Q1 2024 Thoughtworks Holding Inc Earnings Call

Operator: Hello everyone, and welcome to ThoughtWorks' earnings call for the first quarter of 2024. We will be recording today's call, and during the presentations, all lines will be on listen only.

Hello, everyone and welcome to the <unk> earnings call for the first quarter of 2024 will be recording today's call and during the presentation. All lines will be on listen only join us today will be <unk>, president and CEO of <unk> and CFO Eric comments. 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 disc.

Operator: Joining us today will be ThoughtWorks President and CEO Guo Xiao and CFO Erin Cummins. The earnings press release was issued earlier today and is also available on our investor relations page at Botworks.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, quarterly reports on Form 10-Q, and other reports we may file with the SEC from time to 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.

On this call include 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.

Orderly reports on Form 10-Q, and other reports we may file with SEC from time to time. These.

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 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-gap-to-gap reconciliations in our press release, Furnished as an Exhibit Tour 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.

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 that works assumes no obligation to update or revise the information presented on this conference call I'll now hand over to Joe.

Operator: 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. Earlier today, we announced that I would be stepping down from my role and that the board had selected Mike Sutcliffe as my successor, effective June 17th. I have spent 25 years at ThoughtWorks, starting as a software developer in 1999 before taking on various leadership roles around the world. And I'm grateful for the many opportunities I've had.

Joe: Thank you Rob Hello, everyone.

Earlier today, we announced that I will be stepping down from my role and the board has selected Mike Sutcliffe as my successor effective June 17th.

I have spent 25 years I felt works starting as a software developer in 1999 before taking on various leadership roles around the world and I'm grateful for the many opportunities ahead.

Xiao Guo: It has been a privilege to be a ThoughtWorker and to be able to learn from the best and brightest in our industry. I am proud of what we have accomplished together, growing this business and delivering extraordinary impact for our clients around the world. And now, it's the right time to pass the baton.

Joe: It has been a privilege to be a thought walker tend to be able to learn from the best and brightest in our industry I am proud of what we have accomplished together growing this business and delivering extraordinary impact for our clients around the world.

Speaker Change: Now, it's right time to pass the Baton, we're expecting to return to sequential growth in Q2.

Xiao Guo: We're expecting to return to sequential growth in Q2. And I know I'm leaving this business in very capable hands. I will continue to support as an advisor to ensure a smooth transition. In Q1, we exceeded our revenue expectations we delivered in the context of a macroeconomic environment that, though stable, isn't yet showing signs of improvement. Our sales cycles are still elongated, but our client portfolio remains steady. We're having more client conversations around growth-oriented work and seeing strong demand for AI and data services, enterprise modernization, and demo managed services.

Speaker Change: And I know I'm, leaving this business in very capable hands.

Speaker Change: I'll continue to support as an adviser to ensure a smooth transition.

Speaker Change: In Q1, we exceeded our revenue expectation, we deliver in a context of a macroeconomic environment that those stable isn't yet showing signs of improvement.

Speaker Change: Our sales cycles are still elongated, but our client portfolio remains steady.

Speaker Change: We're having more client conversations around growth oriented work and seeing strong demand for AI and data services enterprise monetization and demo managed services. However.

Xiao Guo: However, in Q1, we fell short of our adjusted EBITDA margin guidance. This is primarily due to the timing of our ongoing supply rebalancing program, which includes adjustments to our offshore-onshore mix. This has resulted in a lower-than-expected gross margin.

Speaker Change: Q1, we fell short of our adjusted EBITDA margin guidance. This is primary due to the timing of our ongoing supply rebalancing program, which includes adjustments to our offshore onshore mix.

Speaker Change: This has resulted in a lower than expected gross margin.

Xiao Guo: Our ongoing restructuring program focuses on efficiencies, and we're committed to improving our margin profile, and we're executing our plan to achieve it. Our current strategies are centered around technology. Our investments in sales and marketing, partners, and new services are paying off, and we continue to focus on delivering extraordinary impact for our clients. Now, let me share our first quarter results. We generated revenue of $249 million during the first quarter with an adjusted EBITDA margin of 2.7%.

Speaker Change: Our ongoing restructuring program focuses on efficiencies and we're committed to improving our margin profile and we're executing our plan to achieve it our client strategies are centered around technology our.

Speaker Change: Our investment in sales and marketing partners and new services are paying off and we continue to focus on delivering extraordinary impact for our client.

Speaker Change: Now, let me share our first quarter result, we generated.

Speaker Change: Revenue of $249 million during the first quarter with adjusted EBITDA margin of 2.7% our industry base to go to market is gaining momentum.

Xiao Guo: Our industry-based go-to-market is gaining momentum. We deliver strong bookings in a quarter and expect to return to sequential quarter-over-quarter growth in Q2 2024. We remain focused on growing our client relationships, as reflected in the 57 clients with trailing 12-month bookings of over $5 million at quarter end. New client acquisition remains a strength. We contracted with 49 new clients in the first quarter, compared to 46 in the fourth quarter of 2023. We have seen traction from our vertical-based sales model, with higher new logo acquisitions in our energy, public, and health services, technology, and business services. These are verticals that we have intentionally focused on.

Speaker Change: We delivered strong bookings in the quarter and expect to return to sequential quarter over quarter growth. In Q2, 2024, we remain focused on growing our client relationships as.

Speaker Change: As reflected in the 57 clients with trailing 12 months bookings of over $5 million at quarter end, New client acquisition remains a strength, we contracted waste 49, new clients in the first quarter compared to 46 in the fourth quarter of 2023.

Speaker Change: We have seen traction from a vertical based sales model with higher noodle the acquisitions in our energy public and health services technology and business services. These are verticals that we have intentionally focused on.

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

Speaker Change: We have outstanding technologies and reputation for innovation and thought leadership.

Speaker Change: We're well positioned to help our clients evolve their operations a harness the power of cloud data and AI to adapt for future success.

Speaker Change: Now, let me hand over to Erin Thanks, Shao and thank you to everyone for joining our call today, we continue to invest in strengthening our client relationships and we are driving engagement with clients across all verticals are focused approach to building demand continues to provide ongoing returns with 62% of quarterly bookings.

Erin Cummins: Thanks, Xiao, and thank you to everyone for joining our call today. We continue to invest in strengthening our client relationships, and we are driving engagement with clients across all verticals. Our focused approach to building demand continues to provide ongoing returns, with 62% of quarterly bookings in Q1 coming from outbound efforts. Our teams are closing pipeline opportunities, helping us achieve top-line results ahead of our expectations in Q1. Our team's execution comes against the backdrop of a still-challenged macro environment.

Erin: In Q1 coming from outbound efforts, our teams are converting pipeline opportunities, helping us achieve topline results ahead of our expectations in Q1, our teams execution comes against the backdrop of a still challenged macro environment that said the macro remains steady and we have not seen the development of incremental class.

Erin Cummins: That said, the macro remains steady, and we have not seen the development of incremental client budget pressure since last quarter. Their digital needs remain intact, and we are partnering with our clients as they put their plans into action. Now, let's turn to more detail about the first quarter. Revenues were $249 million, representing a year-over-year decline of 19% in both USD and constant currency.

Erin: Budget pressure since last quarter.

Erin: Their digital needs remain intact, and we are partnering with our clients as they put their plans into action now, let's turn to more detail about the first quarter.

Erin Cummins: Acquisitions completed in the last 12 months were immaterial to the revenue growth rate in Q1. During the quarter, we saw year-over-year declines of 11% in APAC, 21% in Europe, 23% in North America, and 31% in LATAM. Among our industry verticals, revenue declined by 8% year-over-year in automotive, travel, and transportation, 12% in technology and business services, 19% in retail and consumer, 25% in energy, public, and health services, and 29% in financial services and insurance.

Erin: Revenues were $249 million, representing a year over year decline of 19% in both USD and constant currency acquisitions completed in the last 12 months were immaterial to the revenue growth rate in Q1.

Erin: During the quarter, we saw year over year declines of 11% and APAC, 21% in Europe, 23% in North America, and 31% and Latam.

Erin: Among our industry verticals revenue declined by 8% year over year in automotive travel and transportation, 12% in technology and business services, 19% in retail and consumer.

Erin: 25% and energy public and health services, and 29% in financial services and insurance compared to Q4 of 2023, we saw sequential growth in automotive travel and transportation energy public and health and technology and business services. During Q1 as a percentage of total revenue our top five.

Erin Cummins: Compared to Q4 of 2023, we saw sequential growth in automotive travel and transportation, energy, public and health, and technology and business services. During Q1, as a percentage of total revenue, our top 5, top 10, and top 50 clients generated 18%, 29%, and 68%, respectively. As of the end of Q1, we had 27 clients with TTM revenues greater than $10 million. On a TTM basis, around 95% of our business came from existing clients. As of Q1 of 2024, our annualized average revenue per employee was $92,000.

Erin: <unk> top 10, and top 50 clients generated 18%, 29% and 68% respectively. As of the end of Q1, we had 27 clients with TTM revenues greater than $10 million on a TTM basis around 95% of our business came from existing clients.

Erin: As of Q1 of 2024, our annualized average revenue per employee was $92000. We continue to believe that this metric which remains above the industry average reflects the strategic importance of our work.

Erin Cummins: We continue to believe that this metric, which remains above the industry average, reflects the strategic importance of our work. On a trailing 12-month basis, we finished Q1 with bookings of $1.2 billion, down 20% compared to Q1 of 2023. Our year-over-year TTM bookings reflect the change in client behavior that developed over the prior year, which pressured contract length and sizing. However, we continued to see relative stability among our clients, and TTM bookings were unchanged sequentially from Q4 of 2023. As Xiao mentioned, our Q1 bookings were strong. Adjusted gross margin was 31% for Q1 compared to 36.4% during the prior year.

Erin: On a trailing 12 month basis, we finished Q1 with bookings of $1.2 billion down 20% compared to Q1 of 2023, our year over year TTM bookings reflect the change in client behavior that developed over the prior year, which pressured contract length and sizing. However, we continue to see relative stability among.

Erin: Our clients and TTM bookings were unchanged sequentially from Q4 of 2023 as Sal mentioned at Q1 bookings were strong adjusted gross margin was 31% for Q1 compared to 36.4% during the prior year our.

Erin Cummins: Our Q1 adjusted gross margin continued to be impacted by lower onshore utilization and high single-digit pricing declines on a like-for-like basis. In the first quarter, our adjusted SG&A as a percentage of revenue was 28.3% compared to 25.1% in the prior year. We've seen a year-over-year reduction of $7 million in adjusted SG&A through proactive cost management while still investing in demand generation. Adjusted EBITDA was $7 million for the first quarter, for an adjusted EBITDA margin of 2.7%.

Erin: Our Q1 adjusted gross margin continued to be impacted by lower onshore utilization and high single digit pricing declines on a like for like basis in the first quarter, our adjusted SG&A as a percentage of revenue was 28, 3% compared to 25, 1% in the prior year, we have seen a year over year reduction of $7 million.

Erin: And adjusted SG&A to proactive cost management, while still investing in demand generation.

Erin: Adjusted EBITDA was $7 million for the first quarter for an adjusted EBITDA margin of 2.7% Q1, GAAP diluted loss per share was 10 cents compared to three cents in the prior year period, our adjusted diluted loss per share was two cents compared to adjusted diluted EPS of three cents during the first quarter of 2023.

Erin Cummins: Q1 gap diluted loss per share was $0.10 compared to $0.03 in the prior year period. Our adjusted diluted loss per share was $0.02 compared to adjusted diluted EPS of $0.03 during the first quarter of 2023. Free cash flow was negative $20 million during Q1 compared to free cash flow of $31 million in the prior year period.

Erin: Free cash flow was negative $20 million during Q1 compared to free cash flow of $31 million in the prior year period.

Erin Cummins: The timing of certain items, in addition to year-over-year revenue headwinds, impacted cash flow in the quarter. We expect positive cash flow in Q2. As of March 31, 2024, our term loan balance stood at $294 million.

Erin: The timing of certain items. In addition to year over year revenue headwinds impacted cash flow in the quarter. We expect positive cash flow in Q2 as of March 31, 2020 for our term loan balance stood at $294 million. We continue to have good liquidity ending the quarter with a cash balance of $73 million.

Erin Cummins: We continue to have good liquidity, ending the quarter with a cash balance of $73 million and an undrawn $300 million revolving credit facility. Our outstanding employees make our achievements possible, and we continue to believe that we have the best technologists in the industry. Our attrition rate remains below industry average.

Erin: And an Undrawn 300 million dollar revolving credit facility, our outstanding employees make our achievements possible and we continue to believe that we have the best technologists in the industry.

Erin: Our attrition rate remains below industry averages in Q1 voluntary attrition on a TTM basis was 12.4% slightly up sequentially from 12% in Q4, 2023, and an improvement year over year from 13, 1% in Q1 of 2023.

Erin Cummins: In Q1, voluntary attrition on a TTM basis was 12.4%, slightly up sequentially from 12% in Q4 2023 and an improvement year-over-year from 13.1% in Q1 2023. At the end of Q1 2024, our headcount was around 11,000. We are hiring selectively, focusing on specific skill sets, such as data and infrastructure. So, let me hand the call back to Xiao to share a broader update on the business. Thanks, Erin.

Erin: At the end of Q1 2024, our head count was around 11000.

Erin: Our hiring selectively focusing on specific skill sets such as data and infrastructure.

Erin: So let me hand, the call back to shatter share a broader update on the business.

Xiao Guo: We're making steady progress, and we're pleased to receive recent recognition from Forrester, a leading global market research company. ThoughtWorks was named in the Innovation Consulting Services Landscape Q1 2024 report by Forrester Research. We were pleased to be the only listed service provider with a geographic focus on four continents. We continue to execute our vision to deliver extraordinary impact for our clients. Let me share some of the kind stories to bring this to life.

Shatter: Thanks, Erinn, we're making steady progress and we're pleased to received recent recognition from Forrester, a leading global market Research company.

Shatter: <unk> was named in innovation consulting services landscape Q1, 2024 report by Forrester Research.

Shatter: We were pleased to be the only listed series provider with a geographic focus on four continents, we continued to execute our vision to deliver extraordinary impact from clients let.

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

Xiao Guo: Foxtel Group, Australia's leading subscription television company, has worked with us since 2021. We actively engage with Foxtel to integrate their innovative streaming services aggregator platform KO Sports, Binge, and Hubbell. We also aim to shape the future of KO Sports, a thriving sports streaming service under the Foxtel Group umbrella that is affiliated with the American Conglomerate News Corp. Autotrader is the UK's largest automotive marketplace, providing access to over 80% of the UK's automotive retailers.

Shatter: Alcatel Group Australia's leading subscription television company has worked with all we're seeing is 2021.

Shatter: We actively engage with Fox Hill group to integrate their innovative streaming services aggregator platform Kayo sports beans, and Hubbell. We also aim to shape the future of Kayo sports a thriving sports streaming service under the Fox Tao group umbrella that is affiliated with the American conglomerate News Corp.

Shatter: Auto trader's, the Uk's largest automotive marketplace.

Shatter: Providing access to over 80% of U K automotive retailers.

Xiao Guo: Autotrader brings together the largest and most engaged consumer audience with the largest pool of vehicle sellers. Autotrader partnered with ThoughtWorks seven years ago on a major transformation. Today, Autotrade is working with ThoughtWorks to realize their aspirations to provide an industry-defining, connected customer experience. For our client, Total Wine & More, we're building upon our enterprise monetization focus and expanding to drive broader organizational change with a product thinking approach. Having grown into the largest independent retailer of fine wine in the U.S., operating 265 stores, Total Wine prioritized applying this approach to its ERP systems for impactful business outcomes.

Shatter: Auto trader brings together the largest and most engaged consumer audience with the largest pool of vehicle sellers.

Shatter: Auto trader partnering with thought works seven years ago on a major transformation.

Shatter: Today auto trader is working with ours to realize their spy ration to provide a industry defining connected customer experience.

Xiao Guo: Total Wine applied product thinking to internal systems supporting the buyer's response for reviewing and acting on extensive and intricate data sets while adhering to a tight schedule for products to get on store shelves in time, using a port-a-glade approach. Total Wine aims to improve the ERP experience for buyers and streamline buyer tasks, making them easier and more efficient. The initiative is also expected to cut down tedious work and reduce operational costs. Together with our partner, Google, we have enabled Brazil's leading communication and entertainment group, Grupo Globo, to migrate one of its key products, Globo Play, from a Lexus system to Google Cloud Platform in just nine months.

Shatter: At our client total wine more we're building upon our enterprise monetization focus and expanding to drive broader organizational change with a part of thinking approach.

Shatter: Having grown into the largest independent retailer of fine wine. The U S. Operating 265 stores total wine prioritized applying this approach to its ERP systems for impactful pieces outcomes.

Shatter: Total I apply product thinking to internal systems supporting the buyers response for reviewing and acting on extensive and intricate datasets, while adhering to a tight schedule for product to get it on store shelves in time.

Shatter: Using a product led approach.

Shatter: <unk> aims to improve the ERP experience for buyers and streamline buyer tasks, making them easier and more efficient.

Shatter: The initiative is also expected to cut down tedious work and reduce operational costs.

Shatter: Together with our partner Google will have enabled Brazil's leading communication Entertainment group Grupo Globo to migrate one of its key product global play from a legacy system to Google Cloud platform in just nine months. This project was driven by the need to increase efficiencies reduce costs optimize processes in.

Xiao Guo: This project was driven by the need to increase efficiencies, reduce costs, optimize processes, integrate teams, and link to ESG commitments. Through this migration, Global saw a 78% cost reduction in marketing and commercial intelligence and better financial transparency. The streamlined reuse of data and code allowed Global to reduce the size of its dataset by 34% and improve scalability and processing efficiency.

Shatter: Great teams and linked to ESG commitments through this migration global saw a seven 8% cost reduction in marketing and commercial intelligence and better financial transparency. The streamlined reuse of data and code allow it to reduce the size of data set by 34% and improved scalability and Prague.

Shatter: Assessing efficiency.

Xiao Guo: In these examples, you can see that our technologies are intensely focused on solving our clients' toughest challenges by harnessing our expertise with cutting-edge technology. Now, let's turn to AI. Client interest and demand for our AI and AI-related work remains 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 AI-related projects. We're delighted to announce the successful acquisition of the Talented Individuals IP and Technology from Watchful. Watchful is a San Francisco-based company that helps organizations accelerate the creation, enhancement, and deployment of AI models.

Shatter: In these examples you can see that our technologies are intensely focused on solving our clients' toughest challenges by harnessing our expertise with cutting edge technology.

Shatter: Now, let's turn to AI client interest and demand for our AI and AI related work remained strong and our team of World Class service professionals is working to bring clients AI ambitious to reality at the end of the first quarter. We were working on over 50 AI related projects, we're delighted to announce the successful.

Shatter: Acquisition of the talented individuals IP and technology from watchful watchful is a San Francisco based company that helps organizations accelerate the creation enhancement and deployment of AI models. This acquisition enables our strategy to become a leading AI transformation partner globally.

Xiao Guo: This acquisition enables ThoughtWorks' strategy to become a leading AI transformation partner globally. The integration of Watchful's technology into ThoughtWorks' suite of data and AI services will expedite client AI deployment, moving projects from proof-of-concept to production rapidly and effectively, thereby providing clients with faster returns on their AI investment. Our clients are still early in the AI journey, but we're pleased that some are moving from proof of concepts to operational deployment, and we see a long runway of direct and indirect opportunities. In the first quarter, we powered up our services launch engine, launching eight new AI services, such as AI-first software delivery, AI-powered digital products, and AI platforms.

Shatter: The integration of watchful as technology into our suite of data and AI services will expedite client AI deployment moving projects from proof of concept to production rapidly and effectively.

Shatter: Thereby providing clients with faster retires on their AI investments our.

Shatter: Our clients are still early in the AI journey. We're pleased that some are moving from proof of concepts to operational deployment and we see a long runway of direct and indirect opportunities in the first quarter with powered up our services launch engine launching eight new AI services for example, AI first halfords.

Shatter: Livery.

Shatter: Power of digital products and AD platforms. We believe these AI technologies and services covering a wide range of use cases will be a source of value for our clients and we're.

Xiao Guo: We believe these AI technologies and services, covering a wide range of use cases, will be a source of value for our clients and followers. We're also seeing demand increase for our enterprise modernization and data service offerings as clients focus on improving their systems and data to harness AI's potential. Let me share a few client examples. We have worked with a global top 10 bank to streamline its customer compliance process. We have been working with this bank for decades on data platforms, and more recently, large language models.

Shatter: We're also seeing AI increased demand for our enterprise modernization and data service offerings as clients focus on improving their systems and data to harness aie's potential let me share a few client examples we have worked with a global top 10 bank to streamline is customer complaints process.

Shatter: We have been working with this bank for decade on data platforms and more recently large language models.

Xiao Guo: The bank's complaint team faced many challenges, resulting in a poor customer experience. We built and delivered a system to extract and summarize complaint text and audio based on large language models. Additionally, we delivered a webpage summary for complaint analysis and a customer web chatbot. To minimize hallucinations, we employed common keyword techniques, conducted structural analysis, and filtered out irrelevant and harmful information.

Shatter: The banks complained team faced many challenges, resulting in a poor customer experience.

Shatter: Were built and delivered a system to extract and summarize complained tax them. The audio based on large language models.

Recently, we delivered a webpage summary for complaint analyses and a customer web chat bot to minimize hallucinations, we employed calming cure techniques conduct a structural analyses and filtered out irrelevant and harmful information.

Xiao Guo: We achieved 75% efficiency improvement, and agents can now save approximately 40 seconds per customer complaint interaction. We used data modeling to reduce maintenance costs at one of the world's top 20 airlines by revenue. We built an optimization algorithm to find the optimal maintenance sequence to reduce the number of days airplanes are grounded due to maintenance activities.

Shatter: We achieved 75% of efficiency improvement and agents can now save approximately 40 seconds per customer complaint interaction.

Shatter: We use data modeling to reduce maintenance costs at one of the wars top 20 airlines by revenue, we built a optimization algorithm to find the optimal maintenance sequence to do use the number of days airplanes are grounded due to maintenance activities.

Xiao Guo: We integrated this with the airline's internal system to visualize and update the maintenance chain in real time. We also developed data models to evaluate and optimize the tradeoffs between operational disruptions and holding inventory costs. This ongoing program has already delivered double-digit, million-dollar cost savings ahead of schedule. All this is built on 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. Therefore, diversifying our service portfolio is a priority. We're pleased that our demo managed services are getting good uptake, with 16 new deals in Q1. ThoughtWorks' AI-powered, demo-managed services go beyond simply sustaining client applications.

Shatter: We integrated this with the airlines internal system to visualize and update the maintenance chain in real time.

Shatter: We develop data models to reevaluate at optimize the tradeoffs between operational disruptions and holding inventory costs.

Shatter: This ongoing program has already delivered double digit million dollar cost savings ahead of schedule. All of this is build our expertise in and commitment to ethical technology.

Shatter: 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 diversifying our service portfolio is priority.

Shatter: We're pleased that the hours of demo managed services are getting good uptake with 16 new deals in Q1.

Shatter: So ours AI powered demo managed services go beyond simply sustaining client applications, we help them continuously enhance and transform and we expect to deliver 10 times the productivity that labor intensive managed services providers offer.

Xiao Guo: We help them continuously enhance and transform, and we expect to deliver 10 times the productivity that labor-intensive managed services providers offer. Demo Managed Services is strategic for ThoughtWorks to shift to longer-term contracts and for service expansion. Our clients often tell me that our technologies and thought leadership differentiate ThoughtWorks. They look to us to help them make the right technology decisions, which has arguably never been more challenging. Clients turn to us because we write the books that shape the future of technology. This quarter, ThoughtWorks Luminaries published two new books. Software architecture can be a tricky area to get started with, even for relatively experienced software developers.

Shatter: <unk> managed services is strategic for dollars to shift to longer term contracts and for service expansion.

Shatter: Our clients often tell me that our technologies and thought leadership differentiate ours there.

Shatter: They look to us to help them make the right technology decisions, which is arguably never being more challenging clients turn to us because we write the books that shape the future of technology.

Shatter: This quarter saw works luminaries published two new books sulfur architecture can be a tricky area to get started with even for relatively experienced software developers.

Xiao Guo: The book, Head First Software Architecture, takes a radically different approach to technical books, bringing the key concepts and ideas behind software architecture to life in a visual and engaging way. Demand for machine learning solutions has grown significantly in recent years. The book, Effective Machine Learning Teams, bridges the gaps between software engineering, lean product practices, and machine learning models. It is an essential guide for practitioners who want to better understand how to deliver machine learning-backed products.

Shatter: Book Headfirst Silver architecture takes a radically different approach to technical books.

Shatter: Bringing the key concepts and ideas behind software architecture to live in a visual and engaging way.

Shatter: Demand for machine learning solutions has grown significantly in recent years. The book effective machine learning teams bridges, the gap between software engineering lean product practices and machine learning models.

Shatter: It is a central guys practitioners, who want to better understand how to deliver machine learning backed product I'm also proud to share that we publish the thirties edition of the <unk> technology radar.

Xiao Guo: I'm also proud to share that we published the 30th edition of the ThoughtWorks Technology Radar. This twice-yearly snapshot of tools, techniques, platforms, languages, and frameworks is based on the experience of ThoughtWorks' global teams working with clients. Through a series of blips, it highlights to clients what they should adopt, trial, assess, and hold. Edition 30 includes over 100 blips, and a third relates to AI.

Shatter: This twice a year at a snapshot of tools techniques platforms languages and frameworks is based on the experience of Thoughtworks global teams working with clients.

Shatter: Through a series of glyphs the highlights the clients what they should adopt trial assess and hold position.

Shatter: <unk> 30 includes over 100, blips and the third relates to AI.

Erin Cummins: Back to you, Erin. Thanks, Xiao. Now let me discuss our business outlook for Q2 2024 and the full year. We are seeing stability among our client base, and the macroeconomic environment is unchanged. Clients remain focused on achieving more with less, but we do not see incremental budget pressures develop during Q1. Our teams are focused on converting pipeline opportunities within the framework of client budgets. We are seeing the benefits of our vertical-focused approach, which helped drive faster conversion in Q1 and into Q2.

Aaron: Back to you Aaron.

Aaron: Thanks Shao now, let me discuss our business outlook for Q2, 'twenty 'twenty four and the full year, we are seeing stability among our client base and the macroeconomic environment is unchanged clients remain focused on achieving more with less but we did not see incremental budget pressures developed during Q1.

Aaron: Our teams are focused on converting pipeline opportunities within the framework of client budgets. We are seeing the benefits of our vertical focused approach, which helped drive faster conversion in Q1 and into Q2 for the second quarter of 2024, we expect our revenues to be in the range of $250 million to $255 million.

Erin Cummins: For the second quarter of 2024, we expect revenues to be in the range of $250 million to $255 million, reflecting a year-over-year decline of 13% to 11%. At current rates, guidance incorporates an immaterial effects impact in Q2. We expect the adjusted EBITDA margin for the second quarter to be in the range of 5.5% to 7.5%. For the second quarter, we expect adjusted diluted earnings per share to be in the range of negative one cent to positive one cent, assuming a weighted average share count of approximately 323 million diluted shares outstanding.

Aaron: Reflecting a year over year decline of 13% to 11%.

Aaron: At current rates guidance incorporates an immaterial FX impact in Q2.

Aaron: We expect adjusted EBITDA margin for the second quarter to be in the range of five 5% to 7.5%.

Aaron: For the second quarter, we expect adjusted diluted earnings per share to be in the range of negative one cents to positive 1%, assuming a weighted average share count of approximately 323 million diluted shares outstanding.

Erin Cummins: Turning to our full year 2024 outlook, we now expect revenues in the range of $995 million to $1.02 billion, reflecting a year-over-year decline of 12% to 9% in USD and 12% to 10% in constant currency. Additionally, for the full year, we still expect an adjusted EBITDA margin of 8% to 10%. We remain focused on driving efficiencies in both our supply and our G&A functions, and we continue to expect margin expansion as we progress through 2024. As of March 31, we have realized $87 million in annualized cost savings since we began our restructuring program last August.

Aaron: Turning to our full year 2024 outlook, we now expect revenues in the range of $995 million to $1.02 billion, reflecting a year over year decline of 12% to 9% in USD and 12% to 10% in constant currency.

Aaron: Additionally for the full year, we still expect adjusted EBITDA margin of 8%, 10%, we remain focused on driving efficiencies in both our supply and our G&A functions and we continue to expect margin expansion as we progress through 2024.

Aaron: As of March 31, we have realized $87 million in annualized cost savings since we began our restructuring program last August.

Erin Cummins: As we have undergone the process of improving our cost profile, we have identified further savings opportunities. Accordingly, we are raising our targeted range of total cost savings to $100 million to $115 million from our initial targeted range of $75 million to $85 million. With the increased cost savings target from our restructuring program, we now expect total pre-tax charges of $26.5 million to $33 million, of which we have already recorded $21 million through the end of Q1.

Aaron: As we have undergone a process of improving our cost profile, we have identified further savings opportunities.

Aaron: Accordingly, we are raising our targeted range of total cost savings to $100 million to $115 million from our initial targeted range of $75 million to $85 million with the increased cost savings target from our restructuring program.

Aaron: We now expect total pre tax charges of $26 $5 million to $33 million.

Aaron: Of which we have already recorded $21 million through the end of Q1.

Erin Cummins: Importantly, we do not anticipate any disruption to client service as we execute upon these incremental savings opportunities. For the full year, we now expect adjusted diluted EPS of $0.02 to $0.08, assuming a weighted average share count of approximately 330 million diluted shares outstanding. For the full year, we expect share-based compensation to total $42 million.

Aaron: Importantly, we do not anticipate any disruption to client service as we execute upon these incremental savings opportunities.

Aaron: For the full year, we now expect adjusted diluted EPS of two cents to eight cents, assuming a weighted average share count of approximately 330 million diluted shares outstanding.

Aaron: For the full year, we expect share based compensation will total $42 million altogether. We believe that we are at an inflection point and are seeing signs of stability.

Erin Cummins: Altogether, we believe that we are at an inflection point and are seeing signs of stability. Our expected growth into Q2 is encouraging. We are intensely focused on improving results and driving margin expansion. We are building a more resilient company while delivering client impact through our thought, leadership, and technology expertise. Before we get into Q&A, I would like to say thank you to Xiao for his many years of leadership.

Aaron: Our expected growth into Q2 was encouraging we are intensely focused on improving results and driving margin expansion. We are building a more resilient company, while delivering client impact through our thought leadership and technology excellence.

Speaker Change: Before we get into Q&A I would like to say thank you to shell for his many years of leadership you've seen this business. There are many changes in your passion for the work and for all thought workers has never wavered. We greatly appreciate all that you've contributed throughout your time here, it's been an honor to work with you.

Erin Cummins: You've seen this business through many changes, and your passion for the work and for all ThoughtWorkers has never wavered. We greatly appreciate all that you've contributed throughout your time here. It's been an honor to work with you. And with that, we'll move to Q&A. Operator, will 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 has been answered and you'd like to remove yourself from the queue, please press star 1 again.

Speaker Change: And with that let's move to Q&A, operator will you. Please provide instructions for those on the call.

Speaker Change: Thank you if you'd like to ask a question. Please press star one one if your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Operator: Our first question comes from Tianjin Huang with J.P. Morgan. Your line is open. Yeah, thanks so much.

Speaker Change: Our first question comes from Tien Tsin Huang with Jpmorgan. Your line is open.

Speaker Change: Yes.

Tianjin Huang: And good morning, Xiao. I wish you the best, of course, with the transition here. I want to ask just about the transition and your successor, Mike, who's a great choice. We know Mike, but this is the first time I think bringing in an outsider to lead ThoughtWorks, if I'm correct. So I'm just curious about the balance of, [inaudible] bringing in more systems integration and package implementation type of work. Whatever you can share before Mike officially joins would be great. Sure. Hi Tianjin.

Speaker Change: Yes, thanks, so much and good morning.

Speaker Change: Shall I wish you the best of course with the with the.

Speaker Change: The transition here I wanted to ask just on the with the transition and your successor, Mike Who's a great choice.

Speaker Change: We know Mike.

Speaker Change: But it is the first time I think bringing in an outsider to leave that works if I'm correct.

Speaker Change: So I'm just curious around the balance of.

Speaker Change: That change together with the importance of the thought works culture, which I know is really important to you and everybody just trying to I'm trying to think about that balance and can we expect.

Speaker Change: <unk>.

Speaker Change: Of the things you've talked about like vertical nation as well as.

Speaker Change: Bringing in more systems integration and package.

Speaker Change: <unk> type of work.

Speaker Change: Whatever you can share before Mike Michelle joins would be great. Thank you.

Speaker Change: Sure.

Speaker Change: Hi, Tien tsin. Thank you for the question.

Xiao Guo: Thank you for the question. So we are at a phase where I think we are looking at the next four or five years, obviously not just the next one or two quarters. We've done a good transition and restructuring, and then I think we're on the path to a growth trajectory. We believe And we think that it's time to look at the longer term to see what we need to continue to grow the business.

Speaker Change: So we are at a phase where I think we are looking at next four five years, obviously not just the next one or two quarters we've done.

Speaker Change: Transition and restructuring and then I think we're on a path to a growth trajectory we believe in.

Speaker Change: And then we think that it's time to look at a longer time to see what do we need to continue to grow the business and one of the things that we consider is the two to bring in more new blood more external expertise and experience as you mentioned that and Jim we have a lot of our long tenured leaders. He thought words, we think it's time to.

Xiao Guo: And one of the things we're considering is to bring in more new blood, more external expertise, and experience. As you mentioned, at Tencent, we have a lot of long-tenured leaders in ThoughtWorks. We think it's time to take what we believe and what we have and then combine that with more external experience. So that's the rationale.

Speaker Change: To take what we believe and what we have and then combine that with more external experience. So that's the rationale and then to the point of.

Xiao Guo: And then to the point of strategic change, we're on the path in terms of restructuring the vertical focus and also the intention to bring more system integration and then package software implementation. We're not planning to change that. We do see our clients, for example, asking us very often about supporting them with system integration and package software implementation, especially because, at ThoughtWorks, we have a lot of experience with legacy modernization. And we do believe that expanding to those areas helps us to become a better strategic partner to our clients and also increases our time.

Speaker Change: The strategic change wherein.

Speaker Change: We're all in the past.

Speaker Change: In terms of the restructuring of the vertical focus and also.

Speaker Change: The intention to bring more system integration and then packaged software implementation we're.

Speaker Change: We're not planning to change that we do see our clients for example, asking us they're often about supporting them answer is immigration packaged software implementation.

Speaker Change: Especially because it's all works we at hours, we have more with a lot of experience around legacy modernization.

Speaker Change: And we do believe that by expanding into those areas helped hours to become a better strategic partner to our client and also increasing our Tam.

Xiao Guo: And then, at the end, I also just want to mention, as you asked, that we are proud of the unique culture that we have built that focuses on technology excellence, pursuit of excellence, and continuous improvement. And then Mike has been in the industry for a long time, and he knows about ThoughtWorks and has long admired our culture and is committed to our purpose of creating extraordinary impact through our culture and technology excellence. So we're confident that it's going to be a win-win situation. Great No, I'm glad to hear it. I'm sure that's the case.

Speaker Change: And at the end.

Speaker Change: I also just want to mention is as you asked that we are proud of the unique culture that we have built that that focus on technology excellence pursuing excellence.

Speaker Change: Continuous.

Speaker Change: Proven and then Mike has been industry for a long time and he knows about all works as long admired our culture and is committed to to our purpose of creating extraordinary impact.

Speaker Change: Our culture and technology excellence. So we're confident that it's going to be a win win situation.

Speaker Change: Great.

Speaker Change: Thank you and I'm sure. That's the case on the just my second.

Xiao Guo: Just my second follow-up question, just on the stability that you commented on, that's great to hear, no incremental pressures, and whatnot. Just on the pricing front related to that, if you have good visibility here, around the pricing environment, and pushing projects forward. Sure. So the pricing drop we mentioned in Q4'23. And then we're also seeing in Q1 this quarter, as we talked about it last quarter, it was mostly driven by the year-end client negotiations for 2024 budgets, especially some of the big deals that we signed during the quarter or during Q4 and during Q1.

Speaker Change: A follow up question just on the stability.

Speaker Change: That you commented on it.

Speaker Change: That's great to hear no incremental pressures.

Speaker Change: And whatnot just on the pricing front related to that if you have good visibility here.

Speaker Change: Around the pricing environment.

Speaker Change: Pushing projects forward.

Speaker Change: Sure so that the pricing drop we mention in the Q4 'twenty three and then we're also.

Speaker Change: Seeing in Q1 this quarter as we as we talked about it last quarter. It was mostly driven by the year end client negotiation for 2024 budgets, especially some of the big deals that we sign during the quarter or during Q4 and during Q1.

Xiao Guo: So we believe that the new pricing dynamics are already, at this moment, reflected in the majority of our contract portfolio. Therefore, further pricing declines from Q1 to Q2 should be much less significant and should stabilize. In the meantime, the new logos we're signing up for and the new work tends to start at a higher rate than the bigger deals where we have to sometimes give volume discounts. So overall, it's normalizing and stabilizing. We don't expect a significant pricing drop. Thank you, Chef. Thank you, teams. Thank you. The next question comes from Moshe Katri with Webush Securities. Your line is open.

Speaker Change: So we believe that.

Speaker Change: New pricing dynamics is already at this moment reflective in the majority of our contract portfolio.

Speaker Change: So further pricing declines from Q on Q2's should be much less significant and then and shoe should stabilize in.

Speaker Change: In the Meanwhile, the new logos were signing up for in a new work tends to start at a higher rate than.

Speaker Change: And then the bigger deals where we have to sometimes give a volume discounts. So overall it is normalizing and stabilizing we don't expect significant pricing drop to continue.

Speaker Change: Great.

Speaker Change: Thank you Scott.

Speaker Change: Thank you Tien tsin.

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

Moshe Katri: Thanks and Xiao, it's been great interacting with you and good luck. I just wanted to pick up the conversation. So, was there any... driving some of that pricing pressure rather than just like-for-like pricing? Hi Moshe.

Moshe: Thanks, and agile it's been great interacting with you and good luck.

Moshe: Just wanted to pick up.

Moshe: The conversation on pricing again.

Moshe: So was there any factor here in terms of offshore mix, that's been driving some of that pricing pressure rather than just like for like pricing pressure. That's my first question.

Xiao Guo: Yes, it's been great working with you, so thank you for the question. The offshore, the pricing drop I mentioned earlier was referring mostly to like-to-like price comparisons. The offshore-onshore mix definitely creates pressure on what we call the average bill rates across the world.

Hi, Moshe.

Moshe: It's been great working with you. So thank you for the question.

Moshe: The the offshore the pricing drop I mentioned earlier was referring mostly to like to like.

Moshe: Price comparison, the offshore onshore mix definitely creates a pressure on what we call. The average bill rates across the World and then it is an impact it is impact too.

Xiao Guo: And then it has an impact; it has an impact on our average pricing. And then we expect that, definitely, to continue as more work moves offshore. But that's also being offset by higher margins and higher utilization. Overall, we don't mind the pricing decrease if it were because of the offshore-onshore mix. But we were, I think I was mostly referring to the like-like pricing environments that are being stabilized, and said it might follow up on APAC.

Moshe: Two our average pricing and then we expect that definitely we expect that to continue as it won't work move to offshore.

Moshe: But that's a that's also being offset by high.

Moshe: The higher margin higher utilization overall, we don't mind the pricing decrease if it worked because of offshore.

Offshore onshore mix, but.

Moshe: But we were I think hours, mostly referring to the.

Moshe: The light like pricing pricing environments, they've being stabilized.

Xiao Guo: In the past, you guys have provided us with some updates on what you're seeing there in Singapore, Australia, and China, maybe some color there. Sure. APAC has been pretty resilient over the last quarter, and we have seen stronger growth in Singapore and the Indian local market, for that matter. As you mentioned, Australia has seen slower growth over a rather long period of time, mostly because of our exposure to the tech sector in the Australian local market. Now, we're seeing recovery. It's stabilizing, and it's definitely not declining further. We're seeing green shoes.

Speaker Change: Understood and my follow up is on APAC in the past you guys provided us some updates on what youre seeing there or Singapore, Australia, and China, maybe some color there. Thanks a lot.

Speaker Change: Sure APAC, it's been pretty resilient over the last over the last quarter and then we.

Speaker Change: We have we have seen stronger growth in Singapore, and an Indian local market for that matter.

Speaker Change: As you mentioned, Australia as being.

Speaker Change: Havent seen slower growth.

Speaker Change: Over a rather long period of time, mostly because our exposure in the.

Speaker Change: Text and then <unk>.

Speaker Change: Tech sector in Australia local market and then we're seeing recovery. It's stabilizing is definitely not declining further we're seeing green shoes. Some over long term tech clines are now, adding head count is ramping up projects, but it's not as fast as the as we were.

Xiao Guo: Some of our long-term tech clients are now adding headcounts, ramping up projects, but it's not as fast as we were hoping for from a rebound perspective. So we'll just continue, I think, incrementally getting better. China, from their two perspectives, one is that there is offshore work we do there; there is also local work we do there.

Speaker Change: Hoping for from a rebound perspectives, which is continue I think incrementally getting better.

Speaker Change: China Pharma there are two perspectives one is theres offshore work, we do there. There's also the local work we do there the local work is.

Speaker Change: Ah.

Speaker Change: Is is getting back to growth after the country open up the economy start to return to growth isn't it's not as fast as the economy growth rebound is not as fast as a lot of the.

Xiao Guo: The local work is getting back to growth after the country opened up, and the economy started to return to growth. It's not as fast as the economic growth rebound is not as fast as a lot of the economies were expecting, but it's still growing, and then so we are, we're seeing the rebound. It's not growing as fast as it might have been otherwise, but it's still stabilizing and growing. The offshore market for China has been a constraint for a little while because of the geopolitical tension, and then we're also being conscious of the risk exposure, so we're not pushing hard on growing the offshore market in China; instead, we're looking at offshoring more to India and Latin America, Southeast Asia, and some of the other Eastern Europe, some of the other areas. Thanks. Thank you, Moshe.

Speaker Change: Economies, we're expecting but he still growing and then so so we are we're seeing the rebound is not growing.

Speaker Change: As fast.

Speaker Change: As might have been otherwise, but it's still stabilizing and growing offshore market for China has been.

Speaker Change: Ah constrained for a little while because of the geopolitical tension and then we're also being conscious of the risk exposure. So we're not pushing hard on growing the offshore in China is that we're looking at.

Speaker Change: Offshoring more to India and Latin America.

Speaker Change: Southeast Asia, and some of the other eastern Europe some deleverage.

Speaker Change: Thank you.

Speaker Change: Thank you Moshe.

Moshe Katri: Thank you. Our next question comes from Brian Bergin with TD Cowen. Your line is open. Hi, thanks. Zach Eisman on for Brian.

Moshe: Thank you. Our next question comes from Bryan Bergin with TD Cowen Your line is open.

Bryan C. Bergin: First question we had on demand: just wanted to dig further into what's giving you confidence in the implied sequential growth view for 2Q, which would be the first time in almost two years. So what else could you say about how demand indicators have changed over the past three to six months and any notable vertical or geo callouts that you would highlight as a tailwind or headwind looking forward? Sure. Hi Zach.

Bryan C. Bergin: Alright, Thanks, Zach Egan on for Brian first question, we had on on demand just wanted to dig further into what's giving you confidence in the implied sequential growth for <unk>, which would be the first time in almost two years. So what else could you say about how demand indicators have changed over the past three months to six months in any notable vertical.

Bryan C. Bergin: Our G O callouts that you would highlight as a tailwind or headwind looking forward.

Zach Egan: Sure Zach.

Xiao Guo: From a macro perspective, Erin called out earlier, client behavior in the current environment is similar to what we have described in recent quarters, and hasn't fundamentally changed. It's stabilizing with respect to project terms, but we continue to see longer sales cycles and smaller deal size compared with a couple of years ago, for example. But that said, we are seeing some opening of discretionary spending, especially where there's a strong case for ROI.

Zach Egan: We from a from a macro perspective, Erin called out earlier.

Zach Egan: The client behavior in the current environment is is similar to what we have described in recent quarters hasn't fundamentally changed.

Zach Egan: It is stabilizing with respect to project term, but we continue to see longer sales cycles and smaller deal size compare with couple years ago for example.

Zach Egan: But that said we are seeing some opening of discretionary spending where theres, especially where there's a strong case for ROI. We're also I think probably more importantly, we're also seeing our.

Xiao Guo: We're also, I think probably more importantly, seeing our restructuring efforts paying off with increased investments in sales and marketing and a vertical-focused approach. Our team did a good job closing pipeline opportunities in Q1. And then we also have strong bookings in Q1. So that gives us confidence for the coming quarters. So putting this together, we do expect Q2 to return to sequential growth and then be followed by a similar trajectory later this year.

Zach Egan: Restructuring efforts paying off.

Zach Egan: With increased investments in sales and marketing and a vertical focuses approach.

Zach Egan: Our team did a good job converting pipeline opportunities in Q1, and then we also have a strong bookings in Q1s of those gives us confidence.

Zach Egan: For the coming quarters, so putting this together, we do expect Q2 to return to sequential growth.

Zach Egan: And then followed by a similar trajectory later this year.

Erin Cummins: And on the supply constraints, it sounds like these internal limitations that initially emerged last quarter are still causing some friction, but this time more so on the margin front, whereas 4Q is a revenue fulfillment issue. Could you elaborate on the latest here and if it's expected to impact results in the coming quarters? I'll take that question, Zach.

Speaker Change: Got it and on the supply constraints. So it sounds like these internal limitations.

Speaker Change: That initially emerged last quarter are still causing some friction but this time more so on the margin front, whereas <unk> was a revenue fulfillment issue could you elaborate on the latest here and if it is expected to impact results in the coming quarters.

Erin Cummins: Just in terms of the internal frictions and what we touched on in the last earnings release, I'm pleased to say that has been addressed as we had expected. That was more around just some specifics, as you mentioned, with revenue fulfillment, just some of the changes from the restructuring. But we did put in new processes, and things have normalized, and that's been fixed.

Speaker Change: I'll take that question that and.

Speaker Change: Just in terms of the internal friction than what we touched on in the last earnings release and I'm pleased to say that has been addressed as we had expected and that was more around add just some specifics as you mentioned with revenue fulfillment of some of the change from the restructuring.

Speaker Change: But we did put in new processes and things have normalized and that's been fixed now.

Erin Cummins: What Xiao touched on as well as I did that's impacting the margin is the adjustments to the offshore-onshore mix. Really, what we're seeing is higher utilization with our offshore supply and then a little bit lower utilization with the onshore supply. And so that is what is impacting the margin. We had highlighted that issue last quarter and did note that it would take a couple of quarters to work through all of that.

Speaker Change: And what shall touched on as well as I did that impacting the margin is the adjustments on offshore onshore mix and really what we're seeing it's higher utilization with our offshore supply and then a little bit lower utilization with the onshore supply and some of that.

Speaker Change: Is what is impacting the margin and we had highlighted those as well.

Speaker Change: We highlighted that issue I should say last quarter and did note that it would take a couple of quarters to work through all of that so and on the whole the supply issues that we talked about in our Q4 release they've been addressed we're feeling very good and we are focused on the rebalancing of our supply it will take us a couple of quarters to get there but that also.

Erin Cummins: So on the whole, the supply issues that we talked about in our Q4 release have been addressed. We're feeling very good, and we are focused on the rebalancing of our supply. It will take us a couple quarters to get there, but that also is progressing to plan.

Speaker Change: It's progressing to plan.

Zach Eisman: Xiao, it's been good to work with you. We wish you luck in the next chapter. Thank you, Zach.

Speaker Change: Understood Joe it's been good to work with the only wish you luck on the next chapter.

Speaker Change: Thank you Sir.

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

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

Jason Alan Kupferberg: Hi. Good morning, Xiao and Erin. This is Tyler DuPont on behalf of Jason.

Speaker Change: Good good morning, Sharon Erinn. This is Tyler on for Jason Thanks for taking the questions.

Tyler DuPont: Thanks for taking the time. First, I just want to start, if you could maybe just spend a minute and discuss the types of projects you're working on and the visibility and demand across those projects. It sounds like the focus continues to be, you know, left on the more discretionary high bill rate consulting-oriented initiatives and more on those projects with the short-term realizable ROI. Given the historical focus of ThoughtWorks, can you just discuss how your current go-to-market differs between the project types, particularly if there's a difference in any win rates between those two that are worth calling out, and if you're seeing in one queue Sure.

Tyler: First just wanted to start if you could maybe just spend a minute and discuss for the types of projects Youre working on and the visibility in demand across those projects. It sounds like the focus continues to be less on the more discretionary high bill rate consulting oriented initiatives.

Speaker Change: That's all it is known for and more on those projects with the short term realizable ROI.

Speaker Change: Even the historical focus thought works can you just discuss how your current go to market differs between the project types.

Speaker Change: Particularly if there is a difference in any win rates between between those two that are worth calling out.

Speaker Change: And if you are seeing in <unk>, particularly sort of what pricing concessions you had to make as you compete more aggressively for work.

Speaker Change: Sure. Thank you for the question.

Xiao Guo: Thank you for the question. So we have historically done a lot of consulting work. And then I think what we're doing right now is a lot of delivery work, but not necessarily everything is focused on short-term ROI. We do have a lot of long-term engagements where our clients continue to get funded because they're strategically important. So from a go-to-market perspective, we do focus a lot more on expanding our service offerings, but not so much as kind of steering away from short-term consulting projects to just from consulting-type projects just to delivery projects.

Speaker Change: So we can we do.

Speaker Change: <unk> historically done a lot of consulting work and then I think what we're doing right now.

Speaker Change: As a as a lot of delivery work.

Speaker Change: But not necessarily everything as folks know short term ROI, we do have a lot of long term engagements where our clients.

Speaker Change: Let's continue getting found it because theres such a strategic important so from a go to market perspective, we do focus a lot more on expanding our service offerings, but not so much as kind of steering away from short term consulting projects two to just just.

Speaker Change: From consulting kind of projects just to delivery projects.

Speaker Change: Projects and then what we're seeing and really is just the client buying behavior is their funding is not so much focused down, whereas sometimes is getting pulled back more on the consulting side of it more focus now on just.

Xiao Guo: And then what we're seeing really is just client buying behavior. Their funding is not so much focused on, or sometimes it's getting pulled back more on the consulting side of it, more focused on just executing and delivering products. So our go-to-market hasn't fundamentally changed. Our win rate has been consistent and then moving up over the last couple of quarters, especially this quarter.

Speaker Change: Executing and then in delivering product.

Speaker Change: So that our go to market hasn't fundamentally changed our win rate.

Speaker Change: Has been.

Speaker Change: Consistent and then moving up.

Speaker Change: Over the last couple of quarters, especially this quarter.

Xiao Guo: I think part of that is because we are turning over some of the contracts and we are going to the market with more aggressive, more realistic pricing in the current environment. And also, with our vertical-focused approach, we believe that gives us a lot more ability to be relevant to our clients from solving their domain-specific problems, which we believe gives us another edge in increasing our ring rate. So overall, we're feeling good about our win rate, both in terms of new projects and then extensions from a consulting and then delivery perspective. There's not much difference there.

Speaker Change: Part of that is because we are.

Speaker Change: Tony over some of the.

Speaker Change:

Speaker Change: Contracts and we're going to the market with a more aggressive more realistic.

Speaker Change: Pricing.

Speaker Change: In the current environment and also with our vertical focus approach, we believe that giving us a lot more ability to be relevant to our clients from a solving there.

Speaker Change: Their domain specific problem perspective.

Speaker Change: We believe give us another edge in increasing our ring right. So overall, we're feeling good about our win rates both in terms of new projects and then extension.

Speaker Change: From a consulting and.

Speaker Change: And then delivered prospers bet perspective that win rate is similar there is no. There is no much difference there I think that the lack of consulting projects is more due to client pulling back on budget as opposed to compete.

Xiao Guo: I think the lack of consulting projects is more due to clients pulling back on budget as opposed to competing against competition. That's very helpful, Xiao. Thanks for that. And then, just as a follow-up on more...

Speaker Change: Competing against competition.

Speaker Change: Okay Thats fair.

Speaker Change: Helpful. Joe Thanks for that and then just as a follow up on margins.

Tyler DuPont: It looks like 1Q came in modestly below the low end of the range. And based on full year numbers, it looks like we're definitely more back half-weighted. I'm curious if you can walk us through the margin dynamics facing the business. [inaudible] Thanks for the question, Tyler. I'll start.

Speaker Change: Looks like <unk> came in modestly below the low end of the range based on full year numbers.

Speaker Change: It looks like were definitely more back half weighted.

Speaker Change: I'm curious if you can walk us through the margin dynamics facing the business through the year and what gives you confidence in that back half.

Speaker Change: Acceleration, if you will it sounded like many pricing concessions made where for projects across 2024, the budgets across 24 broadly. So do you anticipate pricing strength in the back half of the year on new projects to offset that or just any clarity there would be helpful.

Erin Cummins: In terms of the pricing dynamics, no, there's not an assumption of improved pricing dynamics included in the margin guide for the year or in the back half. We are seeing a stabilized pricing environment, which Xiao talked about, but on the whole, our expectation is that the macro will stay largely unchanged. And then, while we are seeing some discretionary work, we are not expecting the mix of consulting to change. But why do we have confidence in the increased margin? So I touched on this a little bit already, and I also talked about it last quarter. But it's worth a reminder.

Speaker Change: Thanks for the question Tyler I'll start.

Speaker Change: In terms of the pricing dynamics no. There's not an assumption of improved pricing dynamics included in the margin guide for the year or in the back half.

Speaker Change: We are seeing a stabilized pricing environment, which shao talked about but on the whole our expectation is that the macro will stay largely unchanged and then while we are seeing some discretionary work we are not expecting that the mix of consulting to change.

Speaker Change: But why do we have confidence in the increased margin. So I touched on this a little bit already and I also talked about this last quarter. It's worth a reminder, as we look at 2024, the two key elements to our margin improvement first of all is increasing utilization and while we have seen some increase in <unk>.

Erin Cummins: As we look at 2024, the two key elements to our margin improvement, first of all, are increasing utilization. While we have seen some increases in utilization, there's still plenty of room to go. The second piece of that is the rebalancing of our onshore and offshore supply mix, particularly because we have lower utilization that is oriented toward the higher-cost locations.

Speaker Change: Utilization there is still plenty of room to go the second piece of that is the rebalancing of our onshore and offshore supply next particularly because we have lower utilization that is oriented towards the higher cost locations.

Speaker Change: So that has been driving.

Speaker Change: And part of that margin headwind that we've experienced.

Erin Cummins: So that has been driving part of that margin headwind that we've experienced. As we go forward, where we have confidence, you know, first of all, as I touched on in my prepared remarks, we are at an inflection point for the year, we're feeling positive about the top line momentum that we have in the strong bookings, and our Q2 guide incorporates sequential growth from Q1 to Q2. And so that obviously helps.

Speaker Change: As we and as we go forward, where we have confidence you know first of all as I touched on in my prepared remarks, we are at an inflection point for the year.

Speaker Change: Feeling positive about the top line momentum that we have and the strong bookings and our Q2 guide incorporate sequential growth from Q1 to Q2, and so that obviously helps and at the same time, we are managing our costs very carefully and we are aligning our supply base with that shift to offshore.

Erin Cummins: At the same time, we are managing our costs very carefully, and we are aligning our supply base with that shift to offshore. So really, it's a combination of the stability in our revenue base, plus continued discipline in improving our utilization and our cost management. And that is what we expect to drive that consistent margin improvement. For Q2, I have guided to a margin uptick, and I expect to see more margin upticks in the second half of the year. That's helpful, Erin.

Speaker Change: So really it's a combination of the stability into and our revenue base, plus continued discipline and improving our utilization and our cost management and that is what we expect to drive that consistent margin improvement in Q2, I have guided to a margin uptick and I expect to see more margin uptick in the second half of the year.

Speaker Change: That's that's helpful and thank you for that.

Speaker Change: Thank you as a reminder, if you'd like to ask a question. Please press star one one.

Erin Cummins: As a reminder, if you'd like to ask a question, please press star 1. Our next question comes from Jacob Haggerty with Baird. Your line is: Hey guys, this is Jacob on for Dave.

Speaker Change: Our next question comes from Jacob <unk> with Baird. Your line is open.

Jacob Haggerty: So thanks for taking my question. Just want to ask, you have big restructuring savings; you raised that, but the margin guide stayed intact. Why wasn't the margin guide raised in line with the restructuring savings?

Speaker Change: Hey, guys. This is Jacob on for Dave. Thanks for taking my question. Just wanted to ask you have bigger restructuring savings you raise debt, but the margin guide stayed intact why wasn't the margin guide raised in line with the restructuring savings.

Speaker Change: The restructuring.

Erin Cummins: The restructuring, the savings, the additional savings, I guess, first of all, I will say, as a reminder, we delivered $87 million in annualized savings at the end of Q1. Now, there are some timing differences in when those savings will come through. Some of that will come through, and most of it will have been realized certainly in Q2, but some of it won't come through until Q3 and a little bit in Q4. So, part of it is timing differences. And really, that would be the most part of it.

Jacob: The savings the additional savings I guess first of all I will say as a reminder, we have delivered 87 million in annualized savings at the end of Q1 now there are some timing differences of when those savings will come through some of that will come through most of it at will have been realized that certainly in Q2, but some of them won't.

Speaker Change: Through until Q3, and a little banks with four so.

Erin Cummins: As we talked about with the Q1 view, there's the shift in our supply mix. It's something that we're taking very thoughtful and careful actions around, making sure that we're not impacting client service. We've done an incredibly good job so far, and we intend to continue to do that. So, I would say, on the whole, we're focused on doing the right thing for our client. We're doing the right thing on the cost base, but the timing of the adjustments is shifted a little bit, and that is why we haven't updated the margin guidance. That makes sense. Thanks. And then I have just one more question for you. So the share count guide was down. Could you guys explain why that was?

Speaker Change: Part of it is timing differences.

Speaker Change: And really that would be the most of that as we had talked about with the Q1, you Theres just add.

Speaker Change: Shift of our supply mix is something that we're taking very thoughtfully and carefully actions around making sure that we're not impacting client service Mcdonough, an incredibly good job so far and we intend to continue to do that so I would say on the whole we're focused on doing the right thing for our client.

Speaker Change: We're doing the right thing on the cost base, but the timing of the adjustment is shifted a little bit and that is why.

Speaker Change: We haven't updated the margin guidance.

Speaker Change: That makes sense. Thanks, and then just one more question for you. So the share Count guide was down could you guys explain expand on why that was.

Jacob Haggerty: The share count guide would just be from some changes that took place, some assumptions that took place in Q1, because we did have some changes, and there were some issues with shares in the quarter. But for a fuller view, I will come back to you with a question. I don't have the specific answer now, but we'll make sure that we get an answer out.

Speaker Change: The share Count guide I would just be from some.

Speaker Change: Changes that took place some assumptions that took place in Q1, because we did have some.

Speaker Change: Some issue of shares in the quarter.

Speaker Change: But for the Fuller view I'll come back to you with the question I don't have the specific answer now, but we'll make sure that we get an answer out that's clear.

Speaker Change: Okay.

Erin Cummins: Thank you. Our next question comes from Matthew Roswell with RBC. Your line is open. Yes, good morning.

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

Matthew Van Roswell: Thank you very much. And Xiao, it's been a pleasure to work with you over the last couple of years. I guess, following up on the restructuring question, what makes you think that you're maybe not cutting too much when it comes to the restructuring? And I guess, as part of that, what areas are you finding extra cost savings in?

Matthew Van Roswell: Yes. Good morning, Thank you very much and John has been pleasure to work with you over the last couple of years I guess following up on the restructuring question Nick.

Matthew Van Roswell: What makes you think that you mentioned, maybe not cutting too much when it comes to the restructuring and I guess.

Matthew Van Roswell: Part of that what what areas where are you finding the extra cost savings Inc.

Matthew Van Roswell: Okay.

Matthew Van Roswell: Okay.

Erin Cummins: As I mentioned earlier, in terms of the restructuring savings, we are, We're being very thoughtful about the actions that we're taking, and we're very focused on client execution, as well as making sure that we see continued momentum in our demand and our go-to market. So where we are focused is on areas where it's non-client facing in particular. Again, there are some adjustments because of the onshore-offshore mix.

Matthew Van Roswell: And as I mentioned earlier in terms of the restructuring savings from P. R.

Matthew Van Roswell: We're being very thoughtful about the actions that we're taking and we're very focused on client execution as well as making sure that we see continued momentum into our and our.

Matthew Van Roswell: Our demand in our go to market so where.

Matthew Van Roswell: Where we are focused is areas, where it's non client facing in particular again, there is some adjustments and because of the onshore offshore mix and so where we don't expect to see improvements in utilization over the next six months or so and that would be a place where we're looking in a dish.

Erin Cummins: And so, where we don't expect to see improvements and utilization over the next six months or so, that would be a place where we're looking. In addition to that, we are seeing from an operating expense perspective that we've really, by the end of Q1, fully realized what we expected. We had good movement with our function supporting our business as part of the restructuring around the globe. We see further opportunities for decreased operating expenses in some of our office space rationalization, as well as some of our vendor expenses. So, on the whole, it really is in line with the restructuring program that we started last year. It's very consistent.

Matthew Van Roswell: And to that.

Matthew Van Roswell: You are seeing.

Matthew Van Roswell: From an operating expense perspective, we've had really it by the end of Q1 fully realize what we expected we had.

Matthew Van Roswell: Good movement without function supporting our business as part of the restructuring around the globe, we see further opportunity needs for decreased operating expenses and some of our office space rationalization as well as some of our vendor expenses. So on the whole it really is in line with the <unk>.

Matthew Van Roswell: The restructuring program that we started last year, it's very consistent it's just an increase because we've identified more opportunities. We are trading very carefully to make sure that client service continues to go well.

Erin Cummins: It's just an increase because we've identified more opportunities. We are treading very carefully to make sure the client service continues to go well. Yeah, and then just to add to that client services part, we do expect to see sequential growth. We do think that demand for services is increasing, but it's unevenly distributed.

Matthew Van Roswell: Now we know that we're going to see more demand for offshore services. For example, we're going to see more demand for infrastructure skill sets, data skill sets, and cloud skill sets. And then that's slightly different from what we have developed so far over the last few years.

Matthew Van Roswell: And then just to add to that client services part, we do expect to see sequential growth. We do think that the demand for services and increasing but but he's unwell and distribute it now we know that we're going to see more demand for offshore services. For example, we're going to see more demand for infrastructure skill sets.

Xiao Guo: So as we move forward, we're trying to increase capacity and skill sets in certain areas and reduce them in some of the other areas. So all this is done in the spirit to support growth, to empower growth as opposed to optimization at the cost of growth. And if I could follow up on that on the mixed shift and increasing the utilization of the onshore utilization. Is that, you know, what percentage of the improvement is sort of under your control and what percentage is kind of based on the market stabilizing or improving? Hopefully, that question makes sense. It does make sense.

Matthew Van Roswell:

Matthew Van Roswell: Data scale says and cloud skill sets and then that's slightly different what we have developed so far over the last few years. So as we move forward, we're trying to increase capacity skill set in certain areas and reduce it in some of the other areas.

Matthew Van Roswell: So all this is is dialing the spirit to support the growth to empower the grows as opposed to optimization at the cost of the growth.

Speaker Change: And if I could follow up on the on the mix shift and increasing utilization on the onshore utilization.

Matthew Van Roswell: Is that what percentage of the improvement is sort of under your control and what percentage is kind of based on the market stabilizing or improving hopefully that question makes sense.

Erin Cummins: 80% of it, Matthew, would be under our control. Part of it, of course, you know, market dynamics matter. But what we've talked a lot about, we have seen stabilization in the market dynamics, which we're really pleased about. You know, again, worth mentioning the go-to-market momentum, the strong bookings that we had for the quarter, and the sequential growth we expect in Q2. So clearly, the market matters, but most of it is under our control, and we feel very confident about the path that we're on. Okay, thank you very much.

Speaker Change: It does make sense I, 80% of that Matthew will be under our control and part of it of course, you know market dynamics matter and but what we've talked a lot about we have seen stabilization in the market dynamics, which we're really pleased about again worth mentioning.

Matthew Van Roswell: And the go to market momentum, our strong bookings that we had for the quarter and and the sequential growth. We expect in Q2, so clearly the market matters, but most of it is under our control and we feel very confident about the path that we're on.

Matthew Van Roswell: Thank you, Matt. Thank you. Our next question comes from... Darren Peller with Wolf Research. Your line is open. Hi, thanks. This is Paul Obrecht on behalf of Darren.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thank you Matthew.

Speaker Change: Thank you.

Speaker Change: Our next question comes from.

Speaker Change: Darrin Peller with Wolfe Research your line is open.

Darren Peller: Can you provide some more detail on how the new industry-based go-to-market approach is responding with customers, maybe, both as it relates to winning new customers and main... Renewals. And do you find that this model is mostly optimized at this point, or is there still some work to be done to further develop the sales market? Thank you for the question.

Speaker Change: Hi, Thanks. This is Paul <unk> on for Darren can you provide some more detail on how the new industry based go to market approach is resonating with customers maybe.

Speaker Change: Both as it relates on winning new customers and maintaining existing ones are going to them for renewals and.

Speaker Change: And do you find that this model is mostly optimized at this point or is there still some work to be done to further develop the sales and marketing.

Speaker Change: Abilities.

Xiao Guo: We are definitely only at the beginning of this journey. There's a lot more to be done. The vertical sales and go-to-market approach is the intention, the hypothesis, is that our sales team, our go-to-market team, and especially our professional services team on the ground would focus on a particular vertical over a longer period of time so that we build and retain a lot more domain expertise, as opposed to them being constantly being changed and diluted.

Speaker Change: Thank you for the question.

Speaker Change: We are we're definitely only at the beginning of this journey, there's a lot more to be done.

Speaker Change: The vertical sales and go to market approach is the intention the hypothesis that our sales team our go to market team and especially our professional services team on the ground wood.

Speaker Change: <unk> focus on a particular vertical over a longer period of time, so that we build and retain a lot more domain expertise as opposed to baby constantly being a change in diluted so when we talk to our clients that we have more relevant.

Xiao Guo: So, when we talk to our clients, we have more relevant points of view and then understand how to solve their biggest business problems with our technology. And then we're seeing that paying off, I think, at this moment, especially with new pursuits, new wins, where we have people who are more savvy and understand and can speak the same language with our clients. That's why we are seeing more new logos, especially in the verticals we've chosen to focus on. For example, energy, public sector, auto, and then financial services.

Speaker Change: Point of views and then understand how to solve their biggest business problems without with our technology and we're seeing that paying off I think at this moment, especially with new pursues new wins, where we have people who aren't.

Speaker Change: More savvy and then.

Speaker Change: And I understand that and then can speak the same language with our clients.

Speaker Change: That's why we are seeing higher new logos, especially in the verticals, we chosen to focus our for example energy public sector Auto and then in financial services and then four definitely helps with <unk>.

Xiao Guo: It definitely helps with ongoing clients. One of the challenges our clients have had over time with ThoughtWorks is we keep rotating people out of their team, out of the vertical, and then they seem to believe that it's a lost opportunity, given the domain knowledge they have built so far. So, with this model, we have more key technical talents and delivery talents that's ring-fenced, in particular vertical, over a longer period of time.

Speaker Change: Ongoing clients one of the challenges our clients have had.

Speaker Change: Over time, we thought works is we keep rotating people out of.

Speaker Change: Their team out of the vertical.

Speaker Change: Then.

Speaker Change: And then they seem to believe that it's a lost opportunity given the domain knowledge that they have.

Speaker Change: So far so with this motto, we have more key technical talent and delivery talent that's ring fenced.

Speaker Change: In particular vertical over a longer period of time, so they get to becoming a better expert at helping our clients solving their problems.

Xiao Guo: So, they get to become a better experts at helping our clients solve their problems. But like I said, it's only the beginning of the journey. We have only been doing this for a couple of quarters. We believe that over time, we're going to see this approach paying off even more. Great, thanks.

Speaker Change: But like I said is only the beginning of the journey, we have only been doing this for a couple of quarters. We believe that over time, we're going to see this.

Speaker Change: This approach paying off even even more.

Speaker Change: Great. Thanks, and then as a follow up on the topic of Jedi I know the majority of the work being done is mostly prove concepts and getting the data platform is ready, but do you anticipate we could see Jenny I work.

Darren Peller: And then as a follow-up on the topic of Gen-AI, I know the majority of the work being done is... concept. Getting the data platforms ready, but do you anticipate we could see Chinese AI work begin materially contributing to revenues maybe by year-end as clients start deploying it at scale? Or do you expect this won't happen at all? I know it's early, but I'm just trying to think about this from a timeline perspective

Speaker Change: Again materially contributing to revenues maybe by year end as clients start deploying it at scale or do you expect this won't happen until 2025 I know it's early just trying to think about this from a timeline perspective.

Xiao Guo: You're definitely spot on in terms of there being a lot of POC kind of short-term work, and there's a lot of preparation work building the data platforms. The JNI work itself, especially large language model building, hasn't really been a main theme yet. We do expect it to pick up at some point. Now it's going to be the end of the year, probably some of them.

Speaker Change: But youre definitely.

Speaker Change: Yeah.

Speaker Change: Spot on in terms of Theres a lot of POC.

Speaker Change: Short term work in and there's a lot of preparation work building the data platforms.

Speaker Change: The January work itself, especially large language model building hasnt really been.

Speaker Change: Our main theme yet we do expect it to pick up at some point.

Speaker Change: Now, it's going to be end of the year, probably some of them next year definitely more of it.

Xiao Guo: Next year, definitely more of it. That's part of the reason that we have acquired Watchful. It's part of the company, and it specializes in building tools to accelerate large language model development from POC to scaling, for example, especially the eval feature to tell you which model is more effective than others. And this is definitely what we believe is going to be a key area for us later this year and early next year. So we do expect to see more large language model development. We're seeing a few of them, but it's still not the norm.

Speaker Change: That's part of the reason that we have acquired watchful, it's a it's part of company.

Speaker Change: Specializes in building tools to accelerate large language model development from POC to scaling for example, especially the eval feature to tell you, which malo is more effective than the others.

Speaker Change: This is definitely what we believe is going to be a key area for us.

Speaker Change: For us.

Speaker Change: Later this year early next year and so we do see we do expect to see more large larger language model development, we're seeing a few of them, but it's still not the norm.

Darren Peller: But your guess is as good as ours, which is probably going to be later at the end of the year or beginning of next year. Thank you. Our next question comes from Maggie Nolan with William Blair. Your line is open. Hi, everyone. It's Kate Kronstein on for Maggie.

Speaker Change: But your guess is as good as ours, which is probably going to be later at the end of the year or beginning of next year.

Speaker Change: Thank you. Our next question comes from Maggie Nolan with William Blair. Your line is open.

Margaret Marie Niesen Nolan: Congratulations, Xiao, and we wish you luck on your transition. I wanted to start off asking about the top five and top 10 client buckets. It looks like those both increased sequentially.

Speaker Change: Hi, everyone. It's Keith sign on for Maggie Congrats Joe and we wish you luck on your transition.

Keith: I wanted to start off asking about the top five and top 10 client bucket. It looks like those both increased sequentially can you guys talk a little bit more about the current dynamics you are seeing in those cohorts this quarter.

Xiao Guo: Can you guys talk a little bit more about the current dynamics you are seeing in those cohorts this quarter? Sure, so the top five and top 10 clients have, as you pointed out, increased incrementally, about 1% from a revenue concentration perspective. It's still in the 18%, 29% range, which is relatively well diversified, so we're not overly concerned about it.

Keith: Sure.

Kate Kronstein: But the increase is mostly due to, given the current environment, we tend to focus more on retaining our top clients and then develop longer-term, more strategic relationships. For example, adding new service offerings like demo, packaged software, and system integration. We continue to expand our footprint. Given the macro, it's easier, from a revenue perspective, to expand with the current existing top customers, especially when some of them have an intention to consolidate their vendors, and so we're actually benefiting from that, gaining more momentum with our top clients.

Keith: So the top five and top 10 clients.

Speaker Change: As you pointed out.

Speaker Change: Has as increased incrementally.

Speaker Change: By 1% from a constant revenue concentration perspective is still in the.

Speaker Change: 18%, 29% range, which is.

Speaker Change: Relatively well diversified we're not overly concerned about it but.

Speaker Change: The increase is mostly due to given the current environment, we tend to focus more on retaining our top clients and then develop longer term more strategic relationships for example, adding new service offerings like demo.

Speaker Change: Pat yourself, where system integration. So we continue to expand our footprint given the macro is easier to from a revenue perspective to expand with our with the current existing top customers, especially when some of them has a have an intention to consolidate their vendors.

Speaker Change: And so we are actually benefiting from that gaining more momentum with our top clients that said, we're also seeing a longer tail, especially new logos.

Kate Kronstein: That said, we're also seeing a longer tail, especially new logos, increasing. It's just that some of these new projects, given the current environment, are starting at a smaller size, a smaller deal size, and then we're not getting a lot of big deals at the get-go, and then we're following a lot of the land-expand approach. Great. Thank you, y'all.

Speaker Change: Increasing it's just that some of these new projects given the current environment is starting at a smaller size smaller deal size and then so we're we're we're not getting a lot of big deals at the get go and then we're following a lot of the.

Speaker Change: The land and expand approach there.

Speaker Change: Okay, great. Thank you that's helpful.

Xiao Guo: That's helpful. And then my next question is, last quarter, it was mentioned that ThoughtWorks was seeing some supply constraints around certain skill sets. Can you maybe expand on what you're seeing now on the hiring front? I'll take that question. Thanks, Kate.

Speaker Change: And then my next question is last quarter. It was mentioned that.

Speaker Change: Starbucks is seeing some supply constraints around certain skill sets can you maybe explain expand on what you're seeing now on the hiring front.

Erin Cummins: We touched on it a little bit earlier. Xiao was speaking about some of the skill sets where we are seeing lots of demand and where we are doing more hiring. It's particularly around data and infrastructure skills, which continue to be a place where we're seeing good demand, and some of the data skills do have specialized skill sets or experience requirements. That's been a focus for our recruiting team.

Speaker Change: I'll take that question, Thanks, Kate and we touched on a little bit earlier showers speaking about some of the skill sets, where we are seeing lots of demand.

Speaker Change: There we are doing more hiring it's particularly around data and infrastructure scales that continues to be a place where we're seeing good demand and some of the debt data skill sets do you have specialized and skill sets of our experience requirements and so that's been a focus for our recruiting team.

Erin Cummins: We put quite a lot of effort into our recruiting in the last quarter and are seeing some very positive momentum from that. On the whole, we're feeling good about the ability to fulfill that supply and where we continue to expect to see strong demand. The other thing that I would touch on is that offshore has been pretty strong. Where we're continuing to hire is more in our offshore locations, and, on the whole, things are going well. The supply constraints, we think, are well in hand.

Speaker Change: We put quite a lot of effort in our recruiting and in last quarter and are seeing some very positive momentum from that and so on the whole. We're feeling good about the ability to fulfill that supply in and where we continue to expect to see strong demand. The other thing that I would touch on is that offshore is big.

Speaker Change: N.

Speaker Change: Pretty strong and so I you know.

Speaker Change: We're we're continuing to hire is more in our offshore locations.

Speaker Change: And and and on the whole going well, so and the supply constraints. We think are well in hand, the recruiting where we are recruiting.

Kate Kronstein: The recruiting where we are recruiting in particular areas is going very well, and we're pleased to see the momentum. Great. Thank you, Erin. Thank you, Kate.

Speaker Change: In particular areas it is going very well and we're pleased to see the momentum.

Speaker Change: Great. Thank you Erinn.

Erinn: Thank you Kate.

Erin Cummins: Thank you. And our last question comes from Arvind Ramnani with Piper Sandler. Your line is open.

Speaker Change: Thank you and our last question comes from Arvind <unk> with Piper Sandler Your line is open.

Arvind Anil Ramnani: Thanks for doing my question. It was a pleasure working with you and I wish you the very best on your next endeavor. Yeah, I just had a question.

Arvind: Thanks for taking my question.

Arvind: XIAFLEX pleasure working with you and wish you the very best on your next next endeavor.

Arvind: I just had a question I mean on the demand environment.

Xiao Guo: I mean, in the demand environment, you're going to characterize it as still kind of really no change, but it's not getting worse. But is there something specific about your offerings or your services? We are starting to see some signs of improvement. Is there something idiosyncratic about what you do or the type of work that you're doing where you're seeing an improvement even though the demand or the demand environment has not necessarily improved? Sure.

Arvind: Can I characterize it as still kind of really no change, but it's not getting worse.

Arvind: But is there something specific about kind of your.

Arvind: Offerings or services they are starting to see.

Arvind: Yeah.

Arvind: Some.

Arvind: Some signs of incremental something idiosyncratic idiosyncratic.

Arvind: To what you would have done or that type of work that they're doing that youre seeing seeing an improvement even though the demand or the demand environment has not improved.

Arvind: Okay.

Xiao Guo: First of all, thank you, Arvind. It's been a pleasure working with you, too. So, from a demand perspective, we believe that what has made it better for us despite the macro environment is that we have invested in additional sales and marketing capacity, especially our focus after the restructuring to focus more on outbound demand generation capabilities. You might remember that historically, only 15% of our new bookings are generated from outbound; 85% is from inbound given the strong brand and then we have enjoyed.

Speaker Change: Sure first of all thank you Arvind, it's been a pleasure working with you too so from a demand perspective.

Speaker Change: Dave.

Speaker Change: We believe that what has made it better for us. Despite despite of the macro environment is that we have invested.

Speaker Change: In additional sales and marketing capacity.

Speaker Change: Especially our focus after the restructuring to focus more on outbound demand generation capabilities.

Speaker Change: You might remember that historically, we have only 15% of our new bookings is generated from our about 85% is from inbound given the strong brand and then.

Speaker Change: We have enjoyed right now over 60% of our new bookings in Q1 for example came from outbound efforts thus.

Xiao Guo: Right now, over 60% of our new bookings in Q1, for example, came from outbound efforts. That's definitely, I think, due to the effort the sales and marketing team has put in. And as a result, we're also seeing higher conversion from these opportunities.

Speaker Change: That's definitely I think due to.

Speaker Change: The effort the sales and marketing team has put in and as a result, we're also seeing higher conversion.

Speaker Change: From these from these opportunities and then at the same time I mentioned earlier, we'll continue to invest in this vertical based approach.

Xiao Guo: And then at the same time, as I mentioned earlier, we continue to invest in this vertical-based approach. And we're focused on the verticals that we believe are more resilient in this, in this current environment, for example, public energy, healthcare, automotive, life science, and we're seeing that pay off as well. A large number of our new logos come from these verticals.

Speaker Change: And we're focused on the verticals that we believe are more resilient in this in this current environment for example, public energy health care automotive and life science, and we're seeing that pay off as well a large number of our new logos come from these verticals and finally, we are expanding our service offerings.

Xiao Guo: And finally, we are expanding our service offerings, especially efficiency and cost-saving programs, catering for the short term. And then, but also the strategic nature of some of the work some of the clients are asking for. Well, I mentioned demo, the digital application management operation services.

Speaker Change: Especially in the efficiency and cost saving programs catering for the short term.

Speaker Change: But also.

Speaker Change: The strategic nature of some of the work some of the clients are asking for it.

Speaker Change: Well I mentioned de Mow, the digital application management operation services now approximately 30% of our top 50 clients are using this series. It was obviously zero I'll say a couple of years a few years ago. We are continue to expanding this again this give us the opportunity to increase our total addressable market.

Xiao Guo: Now, approximately 30% of our top 50 clients are using this service. It was obviously zero a couple years, a few years ago, and we are continuing to expand this. Again, this gives us an opportunity to increase our total addressable market, even with the same client portfolio we have. That's really helpful, and that explains it.

Speaker Change: With the same client portfolio, we have.

Speaker Change: That's really helpful.

Speaker Change: That explains it.

Xiao Guo: And then, you know, one of the earlier questions, you know, I think what you were saying is, you know, still a lot of the... The work on Gen-AI is proof of concept and pilot, so fairly small in scale. You know, I just...

Speaker Change: And then.

Speaker Change: And one of the earlier questions.

Speaker Change: I think what you were saying there's still a lot of the.

Speaker Change: Work on journey II is.

Speaker Change: Proof of concept in <unk>.

Speaker Change: Alright.

Speaker Change: Fairly fairly small in scale.

Speaker Change: I just.

Xiao Guo: The one thing I want to clarify is... Is there even a single large-scale Gen-AI project you've seen at ThoughtWorks or even at your clients, and maybe ThoughtWorks is not involved? Have you seen any large-scale Gen-AI projects? When it does come together, what kind of project would it be? Like, where would you see, you know, even if you look at the proof of concepts you've seen, where do you see this promise where there could be a much, much larger-scale Gen AI project? It's a great question.

Speaker Change: I want to clarify is it.

Speaker Change: Is there any is there even a single large scale.

Speaker Change: Yeah.

Speaker Change: Kind of Ginnie Mae project you've seen.

Speaker Change: I taught works or are even at your clients and maybe it's hard rock is not involved.

Speaker Change: Have you seen any large scale journey a project.

Speaker Change: If you haven't.

Speaker Change: Yeah.

Speaker Change: When it does come together.

Speaker Change: What kind of project would it be like where do you see.

Speaker Change: Even if you look at the proof of concepts Youll see it where do you see this promise.

Speaker Change: There could be like a much much larger scale generic project.

Xiao Guo: So we do have a few fairly large Gen-AI related projects. And then to peel back the layers, what tends to happen in some of the POCs is just using some of the open cloud-based platforms to use the existing large language models and then use that to perform simple tasks like content generation and some basic analysis. And then you move to another layer up. There's the RAC-based approach, which is very popular right now, the RAC-based R-A-C, RAC-based approach that takes a bit more work to do before you feed any prompts into the larger language model.

Speaker Change: It's a great question. So we do have a.

Speaker Change: A few fairly large Jenny I related projects and then.

Speaker Change: To appear down the layers is what.

Speaker Change: It tends to happen in some of the POC is just using the <unk>.

Speaker Change: Some of the open our cloud based platforms to use the existing large language model and then use that to do simple performance simple task like content generation.

Speaker Change: And some basic analysis and then you move to another labor layer up there as the rack base, which is very popular right now the rack based or a G rack based.

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Speaker Change: Prompts into the into the larger language model. So the work is around the large large language model, but the larger language model itself is steel.

Xiao Guo: So the work is around the large language model, but the large language model itself is still the commercial ones that are readily available, the next level layer down which is fine-tuning. We have certain projects that are doing the fine-tuning of large language models, and that requires more effort, more data computing power, and then that's a little bit more heavy lifting from a cost perspective. The largest programs we've seen so far are in the final phase, which is developing your own large language model, and then that's definitely smaller than the others, but we already have them in flight, and we do believe that as we progress, as the POC and adoption of JNA progress, we're going to see more and more of this work moving from what I mentioned earlier from left to right, slowly proceeding to finally building your own large language model. Now you don't need to build your own LLM in all cases, but some of them would require that, and that's a significant effort, and then those will generate a much bigger project.

Speaker Change: Is do the commercial ones that are readily available.

Speaker Change: And then level layer down which is fine tuning we have certain project that's doing the fine tuning of logical like ours language model and that requires more effort more data computing power and then that's.

Speaker Change: Little bit more heavy lifting from a cost perspective, the largest program. We've seen so far is the final phase that is developing your own large language model and then that's fewer definitely than the others, but we already have them.

Speaker Change: And in flight and we do believe that as we progress as the as the POC and adoption of G&A progress, we're going to see more and more of these work moving from from what I mentioned earlier from left to right.

Speaker Change: Slowly proceeding to finally building your own large large language model now you don't need to build your own allo Lam in every cases, but some of them will require that and that's a significant effort and then those will generate a much bigger projects.

Arvind Anil Ramnani: Perfect. That's really helpful. Thank you very much.

Speaker Change: That's perfect.

Speaker Change: That's really helpful.

Speaker Change: Thank you very much and once again as the.

Speaker Change: Really a pleasure to have worked.

Speaker Change: With you.

Xiao Guo: And once again, it was really a pleasure working with you. Thank you, Arvind. Same here.

Speaker Change: Thank you Arvind same here.

Erin Cummins: I'm just going to jump in quickly while we're still on the call. I wanted to quickly follow up on the share count dynamics that Jacob asked about earlier. I would simply highlight that the share count dynamics reflect the share price and how it impacts the accounting treatment with respect to dilution. So that's a big part of the change from last quarter to this quarter. An example would be dilution from options.

Speaker Change: I'm just going to jump in quickly while we're still in the call I wanted to quickly follow up on the share count dynamics that Jacob asked about earlier and I would simply highlight that the share count dynamics reflect the share price and how it impacts the accounting treatment with respect to dilution. So that's.

Speaker Change: A big part of the change from last quarter to this quarter. An example would be a dilution from from option.

Speaker Change: With that I'll hand over to you operator.

Speaker Change: Okay.

Operator: Thank you there are no further questions I'd like to turn the call over to Joe for closing remarks.

Joe: Thank you.

Joe: And thank you everyone for joining us today for our Q1 earnings call I want to thank all thought workers clients and partners for the for the extraordinary impact we're delivering everyday together stay well and all the best.

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

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Operator: And with that, I'll hand over to you, operator. Thank you. There are no further questions.

Speaker Change: Hello, everyone and welcome to <unk> earnings call for the first quarter of 2024.

Xiao Guo: I'd like to turn the call over to Xiao for closing remarks. Thank you. And thank you, everyone, for joining us today for our Q1 earnings call. I want to thank all the thought workers, clients, and partners for the extraordinary impact we're delivering every day together. Stay well and all the best. Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone have a great day.

Speaker Change: We'll be recording today's call and during the presentation all lines will be on listen only join US today will be thought works president and CEO of Guangzhou and CFO Aaron comments. 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.

Operator: ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Hello everyone and welcome to ThoughtWorks earnings call for the first quarter of 2024. We will be recording today's call and during the presentations all lines will be on listen only.

Operator: Joining us today will be ThoughtWorks President and CEO Guo Xiao and CFO Erin Cummins. The earnings press release was issued earlier today and is also available on our investor relations page at Botworks.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, quarterly reports on Form 10-Q, and other reports we may file with the SEC from time to 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.

Speaker Change: Actions are forward looking and as such are subject to known and unknown risks and uncertainties.

Speaker Change: 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 quarterly reports on Form 10-Q, and other reports we may file with the SEC from time to time.

Speaker Change: 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.

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-gap-to-gap reconciliations in our press release, Furnished as an Exhibit Tour 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.

Speaker Change: 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.

Speaker Change: 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 thought works assumes no obligation to update or revise the information presented on this conference call I'll now hand over to Joe.

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. Earlier today, we announced that I will be stepping down from my role, and the board has selected Mike Sutcliffe as my successor, effective June 17th. I have spent 25 years at ThoughtWorks, starting as a software developer in 1999 before taking on various leadership roles around the world. And I'm grateful for the many opportunities I've had.

Joe: Thank you Rob Hello, everyone.

Joe: Earlier today, we announced that I will be stepping down from my role and the board has selected Mike Sutliff as my successor effective June 17th.

Joe: I have spent 25 years of thought works starting as a software developer in 1999 before taking on various leadership grows around the world and I'm grateful for the many opportunities I've had.

It has been a privilege to be a ThoughtWorker and to be able to learn from the best and brightest in our industry. I am proud of what we have accomplished together, growing this business and delivering extraordinary impact for our clients around the world. And now, it's the right time to pass the baton.

Joe: It has been a privilege to be a thought walker and to be able to learn from the best and brightest in our industry I am proud of what we have accomplished together growing this business and deliver an extraordinary impact for our clients around the world.

Joe: And now it's the right time to pass the Baton, we're expecting to return to sequential growth in Q2, and I know I'm, leaving this business in very capable hands.

We're expecting to return to sequential growth in Q2. And I know I'm leaving this business in very capable hands, our continued support as an advisor to ensure a smooth transition. In Q1, we exceeded our revenue expectations we delivered in the context of a macroeconomic environment that, though stable, isn't yet showing signs of improvement. Our sales cycles are still elongated, but our client portfolio remains steady. We're having more client conversations around growth-oriented work and seeing strong demand for AI and data services, enterprise modernization, and demo managed services.

Joe: I will continue to support as an adviser to ensure a smooth transition.

Joe: In Q1, we exceeded our revenue expectations, we deliver in a context of a macroeconomic environment that those stable isn't yet showing signs of improvement.

Joe: Our sales cycles are still elongated, but our client portfolio remains steady.

Joe: We're having more client conversations around growth oriented work and seeing strong demand for AI and data services enterprise monetization and demo managed services. However.

However, in Q1, we fell short of our adjusted EBITDA margin guidance. This is primarily due to the timing of our ongoing supply rebalancing program, which includes adjustments to our offshore-onshore mix. This has resulted in a lower-than-expected gross margin.

Joe: Q1, we felt short of our adjusted EBITDA margin guidance. This is primarily due to the timing of our ongoing supply rebalancing program, which includes adjustments to our offshore onshore mix.

Joe: This has resulted in a lower than expected gross margin.

Our ongoing restructuring program focuses on efficiencies, and we're committed to improving our margin profile, and we're executing our plan to achieve it. Our client strategies are centered around technology. Our investments in sales and marketing, partners, and new services are paying off, and we continue to focus on delivering extraordinary impact for our clients. Now, let me share our first quarter results. We generated revenue of $249 million during the first quarter with an adjusted EBITDA margin of 2.7%.

Joe: Our ongoing restructuring program focuses on efficiencies and we're committed to improving our margin profile and we're executing our plan to achieve it our calling strategies are centered around technology.

Joe: Our investments in sales and marketing partners and new services are paying off and we continue to focus on delivering extraordinary impact for clients.

Joe: Now, let me share our first quarter results, we generated revenue of $249 million during the first quarter with adjusted EBITDA margin of two 7% our industry basically go to market is gaining momentum.

Our industry-based gold market is gaining momentum. We delivered strong bookings in the quarter and expect to return to sequential quarter-over-quarter growth in Q2 2024. We remain focused on growing our client relationships, as reflected in the 57 clients with trailing 12-month bookings of over $5 million at quarter end. New client acquisition remains a strength. We contracted with 49 new clients in the first quarter, compared to 46 in the fourth quarter of 2023. We have seen traction from our vertical-based sales model, with higher new logo acquisitions in our energy, public, and health services, technology, and business services. These are verticals that we have intentionally focused on.

Joe: We delivered strong bookings in the quarter and expect to return to sequential quarter over quarter growth. In Q2, 2024, we remain focused on growing our client relationships as reflected in the 57 clients with trailing 12 month bookings of over $5 million at quarter end, New client acquisition remains a strength.

Joe: We contracted with 49, new clients in the first quarter compared to 46 in the fourth quarter of 2023, we have seen traction from a vertical based sales model with higher new logo acquisitions in our LNG public and health services technology and business services.

Joe: These are verticals that we have intentionally focused on.

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

Joe: We have outstanding technologies, and a reputation for innovation and thought leadership.

Joe: We're well positioned to help our clients evolve their operations and harness the power of cloud data and AI to adapt for future success.

Joe: Now, let me hand over to Erin.

Thanks, Xiao, and thank you to everyone for joining our call today. We continue to invest in strengthening our client relationships, and we are driving engagement with clients across all verticals. Our focused approach to building demand continues to provide ongoing returns, with 62% of quarterly bookings in Q1 coming from outbound efforts. Our teams are closing pipeline opportunities, helping us achieve top-line results ahead of our expectations in Q1. Our team's execution comes against the backdrop of a still-challenged macro environment.

Erin: Thanks, Joe and thank you to everyone for joining our call today.

Erin: We continue to invest in strengthening our client relationships and we are driving engagement with clients across all verticals are focused approach to building demand continues to provide ongoing returns with 62% of quarterly bookings in Q1 coming from outbound efforts. Our teams are converting pipeline opportunities helping us.

Erin: <unk> top line results ahead of our expectations in Q1.

Erin: Our team's execution comes against the backdrop of a still challenged macro environment that said the macro remains steady and we have not seen the development of incremental client budget pressure since last quarter.

That said, the macro remains steady, and we have not seen the development of incremental client budget pressure since last quarter. Their digital needs remain intact, and we are partnering with our clients as they put their plans into action. Now, let's turn to more detail about the first quarter. Revenues were $249 million, representing a year-over-year decline of 19% in both USD and constant currency.

Joe: Their digital needs remain intact, and we are partnering with our clients as they put their plans into action now, let's turn to more detail about the first quarter.

Acquisitions completed in the last 12 months were immaterial to the revenue growth rate in Q1. During the quarter, we saw year-over-year declines of 11% in APAC, 21% in Europe, 23% in North America, and 31% in LATAM. Among our industry verticals, revenue declined by 8% year-over-year in automotive, travel, and transportation, 12% in technology and business services, 19% in retail and consumer, 25% in energy, public, and health services, and 29% in financial services and insurance.

Joe: Revenues were $249 million, representing a year over year decline of 19% in both USD and constant currency acquisitions completed in the last 12 months were immaterial to the revenue growth rate in Q1.

Joe: During the quarter, we saw year over year declines of 11% and APAC, 21% in Europe, 23% in North America, and 31% and Latam.

Joe: Among our industry verticals revenue declined by 8% year over year in automotive travel and transportation, 12% in technology and business services, 19% in retail and consumer, 25% and energy public and health services and 29% in financial services and insurance compared to Q4.

Compared to Q4 of 2023, we saw sequential growth in automotive travel and transportation, energy, public and health, and technology and business services. During Q1, as a percentage of total revenue, our top 5, top 10, and top 50 clients generated 18%, 29%, and 68%, respectively. As of the end of Q1, we had 27 clients with TTM revenues greater than $10 million. On a TTM basis, around 95% of our business came from existing clients. As of Q1 of 2024, our annualized average revenue per employee was $92,000.

Joe: 2023, we saw sequential growth in automotive travel and transportation energy public and health and technology and business services. During Q1 as a percentage of total revenue our top five top 10, and top 50 clients generated 18%, 29% and 68% respectively as of the.

Joe: End of Q1, we had 27 clients with TTM revenues greater than $10 million on a TTM basis around 95% of our business came from existing clients.

Joe: As of Q1 of 2024, our annualized average revenue per employee was $92000. We continue to believe that this metric which remains above the industry average reflects the strategic importance of our work.

We continue to believe that this metric, which remains above the industry average, reflects the strategic importance of our work. On a trailing 12-month basis, we finished Q1 with bookings of $1.2 billion, down 20% compared to Q1 of 2023. Our year-over-year TTM bookings reflect the change in client behavior that developed over the prior year, which pressured contract length and sizing. However, we continued to see relative stability among our clients, and TTM bookings were unchanged sequentially from Q4 of 2023. As Xiao mentioned, our Q1 bookings were strong. Adjusted gross margin was 31% for Q1 compared to 36.4% during the prior year.

Joe: On a trailing 12 month basis, we finished Q1 with bookings of $1 $2 billion down 20% compared to Q1 of 2023, our year over year TTM bookings reflect the change in client behavior that developed over the prior year, which pressured contract length and sizing. However, we continue to see relative stability among.

Joe: Our clients and TTM bookings were unchanged sequentially from Q4 of 2023, Michelle mentioned at Q1 bookings were strong adjusted gross margin was 31% for Q1 compared to 36, 4% during the prior year our.

Our Q1 adjusted gross margin continued to be impacted by lower onshore utilization and high single-digit pricing declines on a like-for-like basis. In the first quarter, our adjusted SG&A as a percentage of revenue was 28.3% compared to 25.1% in the prior year. We've seen a year-over-year reduction of $7 million in adjusted SG&A through proactive cost management while still investing in demand generation. Adjusted EBITDA was $7 million for the first quarter, for an adjusted EBITDA margin of 2.7%.

Joe: Our Q1 adjusted gross margin continued to be impacted by lower onshore utilization and high single digit pricing declines on a like for like basis in the first quarter, our adjusted SG&A as a percentage of revenue was 28, 3% compared to 25, 1% in the prior year, we have seen a year over year reduction of $7 million.

Joe: And adjusted SG&A through proactive cost management, while still investing in demand generation.

Joe: Adjusted EBITDA was $7 million for the first quarter for an adjusted EBITDA margin of two 7% Q1, GAAP diluted loss per share was 10% compared to three cents in the prior year period, our adjusted diluted loss per share with <unk> compared to adjusted diluted EPS at <unk> during the first quarter of 2023.

Q1 gap diluted loss per share was $0.10 compared to $0.03 in the prior year period. Our adjusted diluted loss per share was $0.02 compared to adjusted diluted EPS of $0.03 during the first quarter of 2023. Free cash flow was negative $20 million during Q1 compared to free cash flow of $31 million in the prior year period.

Joe: Free cash flow was negative $20 million during Q1 compared to free cash flow of $31 million in the prior year period.

The timing of certain items, in addition to year-over-year revenue headwinds, impacted cash flow in the quarter. We expect positive cash flow in Q2. As of March 31, 2024, our term loan balance stood at $294 million.

Joe: The timing of certain items. In addition to year over year revenue headwinds impacted cash flow in the quarter. We expect positive cash flow in Q2 as of March 31, 2020 for our term loan balance stood at $294 million. We continue to have good liquidity ending the quarter with a cash balance of $73 million.

We continue to have good liquidity, ending the quarter with a cash balance of $73 million and an undrawn $300 million revolving credit facility. Our outstanding employees make our achievements possible, and we continue to believe that we have the best technologists in the industry. Our attrition rate remains below industry average.

Joe: And an Undrawn 300 million dollar revolving credit facility, our outstanding employees make our achievements possible and we continue to believe that we have the best technologists in the industry.

Joe: Our attrition rate remains below industry averages.

In Q1, voluntary attrition on a TTM basis was 12.4%, slightly up sequentially from 12% in Q4 2023 and an improvement year-over-year from 13.1% in Q1 2023. At the end of Q1 2024, our headcount was around 11,000. We are hiring selectively, focusing on specific skill sets, such as data and infrastructure. Now, let me hand the call back to Xiao to share a broader update on the business. Thanks, Erin.

Joe: In Q1 voluntary attrition on a TTM basis was 12, 4% slightly up sequentially from 12% in Q4, 2023, and an improvement year over year from 13, 1% in Q1 of 2023.

Joe: At the end of Q1 2024, our head count was around 11000.

Joe: We're hiring selectively focusing on specific skill sets such as data and infrastructure.

Joe: I'll hand, the call back to shatter share a broader update on the business.

We're making steady progress, and we're pleased to receive recent recognition from Forrester, a leading global market research company. ThoughtWorks was named in the Innovation Consulting Services Landscape Q1 2024 report by Forrester Research. We were pleased to be the only listed service provider with a geographic focus on four continents. We continue to execute our vision to deliver extraordinary impact for our clients. Let me share some of the kind stories to bring this to life.

Shatter: Thanks, Erinn, we're making steady progress and we're pleased to receive recent recognition from Forrester, a leading global market Research company.

Shatter: It's all worse it was named in the innovation consulting services landscape Q1, 2024 report by Forrester Research.

Shatter: We were pleased to be the only listed service provider with a geographic focus on four continents, we continued to execute our vision to deliver extraordinary impactful clients let.

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

Foxtel Group, Australia's leading subscription television company, has worked with us since 2021. We actively engage with Foxtel to integrate their innovative streaming services aggregator platform KO Sports, Binge, and Hubbell. We also aim to shape the future of KO Sports, a thriving sports streaming service under the Foxtel Group umbrella that is affiliated with the American Conglomerate News Corp. Autotrader is the UK's largest automotive marketplace, providing access to over 80% of the UK's automotive retailers.

Shatter: <unk> group Australia's leading subscription television company has worked with all we're seeing is 2021.

Shatter: We actively engage with Fox Tao group to integrate their innovative streaming services aggregator platform Kayo sports binge and Hubbell. We also aim to shape the future of Kayo sports a thriving sports streaming service under the Fox tail group umbrella that is affiliated with American conglomerate News Corp.

Shatter: Auto trader's, the Uk's largest automotive marketplace.

Shatter: Providing access to over 80% of UK automotive retailers.

AutoTrader brings together the largest and most engaged consumer audience with the largest pool of vehicle sellers. Autotrader partnered with ThoughtWorks seven years ago on a major transformation. Today, Autotrade is working with ThoughtWorks to realize their aspirations to provide an industry-defining, connected customer experience. For our client, Total Wine & More, we're building upon our enterprise modernization focus and expanding to drive broader organizational change with a product thinking approach. Having grown into the largest independent retailer of fine wine in the U.S., operating 265 stores, Total Wine prioritized applying this approach to its ERP systems for impactful business outcomes.

Shatter: Auto trader brings together the largest and most engaged consumer audience with the largest pool of vehicle sellers.

Shatter: Auto trader partner with thought works seven years ago on a major transformation.

Shatter: Today Auto trade is working with ours to realize their spa ration to provide our industry defining connected customer experience.

Total Wine applied product thinking to internal systems supporting the buyer's response for reviewing and acting on extensive and intricate data sets while adhering to a tight schedule for products to get on store shelves in time, using a port-a-glade approach. Total Wine aims to improve the ERP experience for buyers and streamline buyer tasks, making them easier and more efficient. The initiative is also expected to cut down tedious work and reduce operational costs. Together with our partner, Google, we have enabled Brazil's leading communication and entertainment group, Grupo Globo, to migrate one of its key products, Globo Play, from a Lexus system to Google Cloud Platform in just nine months.

Shatter: At our client total wine more we're building upon our enterprise monetization focus and expanding to drive broader organizational change with a product thinking approach.

Shatter: Having grown into the largest independent retailer of fine wine in the U S. Operating 265 stores total wine prioritized applying this approach to its ERP systems for impactful pieces and outcomes.

Shatter: When I apply product thinking to internal systems supporting the buyers respond support reviewing and acting on extensive and intricate datasets, while adhering to a tight schedule for product to get it on store shelves in time.

Shatter: Using a product led approach.

Shatter: <unk> aims to improve the ERP experience for buyers and streamline buyer tasks, making them easier and more efficient.

Shatter: The initiative is also expected to cut down tedious work and reduce operational costs.

Shatter: Together with our partner Google will have enabled Brazil, as a leading communication Entertainment group Grupo Globo to migrate one of its key product global play from a legacy system to Google Cloud platform in just nine months. This project was driven by the need to increase efficiencies reduce costs optimize processes.

This project was driven by the need to increase efficiencies, reduce costs, optimize processes, integrate teams, and link to ESG commitments. Through this migration, Global saw a 78% cost reduction in marketing and commercial intelligence and better financial transparency. The streamlined reuse of data and code allowed Global to reduce the size of its dataset by 34% and improve scalability and processing efficiency.

Shatter: Teens, ending two ESG commitments through this migration global saw a 78% cost reduction in marketing and commercial intelligence and better financial transparency, the streamlined reuse of data and code, allowing it to reduce the size of stay to set by 34% and improve scalability and.

Shatter: Assessing efficiency and.

In these examples, you can see that our technologies are intensely focused on solving our clients' toughest challenges by harnessing our expertise with cutting-edge technology. Now, let's turn to AI. Client interest and demand for our AI and AI-related work remains 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 AI-related projects. We're delighted to announce the successful acquisition of Talented Individuals IP and Technology from Watchful.

Shatter: In these examples that you can see that our technologies are intensely focused on solving our clients' toughest challenges by harnessing our expertise with cutting edge technology.

Shatter: Now, let's turn to AI client interest and demand for our AI and AI related work remains 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 AI related projects, we're delighted to announce the successful.

Shatter: <unk> of the talented individuals IP and technology from watchful watchful is a San Francisco based company that helps organizations accelerate the creation enhancement and deployment of AI models. This acquisition enables dollar strategy to become a leading AI transformation partner globally.

Watchful is a San Francisco-based company that helps organizations accelerate the creation, enhancement, and deployment of AI models. This acquisition enables our strategy to become a leading AI transformation partner globally. The integration of Watchful's technology into ThoughtWorks' suite of data and AI services will expedite client AI deployment, moving projects from proof-of-concept to production rapidly and effectively, thereby providing clients with faster returns on their AI investment. Our clients are still early in the AI journey.

Shatter: The integration of <unk> technology into thought worth suite of data and AI services.

Shatter: Expedite client AI deployment moving projects from proof of concept to production rapidly and effectively.

Shatter: Thereby providing clients with faster returns on their AI investments.

Shatter: Our clients are still early in the AI journey. We're pleased that some are moving from proof of concepts to operational deployment and we see a long runway of direct and indirect opportunities in the first quarter with powered up our services launch engine launching eight new AI services for example, AI first offered.

We're pleased that some are moving from proof of concepts to operational deployment, and we see a long runway of direct and indirect opportunities. In the first quarter, we powered up our services launch engine, launching eight new AI services, such as AI-first software delivery, AI-powered digital products, and AI platforms.

Shatter: Delivery.

Shatter: Power of digital products and AD platforms. We believe these AI technologies and services covering a wide range of use cases will be a source of value for our clients and topics. We're also seeing increased demand for our enterprise monetization and data service offerings as clients focus on improving their systems and data to harness aie's potential.

We believe these AI technologies and services covering a wide range of use cases will be a source of value for our clients and followers. We're also seeing demand increase for our enterprise monetization and data service offerings, as clients focus on improving their systems and data to harness AI's potential. Let me share a few client examples. We have worked with a global top 10 bank to streamline its customer complaints process. We have been working with this bank for decades on data platforms, and more recently, large language models.

Shatter: Let me share a few client examples we have worked with a global top 10 bank to streamline his customer complaints process.

The bank's complaint team faced many challenges, resulting in a poor customer experience. We built and delivered a system to extract and summarize complaint text and audio based on large language models. Additionally, we delivered a webpage summary for complaint analysis and a customer web chatbot. To minimize hallucinations, we employed common keyword techniques, conducted structural analysis, and filtered out irrelevant and harmful information.

Shatter: We have been working with this bank for decade on data platforms and more recently large language models.

Shatter: The banks complained team faced many challenges, resulting in a poor customer experience.

Shatter: Were built and delivered a system to extract and summarize complained taxing the audio based on large language models Adil.

Shatter: Additionally, we delivered a webpage summary for complainant analysis and their customer web chat bot to minimize hallucinations, we employed common cure techniques conduct a structural analyses and filtered out irrelevant and harmful information we.

We achieved 75% efficiency improvement, and agents can now save approximately 40 seconds per customer complaint interaction. We used data modeling to reduce maintenance costs at one of the world's top 20 airlines by revenue. We built an optimization algorithm to find the optimal maintenance sequence to reduce the number of days airplanes are grounded due to maintenance activities.

Shatter: We achieved 75% of efficiency improvement and agents can now save approximately 40 seconds per customer complaint interaction with <unk>.

Shatter: Use data modeling to reduce maintenance costs and one of the worlds top 20 airlines by revenue, we built a optimization algorithm to find the optimal maintenance sequence to reduce the number of days airplanes are grounded due to maintenance activities.

We integrated this with the airline's internal system to visualize and update the maintenance chain in real time. We also developed data models to evaluate and optimize the trade-offs between operational disruptions and holding inventory costs. This ongoing program has already delivered double-digit, million-dollar cost savings ahead of schedule. All this is built on 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. Therefore, diversifying our service portfolio is a priority. We're pleased that our demo managed services are getting good uptake, with 16 new deals in Q1. ThoughtWorks' AI-powered, demo-managed services go beyond simply sustaining client applications.

Shatter: Integrated this with the airlines internal system to visualize and update the maintenance chain in real time.

Shatter: We develop data models to reevaluate at optimize the tradeoffs between operational disruptions and holding inventory costs.

Shatter: Ongoing program has already delivered double digit million dollar cost savings ahead of schedule. All of this is built on our expertise in and commitment to ethical technology.

Shatter: More than ever this is critical to our clients as they look to deploy it in scale fast moving AI technology in complex often regulated environments diversifying our service portfolio is priority.

Shatter: We're pleased that the hours a day more managed services are getting good uptake with 16 new deals in Q1.

Shatter: It's all worth AI powered demo managed services go beyond simply sustaining client applications, we help them continuously enhance and transform and we expect to deliver 10 times the productivity that labor intensive managed services providers offer.

We help them continuously enhance and transform, and we expect to deliver 10 times the productivity that labor-intensive managed services providers offer. Demo Managed Services is strategic for ThoughtWorks to shift to longer-term contracts and for service expansion. Our clients often tell me that our technologies and thought leadership differentiate ThoughtWorks. They look to us to help them make the right technology decisions, which has arguably never been more challenging. Clients turn to us because we write the books that shape the future of technology. This quarter, ThoughtWorks Luminaries published two new books. Software architecture can be a tricky area to get started with, even for relatively experienced software developers.

Shatter: They won't managed services is strategic for dollars to shift that longer term contracts and for service expansion.

Shatter: Our clients often tell me that our technologies and thought leadership differentiate thoughtworks.

Shatter: They look to us to help them make the right technology decisions wishes arguably never being more challenging clients turn to us because we write the books that shape the future of technology.

Shatter: This quarter <unk>.

Shatter: Works luminaries published two new books software architecture can be a tricky area to get started with even for relatively experienced software developers.

The book, Head First Software Architecture, takes a radically different approach to technical books, bringing the key concepts and ideas behind software architecture to life in a visual and engaging way. Demand for machine learning solutions has grown significantly in recent years. The book Effective Machine Learning Teams bridges the gaps between software engineering, lean product practices, and machine learning models. It is an essential guide for practitioners who want to better understand how to deliver machine learning-backed products.

Shatter: Book Headfirst Silver architecture takes a radically different approach to technical books.

Shatter: Bringing the key concepts and ideas behind software architecture to live in a visual and engaging way.

Shatter: Demand for machine learning solutions has grown significantly in recent years. The book effective machine learning teams bridges, the gap between software engineering lean product practices and machine learning models.

Shatter: It is a central guys practitioners, who want to better understand how to deliver machine learning backed product I'm also proud to share that we published the third edition of the <unk> technology radar.

I'm also proud to share that we published the 30th edition of the ThoughtWorks Technology Radar. This twice-yearly snapshot of tools, techniques, platforms, languages, and frameworks is based on the experience of ThoughtWorks' global teams working with clients. Through a series of blips, it highlights to clients what they should adopt, trial, assess, and hold. Edition 30 includes over 100 blips, and a third relates to AI.

Shatter: This twice a year the snapshot of tools techniques platforms languages and frameworks is based on the experience of thought works global teams working with clients.

Shatter: There are a series of cliffs the highlights the clients what they should adopt trial assess and hold.

Shatter: Additional 30 includes over 100, blips and the third relates to AI.

Erinn: To you Erinn.

Back to you, Erin. Thanks, Xiao. Now let me discuss our business outlook for Q2 2024 and the full year. We are seeing stability among our client base, and the macroeconomic environment is unchanged. Clients remain focused on achieving more with less, but we do not see incremental budget pressures develop during Q1. Our teams are focused on converting pipeline opportunities within the framework of client budgets. We are seeing the benefits of our vertical-focused approach, which helped drive faster conversion in Q1 and into Q2.

Erinn: Thanks Shao now let me discuss our business outlook for Q2, 2024, and the full year, we are seeing stability among our client base and the macroeconomic environment is unchanged clients remain focused on achieving more with less but we do not see incremental budget pressures developed during Q1.

Erinn: Our teams are focused on converting pipeline opportunities within the framework of client budgets. We are seeing the benefits of our vertical focused approach, which helped drive faster conversion in Q1 and into Q2 for the second quarter of 2024, we expect our revenues to be in the range of $250 million to $255 million.

For the second quarter of 2024, we expect revenues to be in the range of $250 million to $255 million, reflecting a year-over-year decline of 13% to 11%. At current rates, guidance incorporates an immaterial FX impact in Q2. We expect the adjusted EBITDA margin for the second quarter to be in the range of 5.5% to 7.5%. For the second quarter, we expect adjusted diluted earnings per share to be in the range of negative 1 cent to positive 1 cent, assuming a weighted average share count of approximately 323 million diluted shares outstanding.

Erinn: Reflecting a year over year decline of 13% to 11%.

Erinn: At current rates guidance incorporates an immaterial FX impact in Q2.

Erinn: We expect adjusted EBITDA margin for the second quarter to be in the range of five 5% to seven 5%.

Erinn: For the second quarter, we expect adjusted diluted earnings per share to be in the range of negative one to positive one assuming a weighted average share count of approximately 323 million diluted shares outstanding.

Turning to our full year 2024 outlook, we now expect revenues in the range of $995 million to $1.02 billion, reflecting a year-over-year decline of 12% to 9% in USD and 12% to 10% in constant currency. Additionally, for the full year, we still expect an adjusted EBITDA margin of 8% to 10%. We remain focused on driving efficiencies in both our supply and our G&A functions, and we continue to expect margin expansion as we progress through 2024. As of March 31, we have realized $87 million in annualized cost savings since we began our restructuring program last August.

Erinn: Turning to our full year 2024 outlook, we now expect revenues in the range of $995 million to $1.02 billion, reflecting a year over year decline of 12% to 9% in USD and 12% to 10% in constant currency.

Erinn: Additionally for the full year, we still expect adjusted EBITA margin of 8%, 10%, we remain focused on driving efficiencies in both our supply and our G&A functions and we continue to expect margin expansion as we progress through 2024.

Erinn: As of March 31, we have realized $87 million in annualized cost savings since we began our restructuring program last August.

As we have undergone the process of improving our cost profile, we have identified further savings opportunities. Accordingly, we are raising our targeted range of total cost savings to $100 million to $115 million from our initial targeted range of $75 million to $85 million. With the increased cost savings target from our restructuring program, we now expect total pre-tax charges of $26.5 million to $33 million, of which we have already recorded $21 million through the end of Q1.

Erinn: We have undergone the process of improving our cost profile, we have identified further savings opportunities.

Erinn: Accordingly, we are raising our targeted range of total cost savings to $100 million to $115 million from our initial targeted range of $75 million to $85 million with the increased cost savings target from our restructuring program.

Erinn: We now expect total pre tax charges of $26 5 million to $33 million.

Erinn: Of which we have already recorded $21 million through the end of Q1.

Importantly, we do not anticipate any disruption to client service as we execute upon these incremental savings opportunities. For the full year, we now expect adjusted diluted EPS of $0.02 to $0.08, assuming a weighted average share count of approximately 330 million diluted shares outstanding. For the full year, we expect share-based compensation to total $42 million.

Erinn: Importantly, we do not anticipate any disruption to client service as we execute upon these incremental savings opportunities.

Erinn: For the full year, we now expect adjusted diluted EPS of two cents to eight cents, assuming a weighted average share count of approximately 330 million diluted shares outstanding.

Erinn: For the full year, we expect share based compensation will total $42 million altogether. We believe that we are at an inflection point and are seeing signs of stability.

Altogether, we believe that we are at an inflection point and are seeing signs of stability. Our expected growth into Q2 is encouraging. We are intensely focused on improving results and driving margin expansion. We are building a more resilient company while delivering client impact through our thought leadership and technology expertise. Before we get into Q&A, I would like to say thank you to Xiao for his many years of leadership.

Erinn: Our expected growth into Q2 is encouraging.

Erinn: We're intensely focused on improving results and driving margin expansion. We are building a more resilient company, while delivering client impact or I thought leadership and technology excellence.

Speaker Change: Before we get into Q&A I would like to say thank you to shell for his many years of leadership you've seen this business. There are many changes and your passion for the work and for all thought workers has never wavered. We greatly appreciate all that you've contributed throughout your time here.

You've seen this business through many changes, and your passion for the work and for all ThoughtWorkers has never wavered. We greatly appreciate all that you've contributed throughout your time here. It's been an honor to work with you. And with that, we'll move to Q&A. Operator, will 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 has been answered and you'd like to remove yourself from the queue, please press star 1 again.

Speaker Change: Been an honor to work with you.

Speaker Change: And with that let's move to Q&A, operator will you. Please provide instructions for those on the call.

Speaker Change: Thank you if you'd like to ask a question. Please press star one one if 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 Tianjin Huang with JP Morgan. Your line is open. Yeah, thanks so much and good morning, Xiao.

Speaker Change: Our first question comes from Tien Tsin Huang with Jpmorgan. Your line is open.

Erinn: Okay.

Speaker Change: Yes, thanks, so much and good.

I want to wish you the best, of course, with the transition here. I want to ask just about the transition and your successor, Mike, who's a great choice. We know Mike.

Speaker Change: Sure wish you the best of course with the transition here I wanted to ask just on the with the transition and your successor, Mike who is a great choice.

Speaker Change #100: We know Mike, but it is the first time I think bringing in an outsider to lead that works.

But it is the first time, I think, bringing in an outsider to lead ThoughtWorks, if I'm correct. So I'm just curious about the balance of... [inaudible] for bringing in more systems integration and package implementation type of work. Whatever you can share before Mike officially joins would be great.

Speaker Change #100: Great. So I'm just curious around the balance of.

Speaker Change #100: That change together with the importance of the thought works culture, which I know is really important to you and everybody just trying to I'm trying to think about that balance and can we expect.

Speaker Change: <unk>.

Speaker Change: All of the things you've talked about like virtualization as well as.

Speaker Change: Bringing in more systems integration and package implementation type of work.

Speaker Change: Whatever you can share before Mike officially joins would be great. Thank you.

Thank you. Sure. Hi Tianjin.

Speaker Change: Sure.

Speaker Change #105: Hi, Tien tsin. Thank you for the question.

Thank you for the question. So we are at a phase where I think we are looking at the next four or five years, obviously not just the next one or two quarters. We've done a good transition and restructuring, and then I think we're on the path to a growth trajectory. We believe And we think that it's time to look at the longer term to see what we need to continue to grow the business.

Speaker Change #102: So we are at a phase where I think we're looking at next four five years, obviously not just the next one or two quarters we've done.

Speaker Change #101: Transition and restructuring and then I think we're on a path to.

Speaker Change #103: Gross trajectory would leave and.

Speaker Change: We think that it's time to look at a longer time to see what do we need to continue to grow the business and one of the things that we can see there is to bring in more new blood more external expertise and experience as you mentioned that Tien tsin, we have a lot of our long tenured leaders thought works, we think it's time to.

And one of the things we're considering is to bring in more new blood, more external expertise, and experience. As you mentioned, at Tencent, we have a lot of long-tenured leaders in ThoughtWorks. We think it's time to take what we believe and what we have and then combine that with more external experience. So that's the rationale.

Speaker Change: To take what we believe what we have and then combine that with more external experience. So that's the rationale and then to the point of.

And then to the point of strategic change, we're on the path in terms of restructuring the vertical focus and also the intention to bring more system integration and then package software implementation. We're not planning to change that. We do see our clients, for example, asking us very often about supporting them with system integration and package software implementation, especially because, at ThoughtWorks, we have a lot of experience with legacy modernization. And we do believe that expanding to those areas helps us to become a better strategic partner to our clients and also increases our time.

Speaker Change: Strategic change where we.

Speaker Change: We're on a path.

Speaker Change: In terms of the restructuring and the vertical focus and also.

Speaker Change: The intention to bring more system integration and then packaged software implementation.

Speaker Change: We're not planning to change that we do see our clients for example, asking us they're often about supporting them on system integration packaged software implementation.

Speaker Change: Especially because it's all works, we thought where we have more with a lot of.

Speaker Change: Experience around legacy modernization.

Speaker Change: And we do believe that by expanding into those areas helped hours to become a better strategic partner to our clients and also increasing our Tam.

And then, at the end, I also just want to mention, as you asked, that we are proud of the unique culture that we have built that focuses on technology excellence, pursuit of excellence, and continuous improvement. Mike has been in the industry for a long time, and he knows about ThoughtWorks and has long admired our culture and is committed to our purpose of creating extraordinary impact through our culture and technology excellence. So we're confident that it's going to be a win-win situation. Great No, I'm glad to hear it. I'm sure that's the case.

Speaker Change: And then.

Speaker Change: And I.

Speaker Change #104: I also just want to mention is as you asked that we are proud of the unique culture.

Speaker Change #104: <unk> built that focus on technology excellence.

Speaker Change #104: <unk> excellence.

Speaker Change #104: Continuous improvement.

Speaker Change #104: Improvement and then Mike has been industry for a long time and he knows about <unk> since a lot of Myer, our culture and is committed to to our purpose of creating extraordinary impact.

Speaker Change: Through our culture and technology excellence. So we're confident that is going to be a win win situation.

Speaker Change: Great.

Mike: Go ahead, thank you and I'm sure. That's the case on the just my second.

Just my second follow-up question, just on the stability that you commented on, that's great to hear, no incremental pressures, and whatnot. Just on the pricing front related to that, if you have good visibility here around the pricing environment, Pushing Projects Forward. Sure.

Speaker Change #108: Follow up question just on the stability.

Speaker Change #108: Yet you commented on it.

Speaker Change #106: That's great to hear no incremental pressures.

Speaker Change #106: And whatnot just on the pricing front related to that if you have good visibility here.

Speaker Change #106: Around the pricing environment.

Speaker Change #106: Pushing projects forward.

So the pricing drop we mentioned in Q4'23 and then we're also seeing in Q1 this quarter, as we talked about it last quarter, was mostly driven by the year-end client negotiations for 2024 budgets, especially some of the big deals that we signed during the quarter or during Q4 and during Q1. So we believe that the new pricing dynamics is already, at this moment, reflected in the majority of our contract portfolio.

Speaker Change #113: Sure. So the pricing drop we mentioned in the Q4 'twenty three and then we're also.

Speaker Change #106: Seeing.

Speaker Change #106: Seeing in Q1 this quarter as we as we talked about it last quarter. It was mostly driven by the year end client negotiation for 2024 budgets, especially some of the big deals that we signed during the quarter during Q4 and during Q1.

Speaker Change #106: So we believe that.

Speaker Change #106: New pricing dynamics is already at this moment reflective in the majority of our contract portfolio.

So further pricing declines from Q1 to Q2 should be much less significant and should stabilize. In the meantime, the new logos we're signing up for and the new work tends to start at a higher rate than the bigger deals where we have to sometimes give volume discounts. So overall, it's normalizing and stabilizing. We don't expect a significant pricing drop to occur. Thank you, Chef. Thank you, teams.

Speaker Change #106: No further pricing declines from Q on Q2 should be much less significant and then shoot should stabilize.

Speaker Change #106: While the new logos were signing up for in the new work tends to start at.

Speaker Change #106: At a higher rate than.

Speaker Change #106: Then the bigger deals where we have to sometimes give volume discounts. So overall it is normalizing and stabilizing we don't expect significant pricing drop to continue.

Speaker Change #111: Great. Thanks.

Speaker Change #109: Thank you Scott.

Speaker Change #110: Thank you Tien tsin.

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

Speaker Change #112: Thank you. Our next question comes from Moshe <unk> with Wedbush Securities. Your line is open.

Thanks and Xiao, it's been great interacting with you and good luck. I just wanted to pick up the conversation. Pricing, and so was there any factor here in terms of offshore, driving some of that pricing pressure, rather than just like-for-like pricing? Hi Moshe.

Moshe: And Joe it's been great interacting with you and good luck.

Moshe: I just wanted to pick up.

Moshe: The conversation on pricing again.

Moshe: So was there any factor here in terms of offshore mix, that's been driving some of that pricing pressure rather than just like for like pricing pressure. That's my first question.

Yes, it's been great working with you, so thank you for the question. The offshore, the pricing drop I mentioned earlier was referring mostly to like-to-like price comparisons; the offshore-onshore mix definitely creates pressure on what we call the average bill rates across the world.

Joe: Hi, Moshe yes.

Moshe: Yes, it's been great working with you. So thank you for the question.

Moshe: The the <unk>.

Moshe: Offshore the pricing drop I mentioned earlier was referring mostly to like to like.

Moshe: Price comparison, the offshore onshore mix definitely creates a pressure on what we call. The average bill rates across the World and then it is the impact it is impact too.

And then it has an impact; it has an impact on our average pricing. And then we expect that, definitely, that to continue as more work moves offshore. But that's also being offset by higher margins and higher utilization. Overall, we don't mind the pricing decrease if it were because of the offshore-onshore mix. But we were, I think I was mostly referring to the light pricing environments that are being stabilized, said it might follow up on APAC. In the past, you guys provided us with some updates on what you're seeing there in Singapore, Australia, and China, maybe some color there. Sure. APAC has been pretty resilient over the last quarter.

Moshe: Two our average pricing and then we expect that definitely we expect that to continue at what work move to offshore.

Moshe: But that's a that's also being offset by high.

Moshe: Higher margin higher utilization overall, we don't mind the pricing decrease if it were because of offshore.

Moshe: Offshore onshore mix.

Moshe: But we were I think I was mostly referring to the.

Moshe: The light like pricing pricing environments, they've being stabilized.

Speaker Change #115: Understood and my follow up is on APAC in the past you guys provided us some updates on what youre seeing there or Singapore, Australia, and China, maybe some color there. Thanks a lot.

And then we have seen stronger growth in Singapore and the Indian local market for that matter. As you mentioned, Australia has seen slower growth over a rather long period of time, mostly because of our exposure in the tech sector in the Australian local market. And then we've seen recovery.

Speaker Change #114: Sure APAC, it's been pretty resilient over the last over the last quarter and then we.

Speaker Change #116: We have we have seen stronger growth in Singapore, and an Indian local market for that matter.

Speaker Change #116: As you mentioned, Australia as being.

Speaker Change #116: Havent seen slower growth.

Moshe: Over the long period of time, mostly because our exposure in the.

Moshe: Text and then <unk>.

Moshe: <unk> sector in Australia local market and then we're seeing recovery its stabilizing its definitely not declining further we're seeing green shoes. Some over long term tech clines are now, adding head count is ramping up projects, but it's not as fast as the as we were.

It's stabilizing. It's definitely not declining further. We're seeing green shoes.

Some of our long-term tech clients are now adding headcounts, ramping up projects, but it's not as fast as we were hoping for from a rebound perspective. So we just continue, I think, incrementally getting better. China, from their two perspectives: one is that there's offshore work we do there.

Moshe: Hoping for from a rebound perspective, so it just continue I think incrementally getting better.

Moshe: China Pharma there are two perspectives one is offshore work we do there. There is also local work we do there the local work is.

There's also local work we do there. The local work is getting back to growth. After the country opened up, the economy started to return to growth.

Moshe:

Moshe: Is it getting back to growth after the country open up the economy start to return to growth.

It's not as fast as the economic growth rebound is not as fast as a lot of the economies were expecting, but it's still growing, and so we are. We're seeing the rebound. It's not growing as fast as it might have been otherwise, but it's still stabilizing and growing. The offshore market for China has been a constraint for a little while because of the geopolitical tension, and then we're also being conscious of the risk exposure, so we're not pushing hard on growing the offshore in China.

Moshe: It's not as fast as the economy growth rebound is not as fast as a lot of the.

Moshe: Economies, where you're expecting but he still growing and so so we are we're seeing the rebound is not growing.

Moshe: As fast.

Moshe: As might have been otherwise, but it's still stabilizing and growing offshore market for China has been.

Moshe: Our constraint for a little while because of the geopolitical tension and then we're also being conscious of the risk exposure.

Moshe: So we're not pushing hard on growing the offshore in China is that we're looking at.

Instead, we're looking at offshoring more to India and Latin America, Southeast Asia, and some of the other Eastern Europe, some of the other areas. Thanks. Thank you, Moshe.

Moshe: Offshore and more to India and Latin America.

Moshe: Southeast Asia, and some of the other eastern Europe some deleverage.

Moshe: Thanks.

Speaker Change #117: Thank you Moshe.

Thank you. Our next question comes from Brian Bergin with TD Kallen. Your line is open. Hi, thanks. Zach Eisman on for Brian.

Speaker Change #117: Thank you. Our next question comes from Bryan Bergin with TD Cowen Your line is open.

First question we had on demand: just wanted to dig further into what's giving you confidence in the implied sequential growth view for 2Q, which would be the first time in almost two years. So what else could you say about how demand indicators have changed over the past three to six months and any notable vertical or geo callouts that you would highlight as a tailwind or headwind looking forward? Sure. Hi Zach.

Bryan C. Bergin: Alright, Thanks, Zack on for Brian First question, we had on on demand just wanted to dig further into what's giving you confidence on the implied sequential growth for <unk>, which would be the first time in almost two years what else could you say about how demand indicators have changed over the past three months to six months in any notable vertical.

Zack: Our Geo callouts that you would highlight as a tailwind or headwind looking forward.

From a macro perspective, Erin called out earlier, client behavior in the current environment is similar to what we have described in recent quarters, and hasn't fundamentally changed. It's stabilizing with respect to project term, but we continue to see longer sales cycles and smaller deal size compared with a couple of years ago, for example. But that said, we are seeing some opening of discretionary spending, especially where there's a strong case for ROI

Bryan C. Bergin: Sure.

Bryan C. Bergin: Zach.

Bryan C. Bergin: From a macro perspective, Erin called out earlier.

Bryan C. Bergin: Client behavior in the current environment is is similar.

Speaker Change #117: Two what we have described in recent quarters hasn't fundamentally changed.

Speaker Change #117: It is stabilizing with respect to project term, but we continue to see longer sales cycles and smaller deal size compare with couple years ago for example.

Speaker Change #117: But that said we are seeing some opening of discretionary spending where there's especially where there is a strong case for ROI. We're also I think probably more importantly, we're also seeing our.

I think, probably more importantly, we're also seeing our restructuring efforts paying off with increased investments in sales and marketing and a vertical-focused approach. Our team did a good job converting pipeline opportunities in Q1, and we also had strong bookings in Q1. So these give us confidence for the coming quarters. So, putting this together, we do expect Q2 to return to sequential growth and then be followed by a similar trajectory later this year. I got it.

Speaker Change #117: Restructuring efforts paying off.

Speaker Change #117: With increased investments in sales and marketing and a vertical focuses approach.

Speaker Change #117: Our team did a good job converting pipeline opportunities in Q1, and then we also have strong bookings in Q1s of those gives us confidence.

Speaker Change #117: For the coming quarters, so putting this together, we do expect Q2 to return to sequential growth.

Speaker Change #117: And then followed by a similar trajectory later this year.

And on the supply constraints, it sounds like these internal limitations that initially emerged last quarter are still causing some friction, but this time more so on the margin front, whereas 4Q was a revenue fulfillment issue. Could you elaborate on the latest here and if it's expected to impact results in the coming quarters? I'll take that question, Zach.

Speaker Change #118: Got it and on the supply constraints. So it sounds like these internal limitations.

Speaker Change #118: Initially emerged last quarter are still causing some friction, but this time more so on the margin front, whereas <unk> was a revenue fulfillment issue could you elaborate on the latest here and if it is expected to impact results in the coming quarters.

Speaker Change #125: I'll take that question that and just in terms of the internal friction than what we touched on in the last earnings release.

Just in terms of the internal frictions and what we touched on in the last earnings release, I'm pleased to say that has been addressed as we had expected. That was more around just some specifics, as you mentioned, with revenue fulfillment, just some of the changes from the restructuring. But we did put in new processes, and things have normalized, and that's been fixed now.

Speaker Change #121: Im pleased to say that has been addressed as we had expected.

Speaker Change #120: That was more around just some specifics as you mentioned with revenue fulfillment to some of the change from the restructuring but.

Speaker Change #120: But we did put in new processes and things have normalized and that's been fixed now.

What Xiao touched on as well as I did that's impacting the margin is the adjustments in the offshore-onshore mix. And really, what we're seeing is higher utilization with our offshore supply and then a little bit lower utilization with the onshore supply. And so that is what is impacting the margin. We had highlighted those.

Speaker Change #120: And what shall touched on as well as I did that's impacting the margin is the adjustments on offshore onshore mix and really what we're seeing is higher utilization with our offshore supply and then a little bit lower utilization with the onshore supply and so that.

Speaker Change #120: Is what is impacting the margin and we had highlighted those.

We highlighted that issue, I should say, last quarter and did note that it would take a couple of quarters to work through all of that. So on the whole, the supply issues that we talked about in our Q4 release have been addressed. We're feeling very good, and we are focused on the rebalancing of our supply. It will take us a couple quarters to get there, but that also is progressing as planned. understood.

Speaker Change #120: We highlighted that issue I should say last quarter and did note that it would take a couple of quarters to work through all of that so.

Speaker Change #120: On the whole the supply issues that we talked about in our Q4 release they've been addressed we're feeling very good.

Speaker Change #120: And we are focused on the rebalancing of our supply it will take US a couple of quarters to get there, but that also is progressing to plan.

Xiao, it's been good to work with you. We wish you luck in the next chapter. Thank you, Zach.

Speaker Change #126: Understood Joe it's been good to work with you I wish you luck on the next chapter.

Speaker Change #122: Thank you.

Thank you. Our next question comes from Jason Kupferberg with Bank of America. Your line is open. Hi, good morning Xiao and Erin. This is Tyler DuPont on behalf of Jason.

Speaker Change #123: Thank you. Our next question comes from Jason Kupferberg with Bank of America. Your line is open.

Speaker Change #123: Hi, good good morning, Sharon Erinn. This is Tyler on for Jason Thanks for taking the questions.

Thanks for taking the time. First, I just want to start, if you could maybe just spend a minute and discuss the types of projects you're working on and the visibility in demand across those projects. It sounds like the focus continues to be, you know, left on the more discretionary high bill rate consulting oriented initiatives and more on those projects with the short-term realizable ROI. Given the historical focus of ThoughtWorks, can you just discuss how your current go-to-market differs between the project types, particularly if there's a difference in any win rates between those two that are worth calling out, and if you're seeing in one queue Sure.

Tyler: First just wanted to start if you could maybe just spend a minute and discuss for the types of projects Youre working on and the visibility in demand across those projects. It sounds like the focus continues to be less on the more discretionary high bill rate consulting oriented initiatives.

Speaker Change #123: That's all it is known for and more on those projects with the short term realizable ROI.

Speaker Change #123: Given the historical focus thought works can you just discuss how your current go to market differs between the project types.

Speaker Change #123: <unk>, if theres a difference in any win rates between between those two that are worth calling out.

Speaker Change #123: And if youre seeing in <unk>, particularly sort of what pricing concessions you had to make as you compete more aggressively for work.

Thank you for the question. So we have historically done a lot of consulting work. And then I think what we're doing right now is a lot of delivery work, but not necessarily everything is focused on short-term ROI. We do have a lot of long-term engagements with our clients that continue to get funded because they're strategically important.

Speaker Change #128: Sure. Thank you for the question.

Speaker Change #124: So we do.

Speaker Change #124: <unk> historically done a lot of consulting work.

Speaker Change #124: I think what we're doing right now is there's a lot of delivery work.

Speaker Change #124: But not necessarily everything as folks know short term ROI, we do have a lot of long term engagements where our clients.

Speaker Change #124: That's continue getting funded because they are so strategically important so from a go to market perspective, we do focus a lot more on expanding our service offerings, but not so much as kind of steering away from short term consulting projects two to just just.

So from a go-to-market perspective, we do focus a lot more on expanding our service offerings, but not so much as kind of steering away from short-term consulting projects to just from consulting-type projects just to delivery projects. And then what we're seeing really is just client buying behavior. Their funding is not so much focused on, or sometimes it's getting pulled back more on the consulting side of it, more focused on just executing and delivering products. So our go-to-market hasn't fundamentally changed. Our win rate has been consistent and then moving up over the last couple of quarters, especially this quarter.

Speaker Change #124: From consulting kind of projects just to delivery.

Speaker Change #124: Projects and then what we're seeing really is just the client buying behavior is their funding is not so much focused down, whereas sometimes is getting pulled back more on the consulting side a bit more focus now on just <unk>.

Speaker Change #124: Executing and delivering product.

Speaker Change #124: So that our go to market hasn't fundamentally changed our win rate.

Speaker Change #124: <unk> has been.

Speaker Change #124: Consistent and then moving up.

Speaker Change #124: Over the last couple of quarters, especially this quarter.

I think part of that is because we are turning over some of the contracts and we're going to the market with more aggressive, more realistic pricing in the current environment. And also, with our vertical focus approach, we believe that gives us a lot more ability to be relevant to our clients from a solving their domain-specific problems perspective, which we believe gives us another edge in increasing our ring rate. So overall, we're feeling good about our win rate, both in terms of new projects and then extensions from a consulting and then delivery perspective.

Speaker Change #124: Part of that is because we are.

Speaker Change #124: Turning over some of the.

Speaker Change #124: Hum.

Speaker Change #124: Contracts and we're going to the market with a more aggressive more realistic.

Speaker Change #124: Pricing.

Speaker Change #124: In the current environment and also our vertical focus approach, we believe that giving us a lot more ability to be relevant to our clients from a solving there.

Speaker Change #124: Their domain specific problem perspective.

Speaker Change #124: We believe give us another edge in increasing our win rates. So overall, we're feeling good about our win rates both in terms of new projects and then extensions.

Speaker Change #124: From a consulting and.

Speaker Change #124: And then delivery personnel perspective that win rate is similar there is no. There is no much difference there I think the lack of consulting projects is more due to client pulling back on budget as opposed to.

There's no much difference there. I think the lack of consulting projects is more due to clients pulling back on budget as opposed to competing against competition. That's very helpful, Xiao. Thanks for that. And then just as a follow-up on more...

Speaker Change #124: Competing against competition.

Speaker Change #127: Okay. That's very helpful. Thanks for that and then just as a follow up on margins.

It looks like 1Q came in modestly below the low end of the range, and based on full year numbers, it looks like we're definitely more back half-weighted. I'm curious if you can walk us through the margin dynamics facing the business. [inaudible] Thanks for the question, Tyler. I'll start.

Speaker Change #127: It looks like <unk> came in modestly below the low end of the range based on full year numbers.

Speaker Change #127: It looks like but definitely more back half weighted I am curious if you can walk us through the margin dynamics facing the business through the year and what gives you confidence in that back half.

Speaker Change #127: Reacceleration if you will.

Speaker Change #127: Like many pricing concessions made where for projects across 2024, the budgets across 24 broadly. So do you anticipate pricing strength in the back half of the year on new projects to offset that or just any clarity there would be helpful.

In terms of the pricing dynamics, no, there's not an assumption of improved pricing dynamics included in the margin guide for the year or in the back half. We are seeing a stabilized pricing environment, which Xiao talked about, but on the whole, our expectation is that the macro will stay largely unchanged. And then, while we are seeing some discretionary work, we are not expecting the mix of consulting to change. But why do we have confidence in the increased margin? So I touched on this a little bit already, and I also talked about it last quarter. But it's worth a reminder.

Speaker Change #130: Thanks for the question Tyler I'll start.

Speaker Change #129: In terms of the pricing dynamics no. There's not an assumption of improved pricing dynamics included in the margin guide for the year or in the back half.

Speaker Change #127: And we are seeing a stabilized pricing environment, which shao talked about but on the whole our expectation is that the macro will stay largely unchanged.

Speaker Change #127: And then while we are seeing some discretionary work we are not expecting that the mix of consulting to change.

Speaker Change #127: But why do we have confidence in the increased margin. So I touched on this a little bit already and I also talked about this last quarter. It's worth a reminder.

As we look at 2024, the two key elements to our margin improvement, first of all, are increasing utilization. While we have seen some increases in utilization, there's still plenty of room to go. The second piece of that is the rebalancing of our onshore and offshore supply mix, particularly because we have lower utilization that is oriented toward the higher cost locations.

Speaker Change #127: As we look at 2024, the two key elements to our margin improvement first of all is increasing utilization and while we have seen some increase in utilization. There is still plenty of room to go the second piece of that is the rebalancing of our onshore and offshore.

Speaker Change #127: Sure supply mix, particularly because we have lower utilization that is oriented towards the higher cost locations.

Speaker Change #127: That has been driving and <unk>.

Speaker Change #127: Part of that margin headwind that we've experienced.

So that has been driving part of that margin headwind that we've experienced. As we go forward, where we have confidence, you know, first of all, as I touched on in my prepared remarks, we are at an inflection point for the year. We're feeling positive about the top line momentum that we have in the strong bookings, and our Q2 guide incorporates sequential growth from Q1 to Q2. And so that obviously helps.

Speaker Change #127: As we as we go forward, where we have confidence first of all as I touched on in my prepared remarks, we are at an inflection point for the year and we're feeling positive about the top line momentum that we have and the strong bookings and our Q2 guide incorporate sequential growth from Q1 to Q2 and so that.

Speaker Change #127: Obviously helps.

At the same time, we are managing our costs very carefully, and we are aligning our supply base with that shift to offshore. So really, it's a combination of the stability in our revenue base, plus continued discipline in improving our utilization and our cost management. And that is what we expect to drive that consistent margin improvement. For Q2, I have guided to a margin uptick, and I expect to see more margin upticks in the second half of the year.

Speaker Change #127: At the same time, we are managing our costs very carefully and we are aligning our supply base with that shift to offshore.

Speaker Change #127: So really it's a combination of the stability in our revenue base, plus continued discipline and improving our utilization and our cost management.

Speaker Change #127: That is what we expect to drive that consistent margin improvement in Q2, I have guided to a margin uptick and I expect to see more margin uptick in the second half of the year.

Speaker Change #133: Okay. That's that's helpful and thank you for that.

That's helpful, Erin. Thanks. Thank you. As a reminder, if you'd like to ask a question, please press star 111. Our next question comes from Jacob Haggerty with Baird. Your line is open. Hey guys, this is Jacob on for Dave.

Speaker Change #132: Thank you as a reminder, if you'd like to ask a question. Please press star one one.

Speaker Change #132: Our next question comes from Jacob <unk> with Baird. Your line is open.

So thanks for taking my question. Just want to ask, you have big restructuring savings; you raised that, but the margin guide stayed intact. Why wasn't the margin guide raised in line with the restructuring savings?

Speaker Change #132: Hey, guys. This is Jacob on for Dave. Thanks for taking my question I. Just wanted to ask you had a big restructuring savings you raise debt, but the margin guide stayed intact why wasn't the margin guide raised in line with the restructuring savings.

Speaker Change #131: The restructuring.

The restructuring, the savings, the additional savings, I guess, first of all, I will say, as a reminder, we delivered $87 million in annualized savings at the end of Q1. Now, there are some timing differences in when those savings will come through. Some of that will come through, and most of it will have been realized, certainly in Q2, but some of it won't come through until Q3 and a little bit in Q4. So, part of it is timing differences. And really, that would be the most part of it.

Speaker Change #131: Savings the additional savings I guess first of all I.

Speaker Change #135: I will say as a reminder, we have delivered 87 million in annualized savings at the end of Q1 now there are some timing differences of when those savings will come through some of that will come through most of it will have been realized at certainly in Q2, but some of that won't come through until Q3, and a little banks before so.

As we talked about with the Q1 view, there's the shift in our supply mix. It's something that we're taking very thoughtful and careful actions around, making sure that we're not impacting client service. We've done an incredibly good job so far, and we intend to continue to do that. So, I would say, on the whole, we're focused on doing the right thing for our client. We're doing the right thing on the cost base, but the timing of the adjustments is shifted a little bit, and that is why we haven't updated the margin guidance. That makes sense.

Speaker Change #131: Part of it is timing differences.

Speaker Change #131: And really that would be the most of that as we had talked about with the Q1 you there.

Speaker Change #131: The shift of our supply mix is something that we're taking very thoughtfully and carefully actions around.

Speaker Change #131: Making sure that we're not impacting client service, we've done an incredibly good job so far and we intend to continue to do that so I would say on the whole we're focused on doing the right thing for our client we're doing the right thing on the cost base, but the timing of the adjustment is shifted a little bit and that is why.

Speaker Change #131: Haven't updated the margin guidance.

Thanks. And then just one more question for you. So the share count guide was down. Could you guys explain why that was?

Speaker Change #134: That makes sense. Thanks, and then just one more question for you. So the share Count guide was down could you guys explain expand on why that was.

The share count guide would just be from some changes that took place, some assumptions that took place in Q1 because we did have some issues with shares in the quarter, but for a fuller view, I will come back to you with a question. I don't have a specific answer now, but we'll make sure that we get an answer out. Thank you. Our next question comes from Matthew Roswell with RBC. Your line is open. Yes, good morning.

Speaker Change #136: The share Count guide I would just be from some <unk>.

Speaker Change #136: Changes that took place on the assumptions that took place in Q1, because we did have some.

Speaker Change #134:

Speaker Change #134: Some issue of shares in the quarter.

Speaker Change #137: But for the full review I will come back to you with the question I don't have the specific answer now, but we will make sure that we get an answer out that's clear.

Speaker Change #137: Yes.

Speaker Change #137: Thank you. Our next question comes from Matthew Roswell with RBC. Your line is open.

Thank you very much. And Xiao, it's been a pleasure to work with you over the last couple of years. I guess, following up on the restructuring question, what makes you think that you're maybe not cutting too much when it comes to the restructuring? And I guess, as part of that, what areas are you finding extra cost savings in?

Matthew Van Roswell: Yes. Good morning, Thank you very much and it's been a pleasure working with you over the last couple of years I guess following up on the restructuring question.

Matthew Van Roswell: Yes.

Matthew Van Roswell: Do you think that you mentioned, maybe not cutting too much when it comes to the restructuring and I guess.

Matthew Van Roswell: Part of that what areas, where are you finding the extra cost savings Inc.

Matthew Van Roswell: Hi.

Matthew Van Roswell: Okay.

As I mentioned earlier, in terms of the restructuring savings, we are, We're being very thoughtful about the actions that we're taking, and we're very focused on client execution, as well as making sure that we see continued momentum in our demand and our go-to market. So where we are focused is on areas where it's non-client facing in particular. Again, there are some adjustments because of the onshore-offshore mix.

Matthew Van Roswell: As I mentioned earlier in terms of the restructuring savings from B R.

Matthew Van Roswell: We're being very thoughtful about the actions that we're taking and we're very focused on client execution as well as making sure that we see continued momentum into our.

Matthew Van Roswell: Our demand in our go to market. So where we are focused is areas, where it's non client facing in particular again theres some adjustments.

Matthew Van Roswell: Because of the onshore offshore mix and so where we don't expect to see improvements in utilization over the next six months or so and that would be a place where we're looking in addition to that we are.

And so, where we don't expect to see improvements and utilization over the next six months or so, that would be a place where we're looking. In addition to that, we are seeing from an operating expense perspective that we've really, by the end of Q1, fully realized what we expected. We had good movement with our function supporting our business as part of the restructuring around the globe. We see further opportunities for decreased operating expenses in some of our office space rationalization, as well as some of our vendor expenses. So, on the whole, it really is in line with the restructuring program that we started last year. It's very consistent.

Matthew Van Roswell: King.

Matthew Van Roswell: From an operating expense perspective, we've had really it by the end of Q1 fully realize what we expected we had.

Matthew Van Roswell: Good movement without function supporting our business as part of the restructuring around the globe.

Matthew Van Roswell: We see further opportunity needs for decreased operating expenses and some of our office space rationalization.

Matthew Van Roswell: As well as some of our vendor expenses. So on the whole. It really is in line with the restructuring program that we started last year. It's very consistent it's just an increase because we have identified more opportunities. We are trading very carefully to make sure. The client service continues to go well.

It's just an increase because we've identified more opportunities, but we are treading very carefully to make sure the client service continues to go well. Yeah, and then just to add to that client services part, we do expect to see sequential growth. We do think that demand for services is increasing, but it's unevenly distributed. Now we know that we're going to see more demand for offshore services. For example, we're going to see more demand for infrastructure skill sets, data skill sets, and cloud skill sets.

Matthew Van Roswell: And then just to add to that client services part, we do expect to see sequential growth. We do think that the demand for services and increasing but but it's only you will distribute it now we know that we're going to see more demand for offshore services. For example, we're going to see more demand for infrastructure skill sets.

And then that's slightly different from what we have developed so far over the last few years. So as we move forward, we're trying to increase capacity skill sets in certain areas and reduce them in some of the other areas. So all this is done in the spirit of supporting growth, to empower growth, as opposed to optimization at the cost.

Matthew Van Roswell:

Matthew Van Roswell: Data <unk> and cloud skill sets and then that's slightly different what we have developed so far over the last few years.

Matthew Van Roswell: So as we move forward, we're trying to increase capacity skill sets in certain areas and reduced in some of the other areas.

Matthew Van Roswell: So all of this is is telling the spirit to support the growth to empower the gross as opposed to optimization at the cost of the growth.

And if I could follow up on the mixed shift and increasing the utilization of the onshore utilization. Is that, you know, what percentage of the improvement is sort of under your control and what percentage is kind of based on the market stabilizing or improving? Hopefully, that question makes sense. It does make sense. 80% of it, Matthew, would be under our control.

Matthew Van Roswell: And if I could follow up on the mix shift increasing utilization on the onshore utilization.

Speaker Change #138: Is that what percentage of improvement is sort of under your control and what percentage is kind of based on the market stabilizing or improving hopefully that question makes sense.

Part of it, of course, you know, market dynamics matter. But what we've talked a lot about, we have seen stabilization in the market dynamics, which we're really pleased about. Again, worth mentioning, the go-to-market momentum, the strong bookings that we had for the quarter, and the sequential growth we expect in Q2. So clearly, the market matters, but most of it is under our control, and we feel very confident about the path that we're on. Okay. Thank you very much.

Speaker Change #141: It does make sense I, 80% of that Matthew will be had.

Speaker Change #138: Under our control and part of it of course market dynamics matter and.

Speaker Change #138: We've talked a lot about we have seen stabilization in the market dynamics, which we're really pleased about again worth mentioning.

Speaker Change #138: And the go to market momentum, our strong bookings that we had for the quarter and and the sequential growth. We expect in Q2, so clearly the market matters, but most of it is under our control and we feel very confident about the path that we're on.

Speaker Change #139: Okay. Thank you very much.

Speaker Change #140: Thank you Matthew.

Speaker Change #143: Thank you.

Thank you, Matt. Thank you. Our next question comes from... Darren Peller with Wolf Research. Your line is open. Hi, thanks. This is Paul Obrecht. I'm on behalf of Darren.

Speaker Change #142: Our next question comes from.

Speaker Change #142: Darrin Peller with Wolfe Research your line is open.

Can you provide some more detail on how the new industry-based go-to-market approach is responding with customers, maybe, both as it relates to winning new customers and main... renewals. And do you find that this model is mostly optimized at this point, or is there still some work to be done to further develop the sales market? Thank you for the question. We are definitely only at the beginning of this journey.

Speaker Change #142: Hi, Thanks. This is Paul <unk> on for Darren can you provide some more detail on how the new industry based go to market approach is resonating with customers maybe.

Speaker Change #144: Both as it relates on winning new customers and maintaining existing ones are going to them for renewals.

Speaker Change #144: That this model is mostly optimized at this point or is there still some work to be done to further develop the sales and marketing.

Speaker Change #146: It is.

There's a lot more to be done. The vertical sales and go-to-market approach is the intention, the hypothesis, is that our sales team, our go-to-market team, and especially our professional services team on the ground would focus on a particular vertical over a longer period of time so that we build and retain a lot more domain expertise, as opposed to them being constantly being changed and diluted.

Speaker Change #145: Thank you for the question.

Speaker Change #148: We're definitely only at the beginning of this journey there is a lot more to be done.

Speaker Change #147: The vertical sales and go to market approach is the intention the hypothesis that our sales team our go to market team and especially our professional services team on the ground wood.

Speaker Change #147: <unk> focus on a particular vertical over a longer period of time, so that we build and retain a lot more domain expertise as opposed to may be constantly being change in diluted so when we talk to our clients that we have more relevant.

So, when we talk to our clients, we have more relevant points of view and then understand how to solve their biggest business problems with our technology. And we're seeing that paying off, I think, at this moment, especially with new pursuits, new wins, where we have people who are more savvy and understand and can speak the same language with our clients. That's why we are seeing more new logos, especially in the verticals we've chosen to focus on, for example, energy, public sector, auto, and then financial services.

Speaker Change #147: Point of views and then understand how to solve their biggest business problems without without technology and then we're seeing that pay off I think at this moment, especially with new pursues new wins, where we have people or.

Speaker Change #147: More savvy, and then and I understand that and then can speak the same language with our clients.

And then for – it definitely helps with ongoing clients. One of the challenges our clients have had over time with ThoughtWorks is that we keep rotating people out of their team, out of the vertical. And then they seem to believe that it's a lost opportunity, given the domain knowledge they have built so far.

Speaker Change #147: That's why we are seeing higher new logos, especially in the verticals. We chosen to focus on for example, energy public sector Auto and then.

Speaker Change #147: Financial services, and then four definitely helps with.

Speaker Change #147: Ongoing clients one of the challenges our clients have had.

Speaker Change #147: Over time, we thought works is we keep rotating people out of.

Speaker Change #147: Their team out of the vertical.

So, with this model, we have more key technical talents and delivery talents that are ring-fenced in a particular vertical over a longer period of time. So, they get to become a better experts at helping our clients solve their problems. But, like I said, it's only the beginning of the journey. We have only been doing this for a couple of quarters.

Speaker Change #147: And then.

Speaker Change #147: And then they seem to believe that it's a lost opportunity given the domain knowledge that they have.

Speaker Change #147: So far so with this model, we have more key technical talent and delivery talent that is ring fenced.

Speaker Change #147: In particular vertical over a longer period of time, so they get to becoming a better expert at helping our clients solving their problems.

Speaker Change #147: But like I said, it's only the beginning of the journey.

Speaker Change #147: I've only been doing this for a couple quarters, we believe that over time, we're going to see this this approach paying off even even more.

We believe that over time, we're going to see this approach paying off even more. Great, thanks. And then as a follow-up on the topic of Gen AI, I know the majority of the work being done is a concept and getting the data platforms ready, but do you anticipate we could see Gen-AI work begin materially contributing to revenues, maybe by year-end, as clients start deploying it at scale? Or do you expect this won't happen? I know it's early, but I'm just trying to think about this from a timeline perspective.

Speaker Change #149: Great. Thanks, and then is it.

Speaker Change #147: A follow up on the topic of jet AI I know the majority of the work being done is mostly prove concepts and getting the data platform is ready, but do you anticipate we could see Jenny I work begin materially contributing to revenues maybe by yearend I was calling start deploying it at scale or do you expect this won't happen until 2025 I know it's early I'm just trying to think about this.

Speaker Change #147: From a timeline perspective.

You're definitely spot on in terms of there being a lot of POC kind of short-term work, and there's a lot of preparation work building the data platforms. The JNI work itself, especially large language model building, hasn't really been a main theme yet. We do expect it to pick up at some point. Now it's going to be the end of the year, probably some of them.

Speaker Change #147: But youre definitely.

Speaker Change #147: Spot on in terms of Theres, a lot of POC kind of.

Speaker Change #147: Short term work and there's a lot of preparation and we're building the data platforms.

Speaker Change #147: The January work itself, especially large languished model building hasnt really been.

Speaker Change #147: Main theme, yet we do expect it to pick up at some point.

Speaker Change #147: Now, it's going to be end of the year, probably some of them next year definitely more of it.

Next year, definitely more of it. That's part of the reason that we have acquired Watchful. It's a company. It specializes in building tools to accelerate large language model development from POC to scaling. For example, the eval feature to tell you which model is more effective than the others.

Speaker Change #147: That's part of the reason that we have acquired watchful, it's a it's part of company.

Speaker Change #147: <unk> and building tools to accelerate large language model development from POC to scaling for example, especially the eval feature to tell you, which model is more effective than others.

And this is definitely what we believe is going to be a key area for us later this year or early next year. So we do expect to see more large language model development. We're seeing a few of them, but it's still not the norm. But Eurocast is as good as ours, which is probably going to be later at the end of the year or beginning of next year.

Speaker Change #147: And this is definitely what.

Speaker Change #147: What we believe is going to be a key area.

Speaker Change #147: For US later this year early next year. So we do see we do expect to see more large larger language model development, we're seeing a few of them, but it's still not the norm.

Speaker Change #147: But your guess is as good as ours, which is probably going to be later at the end of the year or beginning of next year.

Thank you. Our next question comes from Maggie Nolan with William Blair. Your line is open. Hi, everyone. It's Kate Kronstein on for Maggie. Congratulations, Xiao, and we wish you luck on your transition. I wanted to start off asking about the top five and top 10 client buckets. It looks like those both increased sequentially.

Speaker Change #147: Thank you. Our next question comes from Maggie Nolan with William Blair. Your line is open.

Margaret Marie Niesen Nolan: Hi, everyone. It's Keith.

Speaker Change #151: Brian on for Maggie Congrats Joe and you wish you luck on your transition.

Keith: I wanted to start off asking about the top five and top 10 client buckets. It looks like those both increased sequentially can you guys talk a little bit more about the current dynamics you are seeing in those cohorts this quarter.

Can you guys talk a little bit more about the current dynamics you are seeing in those cohorts this quarter? Sure. So the top five and top 10 clients have, like, as you pointed out, increased incrementally, about 1% from a remedy concentration perspective. It's still in the 18%, 29% range, which is relatively well diversified, so we're not overly concerned about it. But the increase is mostly due to, given the current environment, we tend to focus more on retaining our top clients and then develop longer-term, more strategic relationships.

Margaret Marie Niesen Nolan: Sure.

Margaret Marie Niesen Nolan: So the top five and top 10 clients.

Margaret Marie Niesen Nolan: As you pointed out.

Margaret Marie Niesen Nolan: Has that increased.

Margaret Marie Niesen Nolan: Increased incrementally.

Margaret Marie Niesen Nolan: It's about 1% from a constant revenue concentration perspective is still in.

Margaret Marie Niesen Nolan: 18%, 29% range, which is.

Margaret Marie Niesen Nolan: Relatively well diversified we're not overly concerned about it but.

Margaret Marie Niesen Nolan: The increase is mostly due to given the current environment, we tend to focus more on retaining our top clients and then develop longer term more strategic relationships for example, adding new service offerings like demo.

Margaret Marie Niesen Nolan: Packaged software system integration. So we'll continue to expand our footprint given the macro is easier to from a revenue perspective to expand with our with the current existing top customers, especially when some of them has a habit of intention to consolidate <unk>.

For example, adding new service offerings like demo, packaged software, and system integration, so we continue to expand our footprint. Given the macro, it's easier from a revenue perspective to expand with the current existing top customers, especially when some of them have an intention to consolidate their vendors, and so we're actually benefiting from that, gaining more momentum with our top clients. That said, we're also seeing a longer tail, especially new logos increasing.

Margaret Marie Niesen Nolan: Vendors and then so we are actually benefiting from that gaining more momentum with our top clients that said, we're also seeing a.

Margaret Marie Niesen Nolan: A longer tail, especially new logos.

It's just that some of these new projects, given the current environment, are starting at a smaller size, a smaller deal size, and then so we're not getting a lot of big deals at the get-go, and then we're following a lot of the land-expand approach. Thank you, y'all. That's very helpful. And then my next question is, last quarter, it was mentioned that ThoughtWorks was seeing some supply constraints around certain skill sets. Can you maybe expand on what you're seeing now on the hiring front? I'll take that question,

Margaret Marie Niesen Nolan: Increasing it's just that some of these new projects given the current environment is starting at a smaller size smaller deal size and then so where we're not getting a lot of big deals at the get go and then we're following a lot of the.

Margaret Marie Niesen Nolan: The land expand approach there.

Speaker Change #152: Okay, great. Thank you that's helpful.

Speaker Change #157: And then my next question is last quarter. It was mentioned that.

Speaker Change #152: <unk> is seeing some supply constraints around certain skill sets can you maybe explain expand on what youre seeing now on the hiring front.

Thanks, Kate. We touched on this a little bit earlier. Xiao was speaking about some of the skill sets where we are seeing lots of demand. Where we are doing more hiring, it's particularly around data and infrastructure skills. That continues to be a place where we're seeing good demand. Some of the data skills do have specialized skill sets or experience requirements.

Speaker Change #154: I'll take that question. Thanks Kate.

Speaker Change #153: <unk> touched on a little bit earlier I was speaking about some of the skill sets, where we are seeing lots of demand.

Speaker Change #153: We are doing more hiring it's particularly around data and infrastructure skills that continues to be a place where we're seeing good demand and some of the data skill sets do you have specialized and skill sets of our experience requirements and so that's been a focus for our recruiting team.

That's been a focus for our recruiting team. We put quite a lot of effort into our recruiting in the last quarter and are seeing some very positive momentum from that. On the whole, we're feeling good about the ability to fulfill that supply and where we continue to expect to see strong demand. The other thing that I would touch on is that offshore has been pretty strong.

Speaker Change #153: We put quite a lot of effort in our recruiting and.

Speaker Change #153: In the last quarter and are seeing some very positive momentum from that and so on the whole we're feeling good about the ability to fulfill that supply and where we continue to expect to see strong demand.

Where we're continuing to hire is more in our offshore locations. On the whole, it's going well. The supply constraints, we think, are well in hand.

Speaker Change #153: The thing that I would touch on is that offshore has been.

Speaker Change #153: Pretty strong and so we're.

Speaker Change #153: We're we're continuing to hire is more in our offshore locations.

The recruiting where we are recruiting in particular areas is going very well. We're pleased to see the momentum. Great. Thank you, Erin. Thank you, Kate. Thank you. And our last question comes from Arvind Ramnani with Piper Sandler. Your line is open.

Speaker Change #153: And on the whole going well, so and the supply constraints, we think are well in hand, the recruiting where we are recruiting.

Speaker Change #153: In particular areas it is going very well.

Speaker Change #153: And we're pleased to see the momentum.

Speaker Change #155: Great. Thank you Erinn.

Erinn: Thank you Kate.

Speaker Change #156: Thank you and our last question comes from Arvind <unk> with Piper Sandler Your line is open.

Thanks for doing my question. It was a pleasure working with you and I wish you the very best on your next endeavor. Yeah, I just had a question.

Arvind: Thanks for taking my question.

Arvind: As I have pleasure working with you and wish you the very best.

Arvind: On your next endeavor.

Arvind: Yes.

I mean, in the demand environment, you're going to characterize it as still kind of really no change, but it's not getting worse. But is there something specific about your offerings or your services? We are starting to see... You know, some signs of improvement. Is there something idiosyncratic about what you do or the type of work that you're doing where you're seeing an improvement even though the demand, the oral demand environment, has not necessarily improved? Sure.

Arvind: Question on the.

Arvind: The demand environment.

Arvind: Can I characterize it as still kind of really no change, but it's not getting worse.

Arvind: But is there something specific about kind of your.

Arvind: Offerings or services, you are starting to see.

Arvind: <unk>.

Arvind: Some some signs of improvement is there something idiosyncratic idiosyncratic to what you would have done or that type of work that they're doing that you are seeing second improvement, even though the demand or the demand environment has not improved.

Arvind: Okay.

First of all, thank you, Arvind. It's been a pleasure working with you, too. So, from a demand perspective, we believe that what has made it better for us despite the macro environment is that we have invested in additional sales and marketing capacity, especially our focus after the restructuring to focus more on outbound demand generation capabilities. You might remember that historically, only 15% of our new bookings are generated from outbound; 85% is from inbound given the strong brand and then we have enjoyed. Right now, over 60% of our new bookings in Q1, for example, came from outbound efforts.

Speaker Change #158: Sure first of all thank you Arvind, it's been a pleasure working with you too so from a demand.

Speaker Change #158: Perspective.

Speaker Change #158: We believe that what has made it better for us. Despite despite of the macro environment is that we have invested.

Speaker Change #159: In additional sales and marketing capacity.

Speaker Change #159: Especially our focus after the restructuring to focus more on outbound demand generation capabilities.

Speaker Change #159: You might remember that historically, we have only 15% of our new bookings is generated from our about 85% is from inbound given the strong brand and then.

Speaker Change #158: We have enjoyed.

That's definitely due to the effort the sales and marketing team has put in, and as a result, we're also seeing higher conversion from these opportunities. And then at the same time, as I mentioned earlier, we continue to invest in this vertical-based approach, and we're focused on the verticals that we believe are more resilient in this current environment, for example, public energy, healthcare, automotive, life science. And we're seeing that pay off as well. A large number of our new logos come from these verticals.

Speaker Change #158: Right now over 60% of our new bookings in Q1 for example came from outbound efforts thus.

Speaker Change #158: That's definitely.

Speaker Change #158: Due to the.

Speaker Change #158: The effort the sales and marketing team has put in and as a result, we're also seeing higher conversion.

Speaker Change #158: From these.

Speaker Change #158: From these opportunities.

Speaker Change #158: Then at the same time I mentioned earlier, we'll continue to invest in this vertical based approach.

Speaker Change #158: And we're focused on the verticals that we believe are more resilient in this in this current environment for example, public energy health care automotive and life science, and we're seeing that pay off as well a large number of our new logos come from these verticals and finally, we are expanding our service offerings.

And finally, we are expanding our service offerings, especially efficiency and cost-saving programs, catering for the short-term and then, but also the strategic nature of some of the work some of the clients are asking for. Well, I mentioned Demo, the digital application management operation services. Now, approximately 30% of our top 50 clients are using this service. It was obviously zero a few years ago.

Speaker Change #158: Especially in the efficiency and cost saving programs catering for the short term.

Speaker Change #158: But also.

Speaker Change #158: The strategic nature of some of the some of the clients are asking for it.

Speaker Change #158: I mentioned de Mow, the digital application management operation services now approximately 30% of our top 50 clients are using this series. It was obviously zero a couple of years a few years ago. We are continue to expanding this again this gives us the opportunity to increase our total addressable market even.

We are continuing to expand this. Again, this gives us an opportunity to increase our total addressable market, even with the same client portfolio we have. That's really helpful, and that explains it. And then, you know, one of the earlier questions, you know, I think what you were saying is, you know, still a lot of the... The work on Gen AI is proof of concept and pilot, so it is fairly small in scale. You know, I just...

Speaker Change #158: With the same client portfolio, we have.

Speaker Change #160: That's really helpful.

Speaker Change #161: That explains it.

Speaker Change #161: And then.

Speaker Change #161: And one of the earlier questions.

Speaker Change #161: I think what you were saying there is still a lot of the.

Speaker Change #161: Work on journey II is.

Speaker Change #161: <unk> said.

Speaker Change #161: All it.

Speaker Change #161: So fairly fairly small in scale.

Speaker Change #161: I just.

The one thing I want to clarify is that... Is there even a single large-scale Gen-AI project you've seen at ThoughtWorks or even at your clients, and maybe ThoughtWorks is not involved? Have you seen any large-scale Gen-AI projects? When it does come together, what kind of project would it be? Like, where would you see, you know, even if you look at the proof-of-concepts you've seen, where do you see this promise where there could be a much, much larger-scale gen-AI project? It's a great question.

Speaker Change #161: I want to clarify is it.

Speaker Change #161: Is there any is there even a single large scale.

Speaker Change #161: Kind of Ginnie Mae project you have seen.

Speaker Change #161: I talked to folks or are you in that your clients and maybe talk about because it's not involved.

Speaker Change #161: Have you seen any large scale <unk> project and <unk>.

Speaker Change #166: You haven't.

Speaker Change #161: When it does come together.

Speaker Change #161: What kind of project would it be right there.

Speaker Change #161: Or do you see.

Speaker Change #161: Even if you look at the proof of concepts Youll see where do you see this promise.

Speaker Change #161: Okay.

Speaker Change #161: It could be like a much much larger scale generic project.

So we do have a few fairly large GNI-related projects. And then to peel back the layers, what tends to happen in some of the POCs is just using some of the open cloud-based platforms to use the existing large language models and then use that to perform simple tasks like content generation and some basic analysis. And then you move to another layer up. There's the RAC-based approach, which is very popular right now, the RAC-based R-A-C, RAC-based approach that takes a bit more work to do before you feed any prompts into the larger language model.

Speaker Change #162: It's a great question. So we do have.

Speaker Change #162: A few fairly large Jenny I related projects and then.

Speaker Change #162: To appear down the layers is what.

Speaker Change #161: <unk> tends to happen in some of the POC is just using the <unk>.

Speaker Change #161: The.

Speaker Change #161: All of the open.

Speaker Change #161: Cloud based platforms to use.

Speaker Change #161: Existing large language model and then use that to do simple performance simple task like content generation.

Speaker Change #161: And some basic analysis and then you move to another labor layer up there as the rack base, which is very popular right now the rack base, our AG rack based.

Speaker Change #161: Approach that.

Speaker Change #161: That takes a bit more work to do before you feed any.

Speaker Change #161: Prompts into the into the larger language model. So the work is around the large large language model, but the larger language model itself is steel.

So the work is around the large language models, but the large language models themselves are still the commercial ones that are readily available, the next level down, which is fine-tuning. We have certain projects that are doing the fine-tuning of large-language models, and that requires more effort, more data computing power, and then that's a little bit more heavy-lifting from a cost perspective. The largest programs we've seen so far are in the final phase, that is, developing your own large-language model.

Speaker Change #161: As to the commercial ones that are readily available.

Speaker Change #161: And then a layer down which is fine tuning we have certain projects that doing the fine tuning of logical.

Speaker Change #161: Our language model and that requires more effort more data computing power and then that's a little bit more heavy lifting from a cost perspective, the largest program. We've seen so far is the final phase that is developing your own large language model and then that's fewer definitely than the others, but.

And then that's fewer, definitely, than the others, but we already have them in flight. And we do believe that as we progress, as the POC and adoption of JNA progress, we're going to see more and more of this work moving from what I mentioned earlier, from left to right, slowly proceeding to finally building your own large-language model. Now, you don't need to build your own LLM in every case, but some of them will require that, and that's a significant effort, and then those will generate a much bigger project.

Speaker Change #161: We already have them.

Speaker Change #161: In flight and we do believe that as we progress as the as the POC and adoption of G&A progress, we're going to see more and more of these work moving from from what I mentioned earlier from left to right.

Speaker Change #161: Slowly proceeding to finally building your own large large language model not you don't need to build your own allo Lam in every cases, but some of them.

Speaker Change #161: Acquired that and Thats, a significant effort and then those will generate a much bigger projects.

Perfect. That's really helpful. Thank you very much. And once again, it was really a pleasure working with you. Thank you, Arvind. Same here.

Speaker Change #164: Alright perfect.

Speaker Change #165: That's really helpful.

Speaker Change #167: Thank you very much.

Speaker Change #167: Once again as the.

Speaker Change #168: A pleasure.

Speaker Change #164: With you.

Speaker Change #163: Thank you Sam here.

I'm just going to jump in quickly while we're still on the call. I wanted to quickly follow up on the share count dynamics that Jacob asked about earlier. I would simply highlight that the share count dynamics reflect the share price and how it impacts the accounting treatment with respect to dilution. So that's a big part of the change from last quarter to this quarter. An example would be dilution from options.

Speaker Change #171: I'm just going to jump in quickly while we're still on the call I wanted to quickly follow up on the share count dynamics that Jacob asked about earlier and I would simply highlight that the share count dynamics reflect the share price and how it impacts the accounting treatment with respect to dilution. So that's.

Speaker Change #163: A big part of the change from last quarter to this quarter. An example would be dilution from from option.

And with that, I'll hand over to you, operator. Thank you. There are no further questions. I'd like to turn the call over to Xiao for closing remarks. Thank you. And thank you everyone for joining us today for our Q1 earnings call. I want to thank all the thought workers, clients, and partners for the extraordinary impact we're delivering every day together. Stay well, and all the best. Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone have a great day.

Speaker Change #170: With that I'll hand over to you operator.

Speaker Change #170: Okay.

Operator: Thank you there are no further questions I'd like to turn the call over to Joe for closing remarks.

Joe: Thank you.

Joe: And thank you everyone for joining us today for our Q1 earnings call.

Joe: Want to thank all thought workers clients and partners for the for the extraordinary impact we're delivering everyday together stay well and all the best.

Speaker Change #169: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.