in Asia Pacific, especially in the Australia market.

Now energy.

Energy and.

Public health care is a strategic focus for us.

As there are more resilient from a recession perspective, and then we also continue to see growth opportunities from our clients in these in these verticals, especially on a call out life science, we're seeing a lot of exciting.

Opportunities in that sector.

This is now 25% of our portfolio or is this a this vertical so auto and travel transportation, even though is declining year on year. A lot of this is due to the pricing pressure I mentioned earlier, but it is still our most resilient vertical and we're very much focused on driving growth from that from that sector.

Yeah.

Thanks, That's really helpful. And then as a follow up how are you thinking about head count. This year I know I know total employees declined notably the past two quarters.

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

And I guess the questioners in the event of a demand rebound with easing client budgets, what changes would be needed on the supply side to meet this demand and then I guess somewhat related what has been the internal response to these restructuring efforts.

I'll start with head count and so.

Aaron Cummins: On the whole, we are seeing right now that voluntary attrition outpaces hiring, and that's likely to continue for another quarter. We are hiring, however; we have a very strong recruiting capability. We have a very, very strong employer brand. And so we continue to hire in select pockets, particularly in geos where we're more sold out or for skill sets.

On the whole we are seeing right now our voluntary attrition outpace the hiring and and that's likely to continue for another quarter.

And we are hiring however, we have a very strong recruiting capability, we have a very very strong employer brand and so we'll continue to hire in select pockets, particularly India was aware of where more sold our offer more for skill sets I mentioned data earlier, where we continue to see strong demand.

Aaron Cummins: I mentioned data earlier where we continue to see strong demand. So, on the whole, even though total headcount is coming down somewhat, we are continuing to hire. And we have a high degree of confidence in our ability to hire when demand rebounds. And so, I would just touch on the restructuring and how employees are feeling. You know, certainly 2023 was a challenging year across our business.

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

Feeling fine about that.

<unk> I would just touch on the restructuring and how employees are feeling.

And certainly 2023.

Was a challenging year across our business and but we have an open dialogue with our employees and we're focused on being in person, where we can and just helping people understand what we're doing why we're doing it.

Aaron Cummins: But we have an open dialogue with our employees. We're focused on being in person where we can, and just helping people understand what we're doing, why we're doing it. And that really has been our key focus. It's part of the values that we have across ThoughtWorks.

And that really has been our key focus it's part of the values that we have across thought works and we think that is an important and resonating well and then positively some of the changes we're seeing from the restructuring are starting to come through so we're going to keep the dialogue going we think that's a critical part as we go through this change process and then we believe that.

Aaron Cummins: And we think that is important and is responding well. And, positively, some of the changes we're seeing from the restructuring are starting to come through. So we're going to keep the dialogue going. We think that's a critical part as we go through this change process. And then we believe very much in the restructuring, and we know that the outcomes will help make people be confident about what we're doing. So on the whole, things are going okay. Got it, thank you.

Much of the restructuring and we know that the outcomes will and will help make people be confident around what we're doing so on the whole going okay.

Got it thank you.

Guo Xiao: Thank you. At this time, I'd like to turn the call back over to Zhao for any closing remarks. Sure, so I want to reiterate that digital transformation is a long-term strategy for most companies, our clients, and it enables us to differentiate ourselves through technology excellence, over 30 years of thought leadership, we believe that will continue to differentiate in areas like cloud platform, data, AI, gen AI, customer experience, and product. And at the same time, we're also diversifying our business to address more of our clients' urgent needs. For example, enterprise application modernization and demo.

Thank you.

At this time I'd like to turn the call back over to Joe for any closing remarks.

Sure. So I want to reiterate that digital transformation is a long term strategy for most companies our clients and empowers differentiate ourselves through.

Technology excellence over 30 years of thought leadership, we believe that will continue to differentiate in areas like cloud platform data AI journey, II customer experience and product and then at the same time, we also diversify our business to address more of our clients urgent needs.

For example in.

Enterprise application monetization demo so despite some year to year fluctuation, we believe our tech strengths and these investments will position us well to drive steady growth in the long run with.

Operator: So despite some year-to-year fluctuation, we believe our tech strengths and these investments will position us well to drive steady growth in the long run. With that, I want to thank you for joining our call, our earnings call, and I'd like to acknowledge the continued support of our board and shareholders. So stay well, and we look forward to catching up with you next quarter. Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone have a great day.

With that I want to thank you for joining a recall on our earnings call and I'd like to acknowledge the continuing to support.

Our board and shareholders. So stay well and then we look forward to catching up with you next quarter.

Thank you.

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

Okay.