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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from to
Commission File Number 001-40812
https://cdn.kscope.io/860e37ad173d7e0166cef7fcd94fe297-twks-20210930_g1.jpg
THOUGHTWORKS HOLDING, INC.
(Exact name of registrant as specified in its charter)
Delaware82-2668392
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
200 East Randolph Street, 25th Floor
Chicago, Illinois 60601
(312) 373-1000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par valueTWKSNasdaq Global Select Market
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes No
As of November 11, 2021, there were approximately 305,117,043 shares of the registrant's common stock outstanding.


Table of Contents
THOUGHTWORKS HOLDING, INC.
TABLE OF CONTENTS
Page



Table of Contents
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” or similar expressions and the negatives of those terms. The forward-looking statements are generally contained in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include information concerning our possible or assumed future results of operations, client demand, business strategies, technology developments, financing and investment plans, our industry and regulatory environment, effects from the COVID-19 pandemic, potential growth opportunities and the effects of competition.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report. You should read this Quarterly Report and the documents that we have filed as exhibits to the registration statement, of which this Quarterly Report is a part, completely and with the understanding that our actual future results may be materially different from what we expect.
Important factors that could cause actual results to differ materially from our expectations include:
the COVID-19 pandemic has impacted our business and operations, and future business and operational challenges posed by the COVID-19 pandemic could materially adversely affect us;
we may be unable to implement our growth strategy;
our ability to generate and retain business depends on our reputation in the marketplace;
we must successfully attract, hire, train and retain skilled professionals to service our clients’ projects and we must productively deploy our professionals to remain profitable;
increases in wages and other compensation expenses could prevent us from sustaining our competitive advantage and could increase our costs;
our business and operations may be harmed if we cannot positively evolve and preserve our Thoughtworks culture;
our global business exposes us to operational, geopolitical, regulatory, legal and economic risks;
our business, financial condition and results of operations may be adversely affected by fluctuations in foreign currency exchange rates or changes in our effective tax rates;
if we fail to adequately innovate, adapt and/or remain at the forefront of emerging technologies and related client demands, we could be materially adversely affected;
we may not be successful at attracting new clients or retaining and expanding our relationships with our existing clients;
we face intense competition and operate in a rapidly evolving industry, which makes it difficult to evaluate our future prospects;
we generally do not have long-term commitments or contracts with our clients;
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we face risks associated with having a long selling and implementation cycle for our services that require us to make significant resource commitments prior to realizing revenues for those services;
our profitability could suffer if we cannot accurately price our solutions and services, maintain favorable pricing for our solutions and services, are unable to collect on receivables from clients or fail to meet our contractual and other obligations to clients;
we face risks associated with security breaches as well as privacy and data protection regulations, and we may incur significant liabilities if we fail to manage those risks;
we may not be able to prevent unauthorized use of our intellectual property, and our intellectual property rights may not be adequate to protect our business and competitive position;
Funds advised by Apax Partners L.L.P. control us, and such control may give rise to actual or perceived conflicts of interests;
our status as a “controlled company” will grant us exemptions from certain corporate governance requirements, and our status as an “emerging growth company” will allow us to comply with reduced public company reporting requirements; and
other factors disclosed in the section entitled “Risk Factors” in the final prospectus filed September 16, 2021, which forms part of the Registration Statement on Form S-1 declared effective as of the same date (the “IPO Prospectus”) and in this Quarterly Report.
We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report and in our IPO Prospectus. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other Securities and Exchange Commission (“SEC”) filings and public communications. You should evaluate all forward-looking statements made in this Quarterly Report in the context of these risks and uncertainties.
We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.


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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)
THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data and per share data)
September 30, 2021December 31, 2020
(unaudited)
Assets
Current assets:
Cash and cash equivalents$452,810 $490,841 
Trade receivables, net of allowance for doubtful accounts of $9,085 and $10,385, respectively
118,420 113,183 
Unbilled receivables126,517 88,340 
Prepaid expenses 11,086 9,442 
Other current assets40,402 9,960 
Total current assets749,235 711,766 
Property and equipment, net35,038 26,347 
Intangibles and other assets:
Goodwill346,831318,151
Intangible assets, net401,820402,055
Other non-current assets17,688 16,904 
Total assets$1,550,612 $1,475,223 
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:
Accounts payable$6,060 $4,349 
Long-term debt - current7,150 4,565 
Income taxes payable15,840 11,032 
Accrued compensation74,085 49,896 
Deferred revenue9,054 11,720 
Value-added tax and sales tax payable3,584 6,846 
Accrued expenses65,122 29,749 
Total current liabilities180,895 118,157 
Long-term debt, less current portion597,004 435,192 
Deferred tax liabilities86,329 98,310 
Other long-term liabilities17,051 16,052 
Total liabilities881,279 667,711 











The accompanying notes form an integral part of the condensed consolidated financial statements.
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THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data and per share data)


September 30, 2021December 31, 2020
(unaudited)
Commitments and contingencies (See Note 9)
Redeemable, convertible preferred stock:
Series A redeemable convertible preferred stock, $0.001 par value; zero and 217,902,632 shares authorized, zero and 23,493,546 issued and outstanding at September 30, 2021 and December 31, 2020, respectively
— 322,800 
Series B redeemable convertible preferred stock, $0.001 par value; zero shares authorized, zero issued and outstanding at September 30, 2021 and December 31, 2020, respectively
—  
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 100,000,000 and zero shares authorized, zero issued and outstanding at September 30, 2021 and December 31, 2020, respectively
 — 
Common stock, $0.001 par value; 1,000,000,000 and zero authorized, 356,102,614 and zero shares issued, 305,117,043 and zero shares outstanding at September 30, 2021 and December 31, 2020, respectively
356 — 
Class A common stock, $0.001 par value; zero and 416,194,027 authorized, zero and 272,054,182 shares issued, zero and 272,054,182 shares outstanding at September 30, 2021 and December 31, 2020, respectively
— 272 
Class B common stock, $0.001 par value; zero and 116,577,908 authorized, zero and 5,002,488 shares issued, zero and 4,474,514 shares outstanding at September 30, 2021 and December 31, 2020, respectively
— 5 
Class C common stock, $0.001 par value; zero and 55,565,172 authorized, zero and 1,838,757 shares issued, zero and 1,794,020 shares outstanding at September 30, 2021 and December 31, 2020, respectively
— 2 
Treasury stock, 50,985,571 and 572,711 shares at September 30, 2021 and December 31, 2020, respectively
(629,424)(1,608)
Additional paid-in capital1,316,075 381,172 
Accumulated other comprehensive loss(10,591)(1,589)
Retained (deficit) earnings (7,083)106,458 
Total stockholders' equity669,333 484,712 
Total liabilities, redeemable convertible preferred stock and stockholders' equity$1,550,612 $1,475,223 













The accompanying notes form an integral part of the condensed consolidated financial statements.
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THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME (unaudited)
(In thousands, except share data and per share data)

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenues$285,051 $196,549 $783,145 $597,082 
Operating expenses:
Cost of revenues183,945 114,849 471,047 351,750 
Selling, general and administrative expenses113,019 42,073 248,366 139,498 
Depreciation and amortization4,173 4,343 13,007 12,587 
Total operating expenses301,137 161,265 732,420 503,835 
(Loss) income from operations(16,086)35,284 50,725 93,247 
Other (expense) income:
Interest expense(6,734)(6,016)(20,316)(19,833)
Net realized and unrealized foreign currency (loss) gain(1,934)938 (3,608)2,369 
Other income (expense), net162 12 306 139 
Total other expense(8,506)(5,066)(23,618)(17,325)
(Loss) income before income taxes(24,592)30,218 27,107 75,922 
Income tax expense643 8,336 15,605 16,243 
Net (loss) income$(25,235)$21,882 $11,502 $59,679 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments(7,109)9,940 (9,002)(7,321)
Comprehensive (loss) income$(32,344)$31,822 $2,500 $52,358 
Net (loss) earnings per common share:
Basic (loss) earnings per common share$(0.10)$0.08 $(0.20)$0.21 
Diluted (loss) earnings per common share$(0.10)$0.08 $(0.20)$0.21 
Weighted average shares outstanding:
Basic 241,351,052 278,218,732 237,121,811 278,202,291 
Diluted 241,351,052 285,073,748 237,121,811 284,165,048 
The accompanying notes form an integral part of the condensed consolidated financial statements.
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THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (unaudited)
(In thousands, except share data)

Redeemable, Convertible Preferred StockCommon StockTreasuryAdditional
Paid-In Capital
Accumulated Other Comprehensive LossRetained (Deficit)
Earnings
SharesAmountSharesAmountSharesAmountTotal
Balance as of June 30, 2020 $ 278,198,070 $279 572,711 $(1,608)$379,993 $(27,328)$64,972 $416,308 
Net income— — — — — — — — 21,882 21,882 
Other comprehensive income, net of tax— — — — — — — 9,940 — 9,940 
Issuance of common stock on exercise of options, net of withholding taxes— — 27,408 — — — 63 — — 63 
Stock-based compensation expense— — — — — — 292 — — 292 
Balance as of September 30, 2020 $ 278,225,478 $279 572,711 $(1,608)$380,348 $(17,388)$86,854 $448,485 
Balance as of June 30, 202159,489,958 $826,022 228,080,650 $279 50,985,571 $(629,424)$103,785 $(3,482)$18,152 $(510,690)
Net loss— — — — — — — — (25,235)(25,235)
Other comprehensive loss, net of tax— — — — — — — (7,109)— (7,109)
Issuance of common stock upon initial public offering, net of issuance costs of $30.3 million
— — 16,429,964 16 — — 314,700 — — 314,716 
Conversion of redeemable convertible preferred stock to common stock(59,489,958)(826,022)59,489,958 60 — — 825,962 — — 826,022 
Issuance of common stock on exercise of options, net of withholding taxes— — 1,116,471 1 — — (972)— — (971)
Stock-based compensation expense— — — — — — 72,600 — — 72,600 
Balance as of September 30, 2021 $ 305,117,043 $356 50,985,571 $(629,424)$1,316,075 $(10,591)$(7,083)$669,333 
The accompanying notes form an integral part of the condensed consolidated financial statements.
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THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (unaudited)
(In thousands, except share data)
Redeemable, Convertible Preferred StockCommon StockTreasuryAdditional
Paid-In Capital
Accumulated Other Comprehensive LossRetained (Deficit)
Earnings
SharesAmountSharesAmountSharesAmountTotal
Balance as of December 31, 2019 $ 278,193,711 $279 572,711 $(1,608)$379,209 $(10,067)$27,175 $394,988 
Net income— — — — — — — — 59,679 59,679 
Other comprehensive loss, net of tax— — — — — — — (7,321)— (7,321)
Issuance of common stock on exercise of options, net of withholding taxes— — 31,767 — — — 73 — — 73 
Stock-based compensation expense— — — — — — 1,066 — — 1,066 
Balance as of September 30, 2020 $ 278,225,478 $279 572,711 $(1,608)$380,348 $(17,388)$86,854 $448,485 
Balance as of December 31, 202023,493,546 $322,800 278,322,716 $279 572,711 $(1,608)$381,172 $(1,589)$106,458 $484,712 
Net income— — — — — — — — 11,502 11,502 
Other comprehensive loss, net of tax— — — — — — — (9,002)— (9,002)
Issuance of common stock upon initial public offering, net of issuance costs of $30.3 million
— — 16,429,964 16 — — 314,700 — — 314,716 
Issuance of Redeemable Convertible Preferred Stock, net of issuance costs of $11.8 million
35,996,412 503,222 — — — — — — — — 
Conversion of redeemable convertible preferred stock to common stock(59,489,958)(826,022)59,489,958 60 — — 825,962 — — 826,022 
Issuance of common stock on exercise of options, net of withholding taxes— — 1,153,952 1 — — (886)— — (885)
Issuance of common stock— — 133,313 — — — 1,873 — — 1,873 
Dividends— — — — — — (279,191)— (45,821)(325,012)
Tender Offer— — (50,412,860)— 50,412,860 (627,816)(10,391)— (79,222)(717,429)
Stock-based compensation expense— — — — — — 82,836 — — 82,836 
Balance as of September 30, 2021 $ 305,117,043 $356 50,985,571 $(629,424)$1,316,075 $(10,591)$(7,083)$669,333 
The accompanying notes form an integral part of the condensed consolidated financial statements.
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THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)

Nine Months Ended September 30,
20212020
Cash flows from operating activities:
Net income$11,502 $59,679 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense21,702 19,327 
Bad debt provision(611)6,713 
Stock-based compensation expense82,836 1,066 
Unrealized foreign currency exchange loss3,912 165 
Other operating activities, net(10,849)4,863 
Changes in operating assets and liabilities:
Trade receivables(3,960)36,830 
Unbilled receivables(39,670)(30,812)
Prepaid expenses(1,610)(5,131)
Other assets(27,537)825 
Accounts payable1,602 (1,126)
Accrued expenses and other liabilities58,182 6,844 
Net cash provided by operating activities95,499 99,243 
Cash flows from investing activities:
Purchase of property and equipment(21,504)(9,005)
Proceeds from disposal of fixed assets375 101 
Acquisition of businesses, net of cash acquired(44,759) 
Net cash used in investing activities(65,888)(8,904)
Cash flows from financing activities:
Proceeds from initial public offering, net of issuance costs and underwriting discounts314,716  
Proceeds from issuance of Series A Redeemable Convertible Preferred Stock, net of issuance costs380,994  
Proceeds from issuance of Series B Redeemable Convertible Preferred Stock, net of issuance costs122,228  
Payments of obligations of long-term debt(234,921)(3,424)
Payments of debt issuance costs(7,098)(111)
Proceeds from borrowings on revolving credit facility 29,000 
Payments on revolving credit facility (29,000)
Proceeds from borrowings on long-term debt401,285  
Proceeds from issuance of common stock on exercise of options, net of employee tax withholding(885)73 
Shares and options purchased under Tender offer(701,960) 
Proceeds from issuance of common stock1,873  
Dividends paid(315,003) 
Other financing activities, net1,317 105 
Net cash used in financing activities(37,454)(3,357)
The accompanying notes form an integral part of the condensed consolidated financial statements.
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THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
Nine Months Ended September 30,
20212020
Effect of exchange rate changes on cash, cash equivalents and restricted cash(3,394)(574)
Net (decrease) increase in cash, cash equivalents and restricted cash(11,237)86,408 
Cash, cash equivalents and restricted cash at beginning of the period492,199 57,156 
Cash, cash equivalents and restricted cash at end of the period$480,962 $143,564 
Supplemental disclosure of cash flow information:
Interest paid$18,736 $18,364 
Income taxes paid$21,307 $9,470 
Withholding taxes payable$34,539 $ 
Supplemental disclosures of non-cash investing and financing activities:
Conversion of convertible preferred stock to common stock$826,022 $ 
Net settlement on exercise of shares$3,611 $ 
The accompanying notes form an integral part of the condensed consolidated financial statements.
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THOUGHTWORKS HOLDING, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)


Note 1 – Business and Summary of Significant Accounting Policies  
Thoughtworks Holding, Inc., formerly known as Turing Holding Corp., (together with its subsidiaries, the “Company”) develops, implements, and services complex enterprise application software, provides business technology consulting, and licenses technology practitioner tools which are used for software development. The Company conducts business in Australia, Brazil, Canada, Chile, China, Ecuador, Finland, Germany, Hong Kong, India, Italy, the Netherlands, Romania, Singapore, Spain, Thailand, the United Kingdom and the United States. Thoughtworks Holding, Inc. is the ultimate parent holding company of Thoughtworks, Inc. among other subsidiaries.
Initial Public Offering
The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective on September 14, 2021 and the Company’s common stock began trading on the Nasdaq Global Select Market on September 15, 2021. The Company's final prospectus (the “IPO Prospectus”) was filed with the SEC on September 16, 2021. On September 17, 2021 (the “IPO Closing Date”), the Company closed its IPO pursuant to which an aggregate of 42,368,421 shares of its common stock were sold, which includes the issuance and sale of 16,429,964 shares of the Company's common stock, the sale by selling stockholders of 20,412,142 shares of the Company's common stock, and the full exercise of the underwriters' option to purchase 5,526,315 additional shares of common stock from certain of the selling stockholders, at the IPO price of $21.00 per share. The Company received net proceeds of $314.7 million, after deducting the underwriting discounts and commissions and other offering expenses of approximately $30.3 million. Prior to the completion of the IPO, all shares of the Company's Class A, Class B and Class C common stock then outstanding were converted into 5,259,163 shares of common stock on a 1-for-1 basis, and upon the completion of the IPO, all 1,365,058 shares of the Company’s outstanding Series A and B redeemable convertible preferred stock converted into an equivalent number of shares of common stock on a 1-for-1 basis.
Additionally, after the conversion described above and prior to the completion of the IPO, the Company effected an approximate 43.6-for-1 split of each outstanding share of common stock (the "Stock Split"). All share and per share information has been retroactively adjusted to effect the Stock Split for all periods presented, except where otherwise noted.
Post-IPO, offering expenses, which consist of direct incremental legal, accounting, and consulting fees relating to the IPO, were recorded as equity issuance costs as a reduction to additional paid-in capital on the condensed consolidated statement of stockholders' equity. These offering expenses, net of reimbursement received from the underwriters upon completion of the IPO, totaled approximately $30.3 million, of which $19.0 million related to underwriting discounts and commissions and $11.3 million related to offering expenses, as of September 30, 2021.
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Thoughtworks Holding, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes included in the Company’s IPO Prospectus.
Preparation of Financial Statements and Use of Estimates
The preparation of the unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020. The preparation of these condensed consolidated financial statements is in conformity with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and
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THOUGHTWORKS HOLDING, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)


regulations of the SEC regarding interim financial reporting. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, the Company evaluates its estimates, including those related to allowance for doubtful accounts, valuation and impairment of goodwill and long-lived assets, income taxes, accrued bonus, contingencies, stock-based compensation, including the underlying deemed fair value of common stock (prior to the completion of the IPO), and litigation costs. The Company bases its estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of assets and liabilities when those values are not readily apparent from other sources. Actual results can differ from those estimates, and such differences may be material to the condensed consolidated financial statements. Operating results for the interim periods are not necessarily indicative of results that may be expected to occur for the entire year. In management’s opinion, all adjustments considered necessary for a fair presentation of the accompanying unaudited condensed consolidated financial statements have been included, and all adjustments are of a normal and recurring nature.
Segments
The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and assess performance.
While the Company has offerings in multiple modern digital businesses and operates in multiple countries, the Company’s business operates in one operating segment because most of the Company's service offerings are delivered and supported on a global basis, most of the Company's service offerings are deployed in a nearly identical way, and the Company’s CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis.
Long-Lived Assets
The North America geographic region encompasses the Company’s country of domicile (United States) and Canada, of which long-lived assets including property and equipment, net of depreciation, are principally held within the United States. The United States comprised $7.0 million, or 20.0%, and $4.6 million, or 17.4%, of the Company’s long-lived assets as of September 30, 2021 and December 31, 2020, respectively. Canadian long-lived assets were determined to be immaterial given property, and equipment was less than 10% of the Company's long-lived assets as of September 30, 2021 and December 31, 2020.
The Company holds material long-lived assets in the foreign geographic locations of Brazil, China, and India of $5.8 million, $8.1 million, and $7.6 million as of September 30, 2021, respectively, compared to $2.8 million, $7.6 million, and $5.3 million as of December 31, 2020, respectively. Long-lived assets in all other foreign geographic locations, including Canada, totaled $6.5 million and $6.0 million as of September 30, 2021 and December 31, 2020, respectively.
Stock-Based Compensation
The Company accounts for employee and non-employee equity-based compensation in accordance with ASC 718, Compensation – Stock Compensation. Accordingly, compensation expense for employee and non-employee services received in exchange for equity awards is based on the grant date fair value of those awards and is recognized over the requisite service period for the respective award. Prior to the IPO, the fair market value of the Company’s common stock was determined by the estimated fair market value of the Company’s common stock at the time of grant. Upon the completion of the IPO, the Company uses the market closing price of its common stock on the date of grant to determine the fair market value of the common stock, or if there is no market closing price on the date of grant, the closing price reported on the most recent trading date on Nasdaq.
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THOUGHTWORKS HOLDING, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)


The Company’s equity-based awards issued to employees include stock option awards issued by the Company, which vest based on either time or the achievement of certain performance and market conditions. The Company records forfeitures as they occur. Compensation expense resulting from time vesting based awards will be recognized in the Company’s consolidated statement of operations and comprehensive income (loss), primarily within general and administrative expenses, at the grant date fair value over the requisite service period (typically one to four years on an accelerated basis for time vested awards). Compensation expense resulting from performance awards will be recognized over the requisite service period when it is probable that the performance condition will be met. The calculated compensation expense for performance awards is adjusted based on an estimate of awards ultimately expected to vest.
Common Stock Valuation Prior to the IPO Closing Date
Prior to the IPO Closing Date, due to the absence of an active market for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of common stock. The valuation methodology included estimates and assumptions that required the Company’s judgment. These estimates and assumptions included a number of objective and subjective factors, including external market conditions affecting the industry sector, and the likelihood of achieving a liquidity event, such as an IPO, reverse merger or sale. Significant changes to the key assumptions used in the valuations resulted in different fair values of common stock at each valuation date.
The Company’s equity-based awards also include restricted stock units ("RSUs"), and the fair value of each RSU is based on the fair value of the Company’s common stock on the date of grant.
Refer to Note 11, Stock-Based Compensation, for more information on equity-based awards and the related activity that occurred in connection with the IPO.
Restricted Cash
Restricted cash is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Restricted cash is restricted as to withdrawal or use. The Company has restricted cash held on deposit at various financial institutions. The amounts are held in escrow for income tax withholdings, to secure bank guarantees of amounts related to government requirements, and collateral for a corporate credit card. A reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet is as follows (in thousands):
As of
September 30, 2021
As of
December 31, 2020
Cash and cash equivalents$452,810 $490,841 
Restricted cash included in other current assets26,827  
Restricted cash included in other non-current assets1,325 1,358 
Total cash, cash equivalents, and restricted cash$480,962 $492,199 
    
Recently Adopted Accounting Standards
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which amends Accounting Standards Codification (“ASC”) 820, Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The effective date is the first quarter of fiscal year 2020, with early adoption permitted for the removed disclosures and delayed adoption until fiscal year 2020 permitted for the new disclosures. The removed and modified disclosures were adopted on a retrospective basis and the new disclosures will be adopted on a prospective
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THOUGHTWORKS HOLDING, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)


basis. The adoption of ASU 2018-13 did not have a material impact on the Company’s condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 is intended to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The ASU is effective for annual reporting periods beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted. In the third quarter of 2021, the Company early adopted ASU 2018-15 and this adoption did not have a material impact on the Company’s condensed consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance became effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which amends existing accounting standards for lease accounting and requires lessees to recognize virtually all their leases on the balance sheet by recording a right-of-use asset and a lease liability (for other than short term leases). The Company is in the preliminary stages of gathering data and assessing the impact of the new lease standard. The Company anticipates that the adoption of this standard will materially affect the consolidated balance sheet and may require changes to the processes used to account for leases. The Company is currently in the process of evaluating the impact of the adoption of Topic 842 on the condensed consolidated financial statements and will adopt this new standard in the fiscal year beginning January 1, 2022, based on its status as an emerging growth company.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions, and reasonable and supportable forecasts, or a current expected credit loss (“CECL”) model. For trade receivables, loans, and other financial instruments, companies will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. In November 2019, the FASB issued ASU 2019-10 which delayed the effective date for the CECL standard. This guidance and related amendments is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently assessing the impact of this ASU on the condensed consolidated financial statements and will adopt this new standard in the fiscal year beginning January 1, 2023, based on its status as an emerging growth company.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The optional amendments are effective as of March 12, 2020 through December 31, 2022. The Company is currently assessing the impact of this ASU on the condensed consolidated financial statements and will adopt this new standard in the fiscal year beginning January 1, 2023 based on its status as an emerging growth company.
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THOUGHTWORKS HOLDING, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)


Concentration of Credit Risk and Other Risks and Uncertainties
Revenue generated from the Company's operations outside of the United States for the three and nine months ended September 30, 2021 was 66% and 65%, respectively, and for the three and nine months ended September 30, 2020 was 62% and 60%, respectively.
As of September 30, 2021 and December 31, 2020, approximately 71% and 74%, respectively, of trade accounts receivable and unbilled accounts receivable was due from customers located outside the United States. At September 30, 2021 and December 31, 2020, the Company had net fixed assets of $28.0 million and $21.8 million, respectively, outside the United States.
Note 2 – Revenue Recognition
The Company disaggregates revenues from contracts with customers by both geographic customer location and revenue contract types. Geographic customer location is pertinent to understanding the Company's revenues, as the Company generates its revenues from providing professional services to customers in various regions across the world. Revenue contract types are differentiated by the type of pricing structure for customer contracts, which is predominantly time-and-materials, but also includes fixed price contracts.
Disaggregation of Revenues    
The following tables present the disaggregation of the Company’s revenues by customer location for the three and nine months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended September 30,
20212020
Customer Location:
North America (1)$103,769 $76,649 
APAC (2)98,756 64,457 
Europe (3)69,522 46,623 
LATAM13,004 8,820 
Revenues$285,051 $196,549 
(1) North America encompasses the Company’s country of domicile (United States) and Canada, of which revenue is principally generated within the United States. During the three months ended September 30, 2021 and September 30, 2020, the United States represented 33.9%, or $96.5 million, and 37.3%, or $73.4 million, of the Company’s total revenues, respectively. Canadian operations were determined to be immaterial given the revenues generated from such operations as a percentage of total North America revenues was less than 10% for the three months ended September 30, 2021 and September 30, 2020.
(2) During the three months ended September 30, 2021, Australia, which is included in the Asia-Pacific region ("APAC"), represented 10.9%, or $31.0 million, of the Company’s total revenues. During the three months ended September 30, 2021, the revenues generated in China as a percentage of the Company’s total revenues was less than 10%. For the three months ended September 30, 2020, the revenues generated in Australia and China represented 10.0%, or $19.7 million, and 11.9%, or $23.4 million, of the Company’s total revenues respectively.
(3) During the three months ended September 30, 2021, Germany and the United Kingdom, which are included in the Europe region, represented 10.5%, or $30.0 million, and 10.5%, or $30.0 million, of the Company’s total revenues, respectively. For the three months ended September 30, 2020, the revenues generated in Germany and the United Kingdom represented 10.1%, or $19.8 million, and 10.6%, or $20.8 million, of the Company’s total revenues, respectively.
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THOUGHTWORKS HOLDING, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)


Other foreign countries were determined to be immaterial given the revenues generated from such operations as a percentage of the Company’s total revenues was less than 10% for the three months ended September 30, 2021 and September 30, 2020.
Nine Months Ended September 30,
20212020
Customer Location:
North America (1)$290,954 $243,797 
APAC (2)260,928 181,738 
Europe (3)196,476 143,673 
LATAM34,787 27,874 
Revenues$783,145 $597,082 
(1) During the nine months ended September 30, 2021 and September 30, 2020, the United States represented 35.1%, or $275.0 million, and 39.1%, or $233.5 million, of the Company’s total revenues, respectively. Canadian operations were determined to be immaterial given the revenues generated from such operations as a percentage of total North America revenues was less than 10% for the nine months ended September 30, 2021 and September 30, 2020.
(2) During the nine months ended September 30, 2021, Australia, which is included in the APAC region, represented 10.7%, or $83.7 million of the Company’s total revenues. For the nine months ended September 30, 2020, the revenues generated in Australia as a percentage of the Company’s total revenues was less than 10%.
(3) During the nine months ended September 30, 2021, Germany and the United Kingdom, which are included in the Europe region, represented 10.7%, or $84.2 million, and 10.7%, or $83.5 million, of the Company’s total revenues, respectively. For the nine months ended September 30, 2020, the revenues generated in Germany and the United Kingdom represented 10.0%, or $59.9 million, and 11.0%, or $65.7 million, of the Company’s total revenues, respectively.
Other foreign countries were determined to be immaterial given the revenues generated from such operations as a percentage of the Company’s total revenues was less than 10% for the nine months ended September 30, 2021 and September 30, 2020.
The following tables present the disaggregation of the Company’s revenues by contract type for the three and nine months ended September 30, 2021 and 2020 (in thousands):
Three Months Ended September 30,
20212020
Contract Types:
Time-and-material$237,533 $161,202 
Fixed-price47,518 35,319 
Licensing 28 
Revenues$285,051 $196,549 
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THOUGHTWORKS HOLDING, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)


Nine Months Ended September 30,
20212020
Contract Types:
Time-and-material$635,608 $504,710 
Fixed-price147,537 92,029 
Licensing 343 
Revenues$783,145 $597,082 
Contract Balances
The following table is a summary of the Company’s contract assets and contract liabilities (in thousands):
As of
September 30, 2021
As of
December 31, 2020
Contract assets included in unbilled receivables$29,264 $19,790 
Contract liabilities included in deferred revenue$9,054 $11,720 
Contract liabilities represent amounts collected from the Company’s customers for revenues not yet earned. Such amounts are anticipated to be recorded as revenues when services are performed in subsequent periods. During the three and nine months ended September 30, 2021, the Company recognized $0.5 million and $11.2 million of revenues, respectively, that were included in current liabilities at December 31, 2020. During the three and nine months ended September 30, 2020, the Company recognized $0.6 million and $8.2 million of revenues that were included in current liabilities at December 31, 2019.
Costs to Obtain a Customer Contract
The Company incurs certain incremental costs to obtain a contract that the Company expects to recover. The Company applies a practical expedient and recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs would primarily relate to commissions paid to our account executives and are included in selling, general and administrative expenses.
Transaction Price Allocated to Remaining Performance Obligations
The Company does not have material future performance obligations that extend beyond one year. Accordingly, the Company has applied the optional exemption for contracts that have an original expected duration of one year or less.
Note 3 – Acquisitions
The Company acquired two businesses, Gemini Solutions LLC (“Gemini”) and Fourkind Global Oy (“Fourkind”) during the first quarter of 2021 for an aggregate gross purchase price of $46.6 million, or $44.8 million net of cash acquired of $1.8 million. These acquisitions were intended to complement existing operations and to expand into new geographic markets. The Company accounted for these acquisitions under ASC 805, Business Combinations. The goodwill identified by these acquisitions reflects the benefits expected to be derived from expansion, as well as certain operational synergies. The fair value of the net assets acquired for these businesses was determined using Level 3 inputs, for which little or no market data exists, requiring the Company to develop assumptions regarding future cash flow projections. Upon consummation of these acquisitions, each of these businesses is now wholly-owned by the Company. The results of operations for the Company include the results of these businesses from their respective dates of acquisition. The operating results subsequent to the acquisition date did not have a significant impact on the condensed consolidated financial statements of the Company.
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THOUGHTWORKS HOLDING, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)


The Company's preliminary allocation of the fair value of underlying assets acquired and liabilities assumed as of the acquisition date is as follows (in thousands):
Total
Customer Relationship$11,100 
Property and Equipment259 
Other assets/liabilities, net4,228 
Deferred Taxes(1,646)
Goodwill32,615 
Total gross purchase price
$46,556 
Goodwill represents the excess of the purchase price over the fair values of assets acquired and liabilities assumed. For the Fourkind acquisition, the changes in fair value allocated to goodwill, tangible and intangible assets are not deductible for tax purposes. The Gemini acquisition was considered an asset acquisition for tax purposes; therefore, goodwill is deductible for tax purposes.
As additional information is obtained about the assets and liabilities of these acquisitions during the measurement period (not to exceed one year from the date of acquisition), including the completion or finalization of asset appraisals, the Company will refine its estimates of fair value to allocate the purchase price including finalizing the impact on taxes.
Note 4 – Goodwill and Other Intangible Assets
The following is a summary of goodwill as of September 30, 2021 (in thousands):
Total
Balance as of December 31, 2019$314,037 
Changes due to exchange rates4,114 
Balance as of December 31, 2020318,151 
Additions due to acquisitions32,615 
Changes due to exchange rates(3,935)
Balance as of September 30, 2021$346,831 
The following is a summary of other intangible assets as of (in thousands):
September 30, 2021December 31, 2020
Customer relationships$177,100 $166,000 
Less accumulated amortization43,177 34,122 
Customer relationships133,923 131,878 
Trademark273,000 273,000 
Total intangible assets, after amortization406,923 404,878 
Changes due to exchange rates(5,103)(2,823)
Intangible assets, net$401,820 $402,055 
Other than indefinite-lived trademarks, the Company’s intangible assets have finite lives and, as such, are subject to amortization. Amortization expense related to these intangible assets was $3.1 million and $9.1 million for the three and nine months ended September 30, 2021 and $2.7 million and $7.9 million for the three and nine months ended September 30, 2020, respectively.
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THOUGHTWORKS HOLDING, INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)


As of September 30, 2021, estimated amortization expense for the next five years and thereafter is as follows (in thousands):
Year Ending December 31,Total
2021 (excluding nine months ended September 30, 2021)$3,075 
202212,300 
202312,300 
202412,300 
202512,300 
Thereafter81,648 
$133,923