UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 15, 2021
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
City, State Zip Code
(312 ) 373-1000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On November 15, 2021 Thoughtworks Holding, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended September 30, 2021. A copy of the press release is attached hereto as Exhibit 99.1 and is available on the Company’s website at https://investors.thoughtworks.com/quarterly-earnings.
The information furnished in this Item 2.02 in this Current Report on Form 8-K, including the accompanying Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall any such information of exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |||||||
Press release issued by Thoughtworks Holding, Inc. dated November 15, 2021 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 15, 2021
| THOUGHTWORKS HOLDING, INC. | ||||||||||||||
| By: | /s/ Erin Cummins | |||||||||||||
| Erin Cummins | ||||||||||||||
| Chief Financial Officer | ||||||||||||||
Exhibit 99.1
Thoughtworks Reports Strong Third Quarter 2021 Financial Results
•Completion of successful IPO
•Revenue growth of 45.0%; 42.1% at constant currency
•Provides guidance for fourth quarter and full year 2021
CHICAGO, IL., (Nov. 15, 2021) – Thoughtworks Holding, Inc. (NASDAQ: TWKS) ("Thoughtworks" or the "Company"), a leading global technology consultancy, today reported results for the third quarter of 2021 and provided its financial outlook for the fourth quarter and full year 2021.
Guo Xiao, Thoughtworks' Chief Executive Officer, commented, "In our first quarter as a public company, I am pleased to report that we have delivered revenues of $285.1 million, an increase of 45.0% year on year and 42.1% in constant currency1.
Our premium position and cultivating culture attract and retain what we believe to be the best talent in the industry. And I am delighted that we achieved another milestone in the quarter, reaching over 10,000 Thoughtworkers across five continents, delivering extraordinary impact through our technology excellence and culture.
Our strong combination of best-in-class strategy, software engineering, design and organizational transformation expertise has made Thoughtworks a leading digital transformation partner in a large and rapidly-expanding market. We have seen positive momentum in the third quarter and expect a strong end to the year.
To reflect the positive momentum we are seeing in the third quarter as well as our expectations for the remainder of the year, we are providing our fourth quarter and full year 2021 guidance."
Third quarter 2021 highlights
•Revenues of $285.1 million, an increase of 45.0% year-over-year and 42.1% on a constant currency basis
•Gross margin of 35.5%, a decrease of 6.1% from 41.6% in the third quarter of 2020, impacted by $25.8 million of additional stock-based compensation
•Adjusted Gross Margin of 45.7%, compared to 42.7% in the third quarter of 2020, after adjustment for stock-based compensation and depreciation, reflecting solid execution and strong demand for our premium digital transformation services
•Net loss of $(25.2) million and net loss margin of (8.9)%, impacted by $73.2 million of stock-based compensation
•Diluted loss per common share of $(0.10) compared to diluted earnings per common share of $0.08 for the third quarter 2020, which includes the impact of stock-based compensation as noted above
•Adjusted Diluted Earnings per Share of $0.14 compared to $0.08 for the third quarter 2020, which includes the following adjustments: $73.2 million of stock-based compensation, $3.0 million of intangibles amortization, $1.4 million of unrealized foreign exchange losses, $1.6 million of costs related to our initial public offering (“IPO”), $0.5 million of acquisition costs, $0.1 million of non-recurring professional fees and $17.4 million in income tax effects for the aforementioned adjustments
1 Revenue Growth Rate at constant currency, Adjusted EBITDA and certain other measures in this release, are non-GAAP financial measures. See “Non-GAAP Measures” for how we define these measures and the financial tables that accompany this release for reconciliations of these measures to the closest comparable GAAP measures.
•Adjusted EBITDA of $66.5 million, an increase of 52.5% compared to the third quarter of 2020; Adjusted EBITDA Margin of 23.3%, a 110 bps increase compared to the third quarter of 2020
•Cash flow from operations of $35.2 million; Free Cash Flow of $27.5 million
Third quarter financial results | Three months ended September 30, | ||||||||||||||||||||||
| $ in millions, except per share data2 | 2021 | 2020 | Change | % Change | |||||||||||||||||||
| GAAP Metrics: | |||||||||||||||||||||||
| Revenues | $ | 285.1 | $ | 196.5 | $ | 88.5 | 45.0 | % | |||||||||||||||
| Revenue Growth Rate as reported | 45.0 | % | (1.4) | % | 46.4 | % | |||||||||||||||||
| Gross Profit | $ | 101.1 | $ | 81.7 | $ | 19.4 | 23.8 | % | |||||||||||||||
| Gross Margin | 35.5 | % | 41.6 | % | (6.1) | % | |||||||||||||||||
| SG&A | $ | 113.0 | $ | 42.1 | $ | 70.9 | 168.6 | % | |||||||||||||||
| SG&A Margin | 39.6 | % | 21.4 | % | 18.2 | % | |||||||||||||||||
| Net (loss) income | $ | (25.2) | $ | 21.9 | $ | (47.1) | (215.3) | % | |||||||||||||||
| Net (loss) income margin | (8.9) | % | 11.1 | % | (20.0) | % | |||||||||||||||||
| Diluted (loss) earnings per common share | $ | (0.10) | $ | 0.08 | $ | (0.18) | (225.0) | % | |||||||||||||||
| Cash flow from operations | $ | 35.2 | $ | 27.2 | $ | 8.0 | 29.3 | % | |||||||||||||||
| Non-GAAP Metrics: | |||||||||||||||||||||||
| Revenue Growth Rate at constant currency | 42.1 | % | (1.8) | % | 43.9 | % | |||||||||||||||||
| Adjusted Gross Profit | $ | 130.4 | $ | 84.0 | $ | 46.4 | 55.2 | % | |||||||||||||||
| Adjusted Gross Margin | 45.7 | % | 42.7 | % | 3.0 | % | |||||||||||||||||
| Adjusted SG&A | $ | 63.4 | $ | 41.5 | $ | 21.9 | 52.8 | % | |||||||||||||||
| Adjusted SG&A Margin | 22.2 | % | 21.1 | % | 1.1 | % | |||||||||||||||||
| Adjusted Net Income | $ | 37.2 | $ | 24.2 | $ | 13.0 | 53.7 | % | |||||||||||||||
| Adjusted EBITDA | $ | 66.5 | $ | 43.6 | $ | 22.9 | 52.5 | % | |||||||||||||||
| Adjusted EBITDA Margin | 23.3 | % | 22.2 | % | 1.1 | % | |||||||||||||||||
| Adjusted Diluted Earnings per Share | $ | 0.14 | $ | 0.08 | $ | 0.06 | 75.0 | % | |||||||||||||||
| Free Cash Flow | $ | 27.5 | $ | 24.1 | $ | 3.4 | 14.2 | % | |||||||||||||||
We had positive revenue growth in the third quarter of 2021 across all of our geographic markets, with North America growing at 35.4%, APAC growing at 53.2%, Europe growing at 49.1% and LATAM at 47.4%. Revenue growth across all of our industry verticals was strong, with our financial services and insurance vertical growing at 61.3%, a good rebound in our retail and consumer vertical growing at 61.1% and our energy, public and health services growing at 47.8%. Acquisitions completed in the last nine months contributed 2.0% to revenue growth in the quarter. In the third quarter, we achieved a gross margin of 35.5%, a decrease of 6.1% from 41.6% in the third quarter of 2020 which was primarily due to $25.8 million recorded in cost of revenues of additional stock-based compensation incurred in conjunction with our successful IPO, partially offset by the increased demand for our services. Our Adjusted Gross Margin was 45.7%, compared to 42.7% in
2 Certain amounts, percentages, and other figures presented in this press release have been subject to rounding adjustments. Accordingly, figures shown as totals, dollars or percentage amounts of changes may not represent the arithmetic summation or calculation of the figures that precede them.
the third quarter of 2020, reflecting solid execution and strong demand for our premium digital transformation services.
In the third quarter, our net loss margin was (8.9)%, compared to a net income margin of 11.1% for the third quarter of 2020, impacted by $73.2 million of additional stock-based compensation expense incurred in conjunction with our successful IPO. Our Adjusted EBITDA Margin increased to 23.3%, an increase of 1.1% compared to the third quarter of 2020. We had a diluted net loss per common share of $(0.10) in the third quarter, compared to a net income per common share of $0.08 in the third quarter of 2020, impacted by $73.2 million of additional stock-based compensation incurred in connection with the IPO, noted above.
We continue to have strong liquidity and cash flow from operations. We had cash and cash equivalents of $452.8 million as of September 30, 2021, along with $165.0 million of borrowing capacity under our revolving credit line. In October 2021, we repaid an additional $100.0 million of debt, which decreased our total debt outstanding, before deferred financing fees, to $511.4 million, compared to the $611.4 million at September 30, 2021. Free Cash Flow in the third quarter was $27.5 million, compared to $24.1 million in the third quarter of 2020.
IPO
On September 17, 2021, we successfully completed our IPO, in which 42.4 million shares of the Company's common stock were sold, which included the issuance and sale by the Company of 16.4 million shares of common stock, the sale by selling stockholders of 20.4 million shares of common stock, and the full exercise of the underwriters' option to purchase 5.5 million additional shares of common stock from certain of the selling stockholders. We did not receive any proceeds from the sale of our common stock by the selling stockholders. We received net proceeds of $314.7 million upon the closing of the IPO, after deducting the underwriting discounts and commissions and other offering expenses of approximately $30.3 million.
Financial outlook
Thoughtworks provides the following outlook for the fourth quarter and full year 2021:
Fourth quarter
Thoughtworks expects the following for the fourth quarter:
•Revenues in the range of $285 million to $287 million, reflecting year-over-year growth at the midpoint of 39%, or 38% on a constant currency basis;
•Adjusted EBITDA Margin in the range of 17.0% to 18.0%; and
•Adjusted Diluted Earnings per Share ("Adjusted Diluted EPS") in the range of $0.08 to $0.09 for the quarter, assuming a weighted average of 331 million diluted outstanding shares for the quarter.
Full year
Thoughtworks expects the following for the full year:
•Revenues in the range of $1,068 million to $1,070 million, reflecting year-over-year growth at the midpoint of 33%, or 29% on a constant currency basis;
•Adjusted EBITDA Margin in the range of 20.6% to 20.9%; and
•Adjusted Diluted EPS to be in the range of $0.45 to $0.46 for the year, assuming a weighted average of 274 million diluted outstanding shares for the year.
Conference call information
Thoughtworks will host a conference call and webcast call at 8:00 a.m. Eastern Time on Monday, November 15, 2021, to discuss our financial results. The conference call can be accessed through the following numbers: USA / Canada toll-free: +1 (844) 834-1436, International dial-in number: +1 (929) 517-0930, Conference ID: 8968336. To access the webcast and the accompanying slide presentation, which has additional information regarding Thoughtworks' operating results, you can visit our investor relations website at https://investors.thoughtworks.com. A telephone replay will be available from 11:00 a.m. ET on Monday, November 15, 2021 and for seven days following that, on +1 (855) 859-2056 and on +1 (404) 537-3406. A replay of the webcast will also be made available on our investor relations website at https://investors.thoughtworks.com. Information on Thoughtworks' website is not part of this press release.
About Thoughtworks
Thoughtworks is a global technology consultancy that integrates strategy, design and engineering to drive digital innovation. We are 10,000+ Thoughtworkers strong across 48 offices in 17 countries. Over the last 25+ years, we've delivered extraordinary impact together with our clients by helping them solve complex business problems with technology as the differentiator.
Investor contact:
Thoughtworks Holding, Inc.
Investor Relations: investor-relations@thoughtworks.com
Press contact:
Thoughtworks Holding, Inc.
Linda Horiuchi: linda.horiuchi@thoughtworks.com
Forward-looking statements
This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify these forward-looking statements by the use of terms such as "expect," "will," "continue," or similar expressions, and variations or negatives of these words, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements represent our management's beliefs and assumptions only as of the date of this press release. You should read this press release with the understanding that our actual future results may be materially different from what we expect. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, which include but are not limited to: the statements under "Financial outlook," including expectations relating to revenues and other financial or business metrics; statements regarding relationships with clients and business momentum; and any other statements of expectation or belief. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from results expressed or implied in this press release. Such risk factors include, but are not limited to, those related to: the current and future impact of the COVID-19 pandemic on Thoughtworks' business and industry; the effects of competition on the future business of Thoughtworks; uncertainty regarding the demand for and market utilization of our services; the ability to maintain or acquire new client relationships; general business and economic conditions; and our ability to successfully execute our growth strategy and strategic plans. Additional information concerning these and other risks and uncertainties are contained in the "Risk Factors" section of Thoughtworks' registration statement on Form S-1. Additional information will be made available in our quarterly reports on Form 10-Q, and other filings and reports that Thoughtworks may file from time to time with the SEC. Except as required by law, Thoughtworks assumes no obligation, and does not intend to, to
update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Non-GAAP financial measures
Certain financial metrics contained in this press release are considered non-GAAP financial measures. Definitions of and the related reconciliations for these non-GAAP financial measures can be found below. We use these non-GAAP measures in conjunction with traditional GAAP measures to evaluate our financial performance. We believe that these non-GAAP measures provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations. However, non-GAAP measures have limitations as analytical tools, and you should not consider these measures in isolation or as substitutes for analysis of our financial results as reported under GAAP. For example, many of the non-GAAP financial measures used herein exclude stock-based compensation expense, which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy.
Certain non-GAAP measures related to our financial outlook included in this press release and the associated webcast were not reconciled to the comparable GAAP financial measures because the GAAP measures are not accessible on a forward-looking basis. The Company is unable to reconcile these forward-looking non-GAAP financial measures to the most directly comparable GAAP measures without unreasonable efforts because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact GAAP measures for these periods but would not impact the non-GAAP measures. Such items may include stock-based compensation, acquisitions, income tax effects of adjustments and other items. The unavailable information could have a significant impact on the Company's GAAP financial results. Based on the foregoing, the Company believes that providing estimates of the amounts that would be required to reconcile the range of the non-GAAP measures to forecasted GAAP measures would imply a degree of precision that would be confusing or misleading to investors for the reasons identified above.
Revenue Growth Rate and Revenue Growth Rate at constant currency
Certain of our subsidiaries use functional currencies other than the U.S. dollar and the translation of these foreign currency amounts into U.S. dollars can impact the comparability of our revenues between periods. Accordingly, we use Revenue Growth Rate at constant currency as an important indicator of our underlying performance. Revenue Growth Rate at constant currency is calculated by applying the average exchange rates in effect during the earlier comparative fiscal period to the later fiscal period.
Adjusted Gross Profit and Adjusted Gross Margin
We define gross profit as total revenues less cost of revenues. We define Adjusted Gross Profit as gross profit excluding stock-based compensation expense and depreciation expense. We calculate Adjusted Gross Margin by dividing Adjusted Gross Profit by total revenues. Our management uses Adjusted Gross Profit to assess overall performance and profitability, without regard to items such as stock-based compensation and depreciation expense, which are unrelated to our ongoing revenue-generating operations. We also believe this information will be useful for investors to facilitate comparisons of our operating performance and better identify trends in our business.
Adjusted SG&A and Adjusted SG&A Margin
We define Adjusted Selling, General & Administrative ("Adjusted SG&A") as selling, general and administrative expense excluding stock-based compensation expense, acquisition costs, certain professional fees that are considered unrelated to our ongoing revenue-generating operations, tender offer compensation expense that is considered one-time in nature, certain costs related to business rationalization and IPO-related costs. We calculate Adjusted SG&A Margin by dividing Adjusted SG&A by total revenues.
Our management uses Adjusted SG&A and Adjusted SG&A Margin to assess our overall performance, without regard to items such as stock-based compensation expense and other items that are considered to be unique or non-recurring in nature or otherwise unrelated to our ongoing revenue-generating operations. We also believe this information will be useful for investors to facilitate comparisons of our operating performance and better identify trends in our business.
Adjusted Net Income and Adjusted Diluted EPS
We define Adjusted Net Income as net (loss) income adjusted for unrealized gain (loss) on foreign currency exchange, stock-based compensation expense, amortization of acquisition-related intangibles, acquisition costs, certain professional fees that are considered unrelated to our ongoing revenue-generating operations, tender offer compensation expense that is considered one-time in nature, certain costs related to business rationalization, IPO-related costs and income tax effects of adjustments.
We define Adjusted Diluted Earnings per Share ("Adjusted Diluted EPS") as diluted (loss) earnings per common share, with the numerator adjusted for unrealized gain (loss) on foreign currency exchange, stock-based compensation expense, amortization of acquisition-related intangibles, acquisition costs, certain professional fees that are considered unrelated to our ongoing revenue-generating operations, tender offer compensation expense that is considered one-time in nature, certain costs related to business rationalization, IPO-related costs and income tax effects of adjustments. In other words, the numerator for Adjusted Diluted EPS utilizes Adjusted Net Income. We calculate Adjusted Diluted EPS by dividing Adjusted Net Income, after adjustment for preferred stock dividends, resulting in Adjusted Net Income attributable to common shareholders, by diluted weighted average shares outstanding.
Our management uses Adjusted Net Income and Adjusted Diluted EPS to assess our overall performance, without regard to items that are considered to be unique or non-recurring in nature or otherwise unrelated to our ongoing revenue-generating operations, net of the income tax effect of the adjusted items.
Our management uses Adjusted Net Income for planning purposes, including the preparation of our annual operating budget, as a measure of our core operating results and the effectiveness of our business strategy, and in evaluating our financial performance. We also believe this information will be useful for investors to facilitate comparisons of our operating performance and better identify trends in our business.
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as net (loss) income excluding income tax expense, interest expense, other (expense) income, net, unrealized gain (loss) on foreign currency exchange, stock-based compensation expense, depreciation and amortization expense, acquisition costs, certain professional fees that are considered unrelated to our ongoing revenue generating operations, tender offer compensation expense that is considered one-time in nature, certain costs related to business rationalization and IPO-related costs. We calculate Adjusted EBITDA Margin by dividing Adjusted EBITDA by total revenue.
Adjusted EBITDA and Adjusted EBITDA Margin are widely used by investors and securities analysts to measure a company's operating performance without regard to items such as stock-based compensation expense, depreciation and amortization expense, interest expense, other (income) expense, net, and income tax expense that can vary substantially from company to company depending upon their financing, capital structures, and the method by which assets were acquired or costs that are unique or non-recurring in nature or otherwise unrelated to our ongoing revenue-generating operations.
Our management uses Adjusted EBITDA and Adjusted EBITDA Margin for planning purposes, including the preparation of our annual operating budget, as a measure of our core operating results and the effectiveness of our business strategy, and in evaluating our financial performance. We also believe this information will be useful for investors to facilitate comparisons of our operating performance and better identify trends in our business.
Free Cash Flow
We define Free Cash Flow as net cash used in operating activities less cash used for purchases of property and equipment. We believe that Free Cash Flow is a useful indicator of liquidity for investors and is used by our management as it measures our ability to generate cash, or our need to access additional sources of cash, to fund operations and investments. There are a number of limitations related to the use of free cash flow as compared to net cash from operating activities, including that Free Cash Flow includes capital expenditures, the benefits of which are realized in periods subsequent to those when expenditures are made.
THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME
(In thousands, except share data and per share data)
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenues | $ | 285,051 | $ | 196,549 | $ | 783,145 | $ | 597,082 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Cost of revenues | 183,945 | 114,849 | 471,047 | 351,750 | |||||||||||||||||||
| Selling, general and administrative expenses | 113,019 | 42,073 | 248,366 | 139,498 | |||||||||||||||||||
| Depreciation and amortization | 4,173 | 4,343 | 13,007 | 12,587 | |||||||||||||||||||
| Total operating expenses | 301,137 | 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), net | 162 | 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 expense | 643 | 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 | |||||||||||||||||||
Stock-based compensation expense included in the condensed consolidated statements of (loss) income was as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Cost of revenues | $ | 25,756 | $ | — | $ | 29,071 | $ | — | |||||||||||||||
| Selling, general and administrative expenses | 47,420 | 292 | 54,357 | 1,066 | |||||||||||||||||||
| Total stock-based compensation expense | $ | 73,176 | $ | 292 | $ | 83,428 | $ | 1,066 | |||||||||||||||
THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data and per share data)
| September 30, 2021 | December 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 receivables | 126,517 | 88,340 | |||||||||
| Prepaid expenses | 11,086 | 9,442 | |||||||||
| Other current assets | 40,402 | 9,960 | |||||||||
| Total current assets | 749,235 | 711,766 | |||||||||
| Property and equipment, net | 35,038 | 26,347 | |||||||||
| Intangibles and other assets: | |||||||||||
| Goodwill | 346,831 | 318,151 | |||||||||
| Intangible assets, net | 401,820 | 402,055 | |||||||||
| Other non-current assets | 17,688 | 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 - current | 7,150 | 4,565 | |||||||||
| Income taxes payable | 15,840 | 11,032 | |||||||||
| Accrued compensation | 74,085 | 49,896 | |||||||||
| Deferred revenue | 9,054 | 11,720 | |||||||||
| Value-added tax and sales tax payable | 3,584 | 6,846 | |||||||||
| Accrued expenses | 65,122 | 29,749 | |||||||||
| Total current liabilities | 180,895 | 118,157 | |||||||||
| Long-term debt, less current portion | 597,004 | 435,192 | |||||||||
| Deferred tax liabilities | 86,329 | 98,310 | |||||||||
| Other long-term liabilities | 17,051 | 16,052 | |||||||||
| Total liabilities | 881,279 | 667,711 | |||||||||
THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data and per share data)
| September 30, 2021 | December 31, 2020 | ||||||||||
| (unaudited) | |||||||||||
| Commitments and contingencies (See Note 9 to our Quarterly Report on Form 10-Q) | |||||||||||
| 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 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 capital | 1,316,075 | 381,172 | |||||||||
| Accumulated other comprehensive loss | (10,591) | (1,589) | |||||||||
| Retained (deficit) earnings | (7,083) | 106,458 | |||||||||
| Total stockholders' equity | 669,333 | 484,712 | |||||||||
| Total liabilities, redeemable convertible preferred stock and stockholders' equity | $ | 1,550,612 | $ | 1,475,223 | |||||||
THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
| Nine months ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| 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 expense | 21,702 | 19,327 | |||||||||
| Bad debt provision | (611) | 6,713 | |||||||||
| Stock-based compensation expense | 82,836 | 1,066 | |||||||||
| Unrealized foreign currency exchange loss | 3,912 | 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 payable | 1,602 | (1,126) | |||||||||
| Accrued expenses and other liabilities | 58,182 | 6,844 | |||||||||
| Net cash provided by operating activities | 95,499 | 99,243 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of property and equipment | (21,504) | (9,005) | |||||||||
| Proceeds from disposal of fixed assets | 375 | 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 discounts | 314,716 | — | |||||||||
| Proceeds from issuance of Series A Redeemable Convertible Preferred Stock, net of issuance costs | 380,994 | — | |||||||||
| Proceeds from issuance of Series B Redeemable Convertible Preferred Stock, net of issuance costs | 122,228 | — | |||||||||
| 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 debt | 401,285 | — | |||||||||
| 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 stock | 1,873 | — | |||||||||
| Dividends paid | (315,003) | — | |||||||||
| Other financing activities, net | 1,317 | 105 | |||||||||
| Net cash used in financing activities | (37,454) | (3,357) | |||||||||
| 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 period | 492,199 | 57,156 | |||||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | 480,962 | $ | 143,564 | |||||||
THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
| Nine months ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| 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 | $ | — | |||||||
THOUGHTWORKS HOLDING, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except percentages and per share data)
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| Adjusted Gross Profit reconciliation: | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Gross profit, GAAP | $ | 101,106 | $ | 81,700 | $ | 312,098 | $ | 245,332 | |||||||||||||||
| Stock-based compensation | 25,756 | — | 29,071 | — | |||||||||||||||||||
| Depreciation expense | 3,488 | 2,278 | 8,695 | 6,740 | |||||||||||||||||||
| Adjusted Gross Profit | $ | 130,350 | $ | 83,978 | $ | 349,864 | $ | 252,072 | |||||||||||||||
| Gross margin, GAAP | 35.5 | % | 41.6 | % | 39.9 | % | 41.1 | % | |||||||||||||||
| Adjusted Gross Margin | 45.7 | % | 42.7 | % | 44.7 | % | 42.2 | % | |||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| Adjusted SG&A reconciliation: | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| SG&A, GAAP | $ | 113,019 | $ | 42,073 | $ | 248,366 | $ | 139,498 | |||||||||||||||
| Stock-based compensation | (47,420) | (292) | (54,357) | (1,066) | |||||||||||||||||||
| Acquisition costs (a) | (450) | — | (7,936) | — | |||||||||||||||||||
| Certain professional fees (b) | (145) | — | (1,991) | (56) | |||||||||||||||||||
| Non-recurring tender offer compensation expense (c) | — | — | (2,715) | — | |||||||||||||||||||
| Business rationalization (d) | — | (305) | — | (1,108) | |||||||||||||||||||
| IPO-related costs (e) | (1,638) | (14) | (2,713) | (234) | |||||||||||||||||||
| Adjusted SG&A | $ | 63,366 | $ | 41,462 | $ | 178,654 | $ | 137,034 | |||||||||||||||
| SG&A margin, GAAP | 39.6 | % | 21.4 | % | 31.7 | % | 23.4 | % | |||||||||||||||
| Adjusted SG&A Margin | 22.2 | % | 21.1 | % | 22.8 | % | 23.0 | % | |||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net (loss) income | $ | (25,235) | $ | 21,882 | $ | 11,502 | $ | 59,679 | |||||||||||||||
| Income tax expense | 643 | 8,336 | 15,605 | 16,243 | |||||||||||||||||||
| Interest expense | 6,734 | 6,016 | 20,316 | 19,833 | |||||||||||||||||||
| Other income (expense), net | (162) | (12) | (306) | (139) | |||||||||||||||||||
| Unrealized foreign exchange losses | 1,393 | 97 | 3,912 | 165 | |||||||||||||||||||
| Stock-based compensation | 73,192 | 292 | 83,428 | 1,066 | |||||||||||||||||||
| Depreciation and amortization | 7,661 | 6,621 | 21,702 | 19,327 | |||||||||||||||||||
| Acquisition costs (a) | 450 | — | 7,936 | — | |||||||||||||||||||
| Certain professional fees (b) | 145 | — | 1,991 | 56 | |||||||||||||||||||
| Non-recurring tender offer compensation expense (c) | — | — | 2,715 | — | |||||||||||||||||||
| Business rationalization (d) | — | 305 | — | 1,108 | |||||||||||||||||||
| IPO-related costs (e) | 1,638 | 14 | 2,713 | 234 | |||||||||||||||||||
| Adjusted EBITDA | $ | 66,459 | $ | 43,551 | $ | 171,514 | $ | 117,572 | |||||||||||||||
| Net (loss) income margin | (8.9) | % | 11.1 | % | 1.5 | % | 10.0 | % | |||||||||||||||
| Adjusted EBITDA Margin | 23.3 | % | 22.2 | % | 21.9 | % | 19.7 | % | |||||||||||||||
THOUGHTWORKS HOLDING, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except percentages and per share data)
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net (loss) income allocated to common shareholders | $ | (25,235) | $ | 21,882 | $ | (48,140) | $ | 59,679 | |||||||||||||||
| Preferred stock dividends | — | — | 59,642 | — | |||||||||||||||||||
| Net (loss) income | (25,235) | 21,882 | 11,502 | 59,679 | |||||||||||||||||||
| Unrealized foreign exchange losses | 1,393 | 97 | 3,912 | 165 | |||||||||||||||||||
| Stock-based compensation | 73,192 | 292 | 83,428 | 1,066 | |||||||||||||||||||
| Amortization of acquisition-related intangibles | 3,018 | 2,652 | 9,051 | 7,851 | |||||||||||||||||||
| Acquisition costs (a) | 450 | — | 7,936 | — | |||||||||||||||||||
| Certain professional fees (b) | 145 | — | 1,991 | 56 | |||||||||||||||||||
| Non-recurring tender offer compensation expense (c) | — | — | 2,715 | — | |||||||||||||||||||
| Business rationalization (d) | — | 305 | — | 1,108 | |||||||||||||||||||
| IPO-related costs (e) | 1,638 | 14 | 2,713 | 234 | |||||||||||||||||||
| Income tax effects of adjustments (f) | (17,413) | (1,011) | (26,635) | (2,243) | |||||||||||||||||||
| Adjusted Net Income | $ | 37,188 | $ | 24,231 | $ | 96,613 | $ | 67,916 | |||||||||||||||
| GAAP diluted weighted average common shares outstanding | 241,351,052 | 285,073,748 | 237,121,811 | 284,165,048 | |||||||||||||||||||
| Employee stock options and restricted common shares | 20,968,124 | — | 20,839,475 | — | |||||||||||||||||||
| Adjusted diluted weighted average common shares outstanding | 262,319,176 | 285,073,748 | 257,961,286 | 284,165,048 | |||||||||||||||||||
| GAAP diluted (loss) earnings per common share | $ | (0.10) | $ | 0.08 | $ | (0.20) | $ | 0.21 | |||||||||||||||
| Adjusted Diluted EPS | $ | 0.14 | $ | 0.08 | $ | 0.37 | $ | 0.24 | |||||||||||||||
__________
(a)Reflects costs for certain professional fees and retention wage expenses related to certain acquisitions.
(b)Adjusts for certain transaction expenses, non-recurring legal expenses, and one-time professional fees.
(c)Adjusts for the additional compensation expense related to the tender offer completed in the first quarter of 2021.
(d)Adjusts for business rationalization revenues and costs related to closing Thoughtworks Studios, which was completely shut down as of December 31, 2020. Thoughtworkers previously associated with Thoughtworks Studios have been transitioned to higher-revenue generating functions.
(e)Adjusts for IPO-readiness costs and expenses that do not qualify as equity issuance costs.
(f)Adjusts for the income tax effects of the foregoing adjusted items.
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| Free Cash Flow reconciliation: | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net cash provided by operating activities | $ | 35,203 | $ | 27,227 | $ | 95,499 | $ | 99,243 | |||||||||||||||
| Purchase of property and equipment | (7,680) | (3,122) | (21,504) | (9,005) | |||||||||||||||||||
| Free Cash Flow | $ | 27,523 | $ | 24,105 | $ | 73,995 | $ | 90,238 | |||||||||||||||