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0001866550TRUEThoughtworks Holding, Inc. (the "Company") is filing this Amendment No. 1 ("Amendment No. 1”) to its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the "Original Filing"), originally filed with the Securities and Exchange Commission (“SEC”) on August 8, 2023 (the “Original Filing Date”) to correct a misstatement in its Condensed Consolidated Statement of Cash Flows (Unaudited) for the period ended June 30, 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
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/1a52d77d9e02bbebb7372ae8613119a4-thoughtworks_flamingo_wave.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 13(a) of the Exchange 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 August 3, 2023, there were 317,728,750 shares of the registrant's common stock outstanding.



Explanatory Note
Thoughtworks Holding, Inc. (the "Company") is filing this Amendment No. 1 ("Amendment No. 1”) to its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the "Original Filing"), originally filed with the Securities and Exchange Commission (“SEC”) on August 8, 2023 (the “Original Filing Date”) to correct a misstatement in its Condensed Consolidated Statement of Cash Flows (Unaudited) for the period ended June 30, 2023. The misstatement was due to an inaccurate presentation of the change in cash flows ascribed to operating and financing activities in the condensed consolidated statement of cash flows. The misstatement relates solely to the inaccurate classification of the payment of contingent consideration. The Company considered both quantitative and qualitative factors in assessing the materiality of the misstatement and determined the misstatement was material to previously issued financial statements and has restated the accompanying Condensed Consolidated Statement of Cash Flows (Unaudited) for the period ended June 30, 2023 (the "Second Quarter").
There was no change to the net decrease in cash, cash equivalents and restricted cash in the Second Quarter nor was there any change in cash, cash equivalents and restricted cash at the end of the Second Quarter. There was no impact to the Company’s condensed consolidated statements of loss and comprehensive loss, condensed consolidated balance sheets, or its condensed consolidated statements of changes in stockholders’ equity for the Second Quarter.
Items Amended in this Quarterly Report on Form 10-Q/A
In addition to correcting the unaudited condensed consolidated financial statements, specifically the unaudited condensed consolidated statement of cash flows, related revisions and updates have been made to the following sections (the “Amended Items”):
Part I, Item 1. Financial Information
Note 1, Business and Summary of Significant Accounting Policies
Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part I, Item 4. Controls and Procedures
Part II, Item 1A. Risk Factors
Part II, Item 6. Exhibits
This Amendment No. 1 also includes revisions and updates to certain other information including, but not limited to, an updated signature page. Additionally, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Company is including with this Amendment No. 1 currently dated certifications from its principal executive officer and principal financial officer. These certifications are filed or furnished, as applicable, as Exhibits 31.1, 31.2, 32.1 and 32.2.
Except for the Amended Items, no changes have been made to the Original Filing, and this Amendment No. 1 does not modify, amend or update any of the other financial information or other information contained in the Original Filing. This amendment should be read in conjunction with the Company’s other filings with the SEC. This Amendment No. 1 does not reflect events that may have occurred subsequent to the Original Filing Date other than those disclosed in Note 1. This Amendment No. 1 reflects updated Exhibit 101 (Interactive Data Files), which is filed herewith, as applicable.
Internal Controls Considerations
A discussion of the Company's internal controls over financial reporting, including that a material weakness in the Company's internal controls over financial reporting has been identified and management's plans to remediate this material weakness, is set forth in Item 4.


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THOUGHTWORKS HOLDING, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page


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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,” "strive," “will,” “would” or similar expressions and the negatives of those terms but the absence of these words does not mean that the statement is not forward-looking. The forward-looking statements are contained principally in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements may include information concerning our possible or assumed future results of operations, client demand, business strategies, technology developments, financing and investment plans, competitive position, our industry, macroeconomic and regulatory environment, 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 hereto, 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:
our business has been, and may continue to be, adversely affected by volatile or uncertain operational, geopolitical, regulatory, legal and economic conditions;
our restructuring actions may not be successful, may impact our business and financial performance, and may result in additional costs;
our business, financial condition and results of operations may be adversely affected by fluctuations in foreign currency exchange rates;
increases in wages, equity compensation and other compensation expenses could prevent us from sustaining our competitive advantage and increase our costs;
our effective tax rate could be materially adversely affected by several factors;
we may not be successful at attracting new clients or retaining and expanding our relationships with our existing clients;
we generally do not have long-term commitments or contracts with our clients;
we face risks associated with having a long selling and implementation cycle for our services;
our cash flows and results of operations may be adversely affected if we are unable to collect on billed and unbilled receivables from clients;
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 may be unable to implement our strategy;
our ability to generate and retain business depends on our reputation in the marketplace;
our business and operations may be harmed if we cannot positively evolve and preserve our Thoughtworks culture;
if we fail to manage our acquisition strategy, our culture and growth plans could be materially adversely affected;
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;
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 face intense competition and operate in a rapidly evolving industry, which makes it difficult to evaluate our future prospects;
if we cause disruptions to our clients’ businesses, provide inadequate service, or breach contractual obligations, our clients may have claims against us, which our insurance may not adequately protect against, and our reputation may be damaged;
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;
3

Table of Contents
a significant failure in our systems, telecommunications or IT infrastructure could harm our service model, which could result in a reduction of our revenues and otherwise disrupt our business;
changes in privacy and data protection regulations could expose us to risks of noncompliance and costs associated with compliance;
we are subject to laws and regulations in the U.S. and other countries in which we operate, compliance with these laws requires significant resources and non-compliance may result in civil or criminal penalties and other remedial measures;
we may become subject to disputes or legal or other proceedings that could involve significant expenditures by us, which could have a material adverse effect on us, including our financial results;
our existing indebtedness could adversely affect our business and growth prospect;
we may face intellectual property infringement or misappropriation claims that could be costly to defend or if we do not protect our brand through our intellectual property rights, our business may be harmed;
we may not be able to prevent unauthorized use of our client's intellectual property and our business and competitive position may be damaged as a result;
our stock price may be volatile, and the value of our common stock may decline;
our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans, or otherwise will dilute all other stockholders;
if securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market price and trading volume of our common stock could decline;
we do not intend to pay dividends for the foreseeable future and, as a result, the ability of the holders of our common stock to achieve a return on their investment will depend on appreciation in the price of our common stock;
investment funds (the "Apax Funds") advised by Apax Partners L.L.P. ("Apax Partners") control us, and such control may give rise to actual or perceived conflicts of interests;
our status as a “controlled company” grants us exemptions from certain corporate governance requirements; and
other factors disclosed in the subsection entitled “Risk Factor Summary" and the section entitled "Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2023 (the "2022 Annual Report") and the section entitled "Risk Factors" 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, include, but are not limited to, those 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 2022 Annual Report. 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 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)
June 30, 2023December 31, 2022
(unaudited)
Assets
Current assets:
Cash and cash equivalents$88,151 $194,294 
Trade receivables, net of allowance of $7,915 and $9,531, respectively
154,208 201,695 
Unbilled receivables137,089 122,499 
Prepaid expenses and other current assets35,262 38,202 
Total current assets414,710 556,690 
Property and equipment, net32,062 38,798 
Right-of-use assets43,577 43,123 
Intangibles and other assets:
Goodwill422,313405,017
Trademark273,000273,000
Customer relationships, net120,677124,047
Other non-current assets20,888 21,175 
Total assets$1,327,227 $1,461,850 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$4,555 $5,248 
Long-term debt - current7,150 7,150 
Income taxes payable7,449 22,781 
Accrued compensation77,180 85,477 
Deferred revenue6,007 5,167 
Value-added tax and sales tax payable5,289 7,526 
Accrued expenses14,406 30,227 
Lease liabilities, current15,594 15,994 
Total current liabilities137,630 179,570 
Lease liabilities, non-current30,417 29,885 
Long-term debt, less current portion289,379 391,856 
Deferred tax liabilities54,224 62,555 
Other long-term liabilities21,849 19,762 
Total liabilities533,499 683,628 
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 100,000,000 shares authorized, zero issued and outstanding at June 30, 2023 and December 31, 2022, respectively
  
Common stock, $0.001 par value; 1,000,000,000 shares authorized, 368,253,048 and 366,306,970 issued, 317,647,945 and 315,681,987 outstanding at June 30, 2023 and December 31, 2022, respectively
368 366 
Treasury stock, 50,605,103 and 50,624,983 shares at June 30, 2023 and December 31, 2022, respectively
(624,687)(624,934)
Additional paid-in capital1,601,559 1,565,514 
Accumulated other comprehensive loss(39,619)(39,210)
Retained deficit (143,893)(123,514)
Total stockholders' equity793,728 778,222 
Total liabilities and stockholders' equity$1,327,227 $1,461,850 
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 AND COMPREHENSIVE LOSS (unaudited)
(In thousands, except share and per share data)

Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Revenues$287,215 $332,107 $594,271 $653,047 
Operating expenses:
Cost of revenues196,338 250,462 405,860 500,227 
Selling, general and administrative expenses86,626 99,352 172,966 204,117 
Depreciation and amortization5,874 4,215 11,416 10,061 
Total operating expenses288,838 354,029 590,242 714,405 
(Loss) income from operations(1,623)(21,922)4,029 (61,358)
Other (expense) income:
Interest expense(6,150)(4,984)(13,012)(9,631)
Net realized and unrealized foreign currency (loss) gain(30)(11,512)1,155 (6,774)
Other income (expense), net135 (413)(588)(325)
Total other (expense) income(6,045)(16,909)(12,445)(16,730)
Loss before income taxes(7,668)(38,831)(8,416)(78,088)
Income tax expense4,604 477 11,963 4,805 
Net loss$(12,272)$(39,308)$(20,379)$(82,893)
Other comprehensive (loss), net of tax:
Foreign currency translation adjustments(651)(20,760)(409)(26,231)
Comprehensive loss$(12,923)$(60,068)$(20,788)$(109,124)
Net loss per common share:
Basic loss per common share$(0.04)$(0.13)$(0.06)$(0.27)
Diluted loss per common share$(0.04)$(0.13)$(0.06)$(0.27)
Weighted average shares outstanding:
Basic 317,341,907 310,575,050 316,899,214 308,394,443 
Diluted 317,341,907 310,575,050 316,899,214 308,394,443 
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 STOCKHOLDERS' EQUITY (unaudited)
(In thousands, except share data)
Common StockTreasuryAdditional
Paid-In Capital
Accumulated Other Comprehensive LossRetained Deficit
SharesAmountSharesAmountTotal
Balance as of December 31, 2021305,132,181 $356 50,985,571 $(629,424)$1,359,149 $(10,844)$(17,280)$701,957 
Net loss— — — — — — (43,585)(43,585)
Other comprehensive loss, net of tax— — — — — (5,471)— (5,471)
Issuance of common stock for equity incentive awards, net of withholding taxes4,736,820 5 — — (28,047)— — (28,042)
Reissuance of treasury shares for equity incentive awards155,806 — (155,806)1,940 (1,796)— — 144 
Stock-based compensation expense— — — — 100,183 — — 100,183 
Cumulative effect related to adoption of ASU 2016-13— — — — — — (841)(841)
Balance as of March 31, 2022310,024,807 $361 50,829,765 $(627,484)$1,429,489 $(16,315)$(61,706)$724,345 
Net loss— — — — — — (39,308)(39,308)
Other comprehensive loss, net of tax— — — — — (20,760)— (20,760)
Issuance of common stock for equity incentive awards, net of withholding taxes888,186 1 — — 2,442 — — 2,443 
Reissuance of treasury shares for equity incentive awards51,311 — (51,311)639 (496)— — 143 
Stock-based compensation expense— — — — 68,965 — — 68,965 
Balance as of June 30, 2022310,964,304 $362 50,778,454 $(626,845)$1,500,400 $(37,075)$(101,014)$735,828 
Balance as of December 31, 2022315,681,987 $366 50,624,983 $(624,934)$1,565,514 $(39,210)$(123,514)$778,222 
Net loss— — — — — — (8,107)(8,107)
Other comprehensive income, net of tax— — — — — 242 — 242 
Issuance of common stock for equity incentive awards, net of withholding taxes1,189,600 1 — — (180)— — (179)
Reissuance of treasury shares for equity incentive awards12,798 — (12,798)159 (159)— —  
Stock-based compensation expense— — — — 17,679 — — 17,679 
Balance as of March 31, 2023316,884,385 $367 50,612,185 $(624,775)$1,582,854 $(38,968)$(131,621)$787,857 
Net loss— — — — — — (12,272)(12,272)
Other comprehensive loss, net of tax— — — — — (651)— (651)
Issuance of common stock for equity incentive awards, net of withholding taxes756,478 1 — — 1,187 — — 1,188 
Reissuance of treasury shares for equity incentive awards7,082 — (7,082)88 (88)— —  
Stock-based compensation expense— — — — 17,606 — — 17,606 
Balance as of June 30, 2023317,647,945 $368 50,605,103 $(624,687)$1,601,559 $(39,619)$(143,893)$793,728 
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)
Six Months Ended June 30,
20232022
(as restated)
Cash flows from operating activities:
Net loss$(20,379)$(82,893)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense18,220 16,656 
Bad debt expense2,596 2,038 
Deferred income tax benefit(12,033)(19,618)
Stock-based compensation expense35,285 169,148 
Unrealized foreign currency exchange (gain) loss(735)7,794 
Non-cash lease expense on right-of-use assets9,312 8,870 
Other operating activities, net2,018 1,134 
Changes in operating assets and liabilities:
Trade receivables47,332 (20,069)
Unbilled receivables(15,276)(48,629)
Prepaid expenses and other assets2,727 (2,690)
Lease liabilities(9,495)(6,951)
Accounts payable(813)1,699 
Accrued expenses and other liabilities(28,516)(5,012)
Net cash provided by operating activities30,243 21,477 
Cash flows from investing activities:
Purchase of property and equipment(3,681)(12,459)
Proceeds from disposal of fixed assets221 267 
Acquisitions, net of cash acquired(15,989)(65,410)
Net cash used in investing activities(19,449)(77,602)
Cash flows from financing activities:
Payments of obligations of long-term debt(103,575)(3,575)
Payments of debt issuance costs(99) 
Proceeds from issuance of common stock on exercise of options, net of employee tax withholding3,816 3,928 
Withholding taxes paid on tender offer (15,469)
Withholding taxes paid on dividends previously declared (10,009)
Withholding taxes paid related to net share settlement of equity awards(3,261)(29,026)
Payment of contingent consideration(13,996) 
Other financing activities, net80 (48)
Net cash used in financing activities(117,035)(54,199)
Effect of exchange rate changes on cash, cash equivalents and restricted cash178 (8,884)
Net decrease in cash, cash equivalents and restricted cash(106,063)(119,208)
Cash, cash equivalents and restricted cash at beginning of the period195,564 394,942 
Cash, cash equivalents and restricted cash at end of the period$89,501 $275,734 
Supplemental disclosure of cash flow information:
Interest paid$12,544 $8,987 
Income taxes paid$31,929 $10,554 
Withholding taxes payable$(454)$ 









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THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
Six Months Ended June 30,
20232022
(as restated)
Supplemental disclosures of non-cash financing activities:
Withholding taxes payable included within accrued compensation$ $219 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$88,151 $274,527 
Restricted cash included in other non-current assets1,350 1,207 
Total cash, cash equivalents and restricted cash$89,501 $275,734 
    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. (together with its subsidiaries, the “Company”) develops, implements, and services complex enterprise application software, and provides business technology consulting. 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, the United States and Vietnam. Thoughtworks Holding, Inc. is the ultimate parent holding company of Thoughtworks, Inc. among other subsidiaries.
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Thoughtworks Holding, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s 2022 Annual Report.
Certain amounts in the prior period consolidated financial statements and notes have been reclassified to conform to the 2023 presentation. These reclassifications had no effect on results of operations previously reported.
Preparation of Financial Statements and Use of Estimates
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 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 credit losses, valuation and impairment of goodwill and long-lived assets, income taxes, accrued bonus, contingencies, stock-based compensation and litigation costs. The Company bases its estimates on current expectations and 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 in the future. Operating results for 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.
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 to secure bank guarantees of amounts related to government requirements and as collateral for a corporate credit card.
Allowance for Credit Losses
The Company analyzes its historical credit loss experience and considers current conditions and reasonable and supportable forecasts in developing the expected credit loss rates. Interest is not generally accrued on outstanding balances as the balances are considered short-term in nature.
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Activity related to the Company’s allowance for credit losses is as follows (in thousands):
Six Months Ended June 30, 2023
Allowance for credit losses, beginning balance$(9,531)
Current provision for expected credit losses(2,596)
Write-offs charged against allowance4,648 
Recoveries of amounts previously written off(96)
Changes due to exchange rates(340)
Allowance for credit losses, ending balance$(7,915)
Recently Adopted Accounting Standards
In October 2021, the FASB issued ASU 2021-08, which amends ASC 805 to require acquiring entities to apply ASU 2014-09, Revenue from Contracts with Customers (Topic 606), to recognize and measure contract assets and contract liabilities in a business combination. The guidance is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Entities should apply the ASU’s provisions prospectively to business combinations occurring on or after the effective date of the amendments. The Company adopted the standard in the first quarter of 2023. The adoption did not have a material impact on the Company's condensed consolidated financial statements.
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 London Interbank Offer Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The optional amendments are effective as of March 12, 2020 through December 31, 2024, and upon adoption may be applied prospectively through December 31, 2024. The Company elected to utilize the temporary optional expedients in connection with the amendment of our credit agreement, which transitioned the Term Loan from LIBOR to the Secured Overnight Financing Rate (“SOFR”) on May 18, 2023. Refer to Note 8, Credit Agreements.
Concentration of Credit Risk and Other Risks and Uncertainties
Revenue generated from the Company's operations outside of the United States for the three months ended June 30, 2023 and 2022 was 66% and 62%, respectively, and 66% and 63% for the six months ended June 30, 2023 and 2022, respectively.
As of June 30, 2023 and December 31, 2022, 74% and 69%, respectively, of trade receivables and unbilled receivables was due from customers located outside the United States. At June 30, 2023 and December 31, 2022, the Company had net property and equipment of $23.8 million and $30.0 million, respectively, outside the United States.
Change in Accounting Principle - Stock-Based Compensation
In the fourth quarter of 2022, the Company changed its stock-based compensation policy for recognizing expense for graded vesting awards with only service conditions from the accelerated attribution method to the straight-line attribution method. The Company believes the straight-line attribution method for stock-based compensation expense for awards solely subject to time-based vesting conditions is the preferable accounting policy in accordance with ASC 250, Accounting Changes and Error Corrections, because it more accurately reflects how the award is earned over the service period and is the predominant method used in its industry. The Company applied the change retrospectively adjusting all periods presented resulting in an increase to net loss of $9.3 million and an increase to basic and diluted loss per share of $0.03 for the three months ended June 30, 2022 and a decrease to net loss of $7.0 million and a decrease to basic and diluted loss per share of $0.02 for the six months ended June 30, 2022.
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Restatement of Condensed Consolidated Statement of Cash Flows

Subsequent to the issuance of the Company's interim condensed consolidated financial statements for the period ended June 30, 2023, management determined that there was a misstatement in its Condensed Consolidated Statement of Cash Flows (Unaudited) for the period ended June 30, 2023. The misstatement was due to an inaccurate presentation of the change in cash flows ascribed to operating and financing activities in the condensed consolidated statement of cash flows. The misstatement relates solely to the inaccurate classification of the payment of contingent consideration.
As disclosed in Note 3, Acquisitions, the Company made a payment of contingent consideration related to the acquisition of Connected Lab Inc. of $14.3 million. In the Original Filing, the Company included this payment in the operating activities section of the condensed consolidated statement of cash flows. Of the $14.3 million payment, $14.0 million reflects the fair value of the contingent consideration on the acquisition date and should have been included within the financing activities section, and not within the operating activities section, of the condensed consolidated statement of cash flows.
A summary of the impact on the condensed consolidated statements of cash flows is as follows for the six months ended June 30, 2023 (in thousands):
Six Months Ended June 30, 2023
As reportedAdjustmentAs restated
Cash flows from operating activities:
Accrued expenses and other liabilities$(42,512)$13,996 $(28,516)
Net cash provided by operating activities$16,247 $13,996 $30,243 
Cash flows from financing activities:
Payment of contingent consideration$ $(13,996)$(13,996)
Net cash used in financing activities$(103,039)$(13,996)$(117,035)
Note 2 – Revenue Recognition
The Company disaggregates revenues from contracts with customers by geographic customer location, industry vertical 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. The Company groups customers into one of five industry verticals. 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 table presents the disaggregation of the Company’s revenues by customer location (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
North America (1)$105,775 $131,486 $218,089 $253,435 
APAC (2)100,465 109,674 200,627 211,880 
Europe (3)70,182 76,603 153,232 159,529 
LATAM10,793 14,344 22,323 28,203 
Total revenues$287,215 $332,107 $594,271 $653,047 
(1)For the three months ended June 30, 2023 and 2022, the United States represented 35.8%, or $102.7 million, and 37.2%, or $123.5 million, respectively, of the Company’s total revenues. For the six months ended June 30, 2023 and 2022, the United States represented 35.5%, or $211.1 million, and
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36.5%, or $238.6 million, of the Company’s total revenues, respectively. Canadian operations were determined to be immaterial given revenue as a percentage of total North America revenues was less than 10% for the three and six months ended June 30, 2023 and 2022.
(2)For the three months ended June 30, 2023 and 2022, Australia represented 10.5%, or $30.3 million, and 12.0%, or $39.8 million, respectively, of the Company's total revenues. For the six months ended June 30, 2023 and 2022, Australia represented 10.0%, or $59.2 million, and 11.7%, or $76.1 million, of the Company's total revenues, respectively.
(3)For the three months ended June 30, 2023 and 2022, revenue in the United Kingdom as a percentage of the Company's total revenues was less than 10%. For the six months ended June 30, 2023 and 2022, the United Kingdom represented 10.0%, or $59.5 million, and 10.8%, or $70.3 million, respectively, of the Company’s total revenues. For the three months ended June 30, 2023, Germany represented 10.6%, or $30.5 million of the Company's total revenues. For the six months ended June 30, 2023, Germany represented 10.7%, or $63.3 million of the Company's total revenues. For the three and six months ended June 30, 2022, revenue in Germany as a percentage of the Company’s total revenues was less than 10%.
Other non-U.S. countries were determined to be immaterial given the revenues as a percentage of the Company’s total revenues was less than 10% for the three and six months ended June 30, 2023 and 2022.
The following table presents the disaggregation of the Company’s revenues by industry vertical (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Technology and business services$69,695 $95,247 $143,828 $180,596 
Energy, public and health services75,313 76,605 159,352 153,715 
Retail and consumer44,485 62,628 92,397 125,063 
Financial services and insurance52,778 59,671 107,933 118,135 
Automotive, travel and transportation44,944 37,956 90,761 75,538 
Total revenues$287,215 $332,107 $594,271 $653,047 
The following table presents the disaggregation of the Company’s revenues by contract type (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Time-and-material$235,119 $275,932 $492,369 $547,295 
Fixed-price52,096 56,175 101,902 105,752 
Total revenues$287,215 $332,107 $594,271 $653,047 
Contract Balances
The following table is a summary of the Company’s contract assets and contract liabilities (in thousands):
As of
June 30, 2023
As of
December 31, 2022
Contract assets included in unbilled receivables$39,548 $39,941 
Contract liabilities included in deferred revenue$6,007 $5,167 
Contract assets primarily relate to unbilled amounts on fixed-price contracts. Contract assets are recorded when services have been provided but the Company does not have an unconditional right to receive
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consideration. Professional services performed on or prior to the balance sheet date, but invoiced thereafter, are reflected in unbilled receivables.
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. For the three months ended June 30, 2023 and 2022, the Company recognized $0.8 million and $2.5 million, respectively, of revenues that were included in current liabilities at the prior year end. For the six months ended June 30, 2023 and 2022, the Company recognized $4.3 million and $12.6 million, respectively, of revenues that were included in current liabilities at the prior year end.
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 ("SG&A") expenses.
The following table is a summary of the Company’s costs to obtain contracts and related amortization and impairment where the amortization period of the assets is greater than one year (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Balance at beginning of period$1,391 $1,814 $1,588 $2,039 
Costs to obtain contracts capitalized281 147 349 238 
Amortization of capitalized costs(859)(310)(1,127)(625)
Changes due to exchange rates12 (9)15 (10)
Balance at end of period$825 $1,642 $825 $1,642 
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
On February 1, 2023, the Company completed the acquisition of ITOC Pty Ltd ("Itoc"), a leading Amazon Web Services Advanced Consulting Partner and Cloud Managed Services Provider in Australia, in an all-cash transaction for a gross purchase price of $17.8 million, or $16.0 million net of cash acquired of $1.8 million. Itoc is now wholly owned by the Company. The acquisition expands Thoughtworks’ capabilities to help modernize and place digital at the center of client operations as they transition to the cloud.
The Company accounted for the acquisition under ASC 805, Business Combinations. The goodwill recognized in connection with the acquisition reflects the benefits expected to be derived from certain operational synergies. The fair value of the net assets acquired for the business 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. The results of operations of the acquired business have been included in the condensed consolidated statements of loss and comprehensive loss from the acquisition date. Pro forma results of operations for the acquisition are not presented because the pro forma effects were not material to the Company's consolidated results of operations.
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Aggregate acquisition-related costs related to Itoc of $1.4 million and $2.5 million for the three and six months ended June 30, 2023 were included within SG&A expenses in the condensed consolidated statements of loss and comprehensive loss.
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
Cash and cash equivalents$1,788 
Trade receivables, net of allowance1,251 
Customer relationships, net (1)3,500 
Goodwill13,766 
Accounts payable(110)
Accrued compensation(363)
Accrued expenses(927)
Deferred revenue(235)
Income taxes payable(178)
Lease liabilities, current(173)
Deferred tax liabilities(1,050)
Other assets/liabilities, net508 
Total gross purchase price$17,777 
(1)The weighted average amortization period is four years.
Goodwill represents the excess of the purchase price over the fair values of assets acquired and liabilities assumed. The changes in fair value allocated to goodwill, tangible and intangible assets are not deductible for tax purposes.
As additional information is obtained about the assets and liabilities of the acquisition 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.
In connection with the acquisition of Connected Lab Inc. ("Connected") in the second quarter of 2022, the Company recorded a liability of $14.0 million of contingent consideration, which is included within the total purchase price and classified within accrued expenses in the condensed consolidated balance sheet. The present value of the contingent consideration liability was determined using a Monte Carlo Simulation that calculated the average present value of the earnout payment. The fair value measurement of the earnout includes a performance metric which is an unobservable Level 3 input. The contingent consideration is payable in cash dependent upon achievement of the performance metric. The liability was remeasured to fair value at each reporting date with adjustments recorded within other income (expense), net in the condensed consolidated statements of loss and comprehensive loss, and the final payout amount of $14.3 million was paid on May 4, 2023.
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The following table presents the change in the contingent consideration liability (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Balance at beginning of period$14,267 $ $14,255 $ 
Additions in the period 13,996  13,996 
Payments in the period(14,344) (14,344) 
Change in fair value129 528 129 528 
Change due to exchange rates(52)(142)(40)(142)
Balance at end of period$ $14,382 $ $14,382 
Note 4 – Goodwill and Other Intangible Assets
The following is a summary of the changes in the carrying value of goodwill (in thousands):
Total
Balance as of December 31, 2022$405,017 
Additions due to acquisitions13,766 
Changes due to exchange rates3,530 
Balance as of June 30, 2023$422,313 
The following is a summary of other intangible assets (in thousands):
June 30, 2023December 31, 2022
Customer relationships$196,947 $193,447 
Less accumulated amortization(66,618)(59,369)
Customer relationships, net130,329 134,078 
Trademark273,000 273,000 
Total other intangible assets, after amortization403,329 407,078 
Changes due to exchange rates(9,652)(10,031)
Other intangible assets, net$393,677 $397,047 
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 $3.7 million and $3.3 million for the three months ended June 30, 2023 and 2022, respectively, and $7.3 million and $6.3 million for the six months ended June 30, 2023 and 2022, respectively.
As of June 30, 2023, estimated amortization expense for the next five years and thereafter is as follows (in thousands):
Remainder of 2023$7,755 
202415,510 
202515,510 
202615,510 
202714,708 
Thereafter61,336 
$130,329 
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The weighted average remaining useful life of the Company’s finite-lived intangible assets was 8.6 years as of June 30, 2023 and 9.2 years as of December 31, 2022.
Note 5 – Income Taxes
Prior to the Company's initial public offering ("IPO") in September 2021, the Company calculated the provision for income taxes during interim reporting periods by applying an estimate of the effective tax rate for the full year to the pre-tax income or loss for the interim period, adjusting the provision for discrete tax items recorded in the period. Upon the IPO, due to the magnitude of transaction related stock-based compensation costs, the Company's forecasted pre-tax income for the year is causing the tax rate to be highly sensitive, whereby minor changes in forecasted pre-tax income generate significant variability in the estimated annual effective tax rate. This is impacting the customary relationship between income tax expense and pre-tax income in interim periods. Beginning in the third quarter of 2021, the Company concluded that it could not calculate a reliable estimate of the annual effective tax rate due to the range of potential impacts for the aforementioned forecast changes. Accordingly, the Company computed the effective tax rate for the six-month period ended June 30, 2023 using actual results, as allowed by ASC 740-270-30-18, Income Taxes-Interim Reporting.
The Company’s effective tax rate for the three months ended June 30, 2023 and June 30, 2022 was (60.0)% and (1.2)%, respectively, and (142.1)% and (6.2)% for the six months ended June 30, 2023 and June 30, 2022, respectively. The effective tax rate in each period differed from the U.S. statutory rate of 21% primarily due to U.S. corporate state income taxation and the effect of foreign operations, which reflects the impact of higher income tax rates in locations outside the United States, the unfavorable impact of valuation allowances on deferred tax assets of select foreign operations, the non-deductibility of China SAFE restricted stock units ("RSUs"), the unfavorable impact of capitalized research and experimental costs under Internal Revenue Code ("IRC") §174 increasing the Company's net global intangible low tax income ("GILTI") inclusion, impacted by excess tax deficiencies unfavorably and excess tax benefits favorably on stock-based compensation for the three and six months ended June 30, 2023 and June 30, 2022, respectively, and the unfavorable impact of providing for and settling of uncertain income tax positions for the three and six months ended June 30, 2023. The change in the effective tax rate for the three and six months ended June 30, 2023, as compared to the prior periods, and the negative effective tax rate for the three and six months ended June 30, 2023 and June 30, 2022 is a result of the aforementioned unique net unfavorable items when compared to the pre-tax loss recorded for the respective periods.
Note 6 – Loss Per Share
The components of basic and diluted loss per share are as follows (in thousands, except share and per share data):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Numerator:
Net loss$(12,272)$(39,308)$(20,379)$(82,893)
Denominator:
Weighted average shares outstanding – Basic and diluted317,341,907 310,575,050 316,899,214 308,394,443 
Basic and diluted loss per share$(0.04)$(0.13)$(0.06)$(0.27)
The following potentially dilutive securities were excluded from the computation of diluted loss per share because the impact of including them would have been anti-dilutive:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Employee stock options, RSUs and performance stock units ("PSUs")17,170,149 24,376,880 19,018,901 25,847,639 
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Note 7 – Stock-Based Compensation
The following is a summary of the components of stock-based compensation expense for the periods indicated (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Cost of revenues$10,696 $49,573 $21,226 $119,482 
Selling, general and administrative expenses6,910 19,392 14,059 49,666 
Total stock-based compensation expense$17,606 $68,965 $35,285 $169,148 
Stock Options
The following is a summary of performance and time vesting stock option activity for the six months ended June 30, 2023 (in thousands, except share and per share data):
Number of Stock OptionsWeighted Average Exercise PriceAggregate
Intrinsic Value
Weighted-
Average
Remaining
Contractual
Term (years)
Balance at December 31, 202221,607,562 $3.83 
Granted  
Forfeited(217,638)11.85 
Exercised(1,308,049)2.92 
Cancelled  
Expired  
Balance at June 30, 202320,081,875 $3.81 $87,637 5.1
Exercisable at June 30, 202319,392,211 $3.58 $86,927 5
As of June 30, 2023, total compensation cost related to time vesting options not yet recognized was $5.1 million, which will be recognized over a weighted-average period of 1.6 years. Unless otherwise prohibited by law in local jurisdictions, time vesting options will continue to vest according to the 2017 Stock Option Plan (the "2017 Plan") and the applicable award agreements.
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Restricted Stock Units
The following is a summary of RSU activity for the six months ended June 30, 2023:
Number of RSUsWeighted Average Grant Date Fair Value
Unvested balance at December 31, 202213,013,946 $17.37 
Granted337,699 8.17 
Forfeited(855,232)17.88 
Vested (1)(955,725)21.93 
Unvested balance at June 30, 202311,540,688 $16.69 
(1)Includes 0.3 million shares that were net settled when released and returned to the share pool for future grants.
As of June 30, 2023, total compensation cost related to RSUs not yet recognized was $112.7 million, of which $93.0 million is primarily related to the annual grant and considered recurring. The remainder of $19.7 million is IPO related or associated with one-time grants and considered non-recurring. The total unamortized expense is anticipated to be recognized over a weighted-average period of 2.4 years.
Performance Stock Units
The following is a summary of PSU activity for the six months ended June 30, 2023:
Number of PSUsWeighted Average Grant Date Fair Value
Unvested balance at December 31, 202276,697 $20.11 
Granted (1)737,483 8.44 
Adjustment for PSUs expected to vest as of current period end(725,341)8.25 
Forfeited  
Vested  
Unvested balance at June 30, 202388,839 $20.11 
(1)Reflects shares granted at 100%.
For compensation expense purposes, the fair value of the non-market-based PSUs was determined using the closing stock price on the grant date and the fair value for the market-based PSUs was determined using a Monte-Carlo simulation.
As of June 30, 2023, total compensation cost related to PSUs not yet recognized was $6.0 million. The unamortized expense is anticipated to be recognized over a weighted-average period of 2.2 years.
Note 8 Credit Agreements
Our subsidiaries are party to an amended and restated credit agreement, dated December 9, 2022 (as amended, the “Credit Agreement”), among Thoughtworks, Inc., Turing Acquisition LLC and Turing Midco LLC, Turing Topco LLC (“Holdings”), Credit Suisse AG, Cayman Islands Branch, as administrative agent, the lenders party thereto and the other parties from time-to-time party thereto, which provides for a senior secured term loan (the "Term Loan") of $715.0 million and a senior secured revolving credit facility (the "Revolver") of $300.0 million.
On February 24, 2023, the Company made a voluntary prepayment of $100.0 million on outstanding amounts owed on the Term Loan. As a result of the prepayment, the Company wrote off $0.9 million of deferred
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financing fees, which is reflected in other (expense) income, net in the condensed consolidated statements of loss and comprehensive loss for the six months ended June 30, 2023.
On May 18, 2023, the Company amended and restated its credit agreement (the “Third Amendment and Restatement”) to transition the reference rate for the Term Loan borrowings under the Credit Agreement from LIBOR to SOFR.

The following table presents the Company's outstanding debt and borrowing capacity (in thousands, except percentages):
June 30, 2023December 31, 2022
Availability under Revolver (due March 26, 2026)$300,000 $300,000 
Borrowings under Revolver$ $ 
Long-term debt (due March 24, 2028), including current portion (1)$296,529 $399,006 
Interest rate7.7 %6.9 %
(1)The balance includes deferred financing fees. A reconciliation of gross to net amounts is presented below.
The following table presents the carrying value of the Company’s credit facilities (including current maturities) (in thousands):
June 30, 2023December 31, 2022
Long-term debt, less current portion$291,763 $395,338 
Capitalized deferred financing fees(2,384)(3,482)
Long-term debt289,379 391,856 
Current portion of long-term debt7,150 7,150 
Total debt carrying value$296,529 $399,006 
The Company estimates the fair value of the Term Loan using current market yields. These current market yields are considered Level 2 inputs. The book value of the Company’s credit facilities is considered to approximate its fair value as of June 30, 2023 as the interest rates are considered in line with current market rates. The fair value of the Term Loan was $392.0 million as of December 31, 2022.
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Note 9 Accrued Expenses
The following is a summary of the Company’s accrued expenses (in thousands):
June 30, 2023December 31, 2022
Accrued interest expense$194 $221 
Accrued employee expense1,393 2,016 
Accrued travel expense566 281 
Operating lease expenses406 425 
Insurance charges243 198 
Professional fees5,681 6,321 
Withholding taxes payable178 43 
Other taxes payable896 1,815 
Rebates payable1,116 1,168 
Contingent consideration 14,255 
Other accrued expenses3,733 3,484 
Accrued expenses$14,406 $30,227 
Note 10 – Subsequent Events
Restructuring Actions

On August 8, 2023, the Company announced that its Board of Directors approved and committed to a structural reorganization (the "Reorganization") on August 7, 2023 that will (i) move its operational functions from a geographic to a centralized model, (ii) create a new organizational home for the majority of its client facing workforce, our Digital Engineering Center, and (iii) evolve its regional market structure. Centralizing operations globally is expected to reduce overall costs, better align its resources to strategic priorities, right-size its operations, and increase operational efficiencies. The new Digital Engineering Center will provide supply across the regional markets and is expected to allow the Company to optimize resource allocation globally to better align to clients’ needs. Finally, these changes will enable its regional markets to have a more client and industry-based go-to-market focus while continuing to fund its investments in demand generation.

The majority of the actions will be taken in the third quarter of 2023 and are expected to be completed within the next twelve months. The actions are expected to impact approximately 5% to 6% of our employee headcount globally.

Thoughtworks expects to incur total pre-tax cash charges of approximately $20 million to $25 million (the “Total Charges”), of which approximately $18 million to $20 million are expected to be recognized in 2023. The Total Charges include $18 million to $22 million in wage-related expenses, such as employee severance and related benefits, and $2 million to $3 million in non-wage related expenses, including costs related to reducing leased office space, vendor contract cancellations and professional fees.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the related notes included in our 2022 Annual Report. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read the sections titled “Risk Factors” in our 2022 Annual Report and in this Quarterly Report on Form 10-Q and “Forward-Looking Statements” herein for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Quarterly results reflected herein are not necessarily indicative of our operating results for a full year or any future period.
Certain items within this management's discussion and analysis of financial condition and results of operations have been updated as a result of the amendment and restatement of this Quarterly Report on Form 10-Q/A as described in further detail in the “Explanatory Note” at the beginning of this Form 10-Q/A. For additional information regarding the restatement, see Note 1, Business and Summary of Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements (Unaudited) of this Form 10-Q/A and Part I, Item 4 “Controls and Procedures.”
Overview
We are a global technology consultancy that integrates strategy, design and engineering to drive digital innovation. We are 11,574 Thoughtworkers strong across 51 offices in 18 countries. For 30 years, we have delivered extraordinary impact together with our clients by helping them solve complex business problems with technology as the differentiator.
Our revenues are generated from providing professional services based on the mix and locations of delivery professionals involved, the pricing structure, which is predominantly time-and-materials, and the type of services, including: enterprise modernization, platforms & cloud; customer experience, product & design; data & artificial intelligence; digital application management & operations; and digital transformation & operations.
Key Operational and Business Metrics
In addition to the measures presented in our condensed consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions (in thousands, except percentages):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Revenues$287,215 $332,107 $594,271 $653,047 
Revenue Growth Rate as reported (1)(13.5)%27.5 %(9.0)%31.1 %
Revenue Growth Rate at constant currency (1)(12.5)%33.5 %(6.9)%35.7 %
Net loss$(12,272)$(39,308)$(20,379)$(82,893)
Net loss margin(4.3)%(11.8)%(3.4)%(12.7)%
Adjusted Net Income (2)$10,105 $37,008 $20,172 $81,000 
Adjusted EBITDA (3)$29,300 $58,517 $64,200 $131,389 
Adjusted EBITDA Margin (3)10.2 %17.6 %10.8 %20.1 %
(1)Certain of our subsidiaries use functional currencies other than the U.S. dollar and the translation of these foreign currency amounts into the U.S. dollar can impact the comparability of our revenues between periods. Accordingly, we use Revenue Growth Rate at constant currency as an important indicator of our
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underlying performance. Revenue Growth Rate at constant currency is a Non-GAAP measure and is calculated by applying the average exchange rates in effect during the earlier comparative fiscal period to the later fiscal period.
(2)We use Adjusted Net Income as an important indicator of our performance. See “—Non-GAAP Financial Measures” below for a definition of and reconciliation of Adjusted Net Income to net (loss) income, the most directly comparable GAAP measure, how we use this measure and an explanation of why we consider this non-GAAP measure to be helpful for investors.
(3)We also use Adjusted EBITDA and Adjusted EBITDA Margin as important indicators of our performance. See “—Non-GAAP Financial Measures” below for a definition of and a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable GAAP measure, how we use Adjusted EBITDA and Adjusted EBITDA Margin and an explanation of why we consider these non-GAAP measures to be helpful for investors.
Revenue Growth Rate and Revenue Growth Rate at constant currency
For the three and six months ended June 30, 2023, revenues decreased 13.5% and 9.0%, respectively. The decrease in revenue was due to the continued impact of the macroeconomic environment, particularly in the IT services market, combined with slower pipeline conversion, incremental start ups, and client budget caution, which caused lower revenue actualization in our client cohort for the three and six months ended June 30, 2023. Acquisitions completed in the last twelve months contributed approximately 1% and 2% to the revenue growth rate for the three and six months ended June 30, 2023, respectively. Had our consolidated revenues been expressed in constant currency terms using the exchange rates in effect for the three and six months ended June 30, 2022, we would have reported a decrease in revenues of 12.5% and 6.9%, respectively. The negative impact to revenues from foreign currencies was due to the appreciation of the U.S. dollar relative to certain principal functional currencies of our subsidiaries.
For more detail regarding our exposure to foreign currency rate fluctuations, see Note 2, Revenue Recognition, to our condensed consolidated financial statements and “Item 3. Quantitative and Qualitative Disclosures About Market Risk.”
Net Loss, Net Loss Margin and Adjusted Net Income
For the three months ended June 30, 2023, the $27.0 million decrease in net loss and 7.5 percentage point decrease in net loss margin as compared to the three months ended June 30, 2022 were driven by decreased stock-based compensation expense of $51.4 million, which includes a decrease of $54.0 million of nonrecurring expense mainly related to option and RSU expense from the IPO, offset by an increase of $2.6 million of recurring RSU expense primarily related to the annual grant, a decrease in payroll expense (excluding stock-based compensation) of $12.0 million resulting from a lower professional service headcount and lower bonus accruals for 2023, offset by a $44.9 million decrease in revenue, as discussed above, and a $4.1 million increase in income tax expense.
For the three months ended June 30, 2023, the decrease in Adjusted Net Income as compared to the three months ended June 30, 2022 of $26.9 million, or 72.7%, was primarily due to a decrease in revenue of $44.9 million, offset by a decrease in payroll expense (excluding stock-based compensation) of $12.3 million.
For the six months ended June 30, 2023, the $62.5 million decrease in net loss and 9.3 percentage point decrease in net loss margin as compared to the six months ended June 30, 2022 were driven by decreased stock-based compensation expense of $133.9 million, which includes a decrease of $139.6 million of nonrecurring RSU expense mainly related to option and RSU expense from the IPO, offset by an increase of $5.7 million of recurring RSU expense primarily related to the annual grant, an increase in payroll expense (excluding stock-based compensation) of $7.2 million, which includes severance expense and a $58.8 million decrease in revenue. For more information, see “—Results of Operations.” We consider net loss margin as the most directly comparable GAAP measure to Adjusted EBITDA Margin.
For the six months ended June 30, 2023, the decrease in Adjusted Net Income as compared to the six months ended June 30, 2022 of $60.8 million, or 75.1%, was primarily due to a decrease in revenue of $58.8 million, and increased payroll expense (excluding stock-based compensation) of $10.3 million, which includes severance expense, partially offset by a decrease in professional fees of $4.5 million.
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Adjusted EBITDA and Adjusted EBITDA Margin
For the three months ended June 30, 2023, the decrease in Adjusted EBITDA as compared to the three months ended June 30, 2022 of $29.2 million, or 49.9%, and the decrease in Adjusted EBITDA Margin as compared to the three months ended June 30, 2022 was primarily due to a decrease in revenue due to lower revenue actualization in our top 50 client cohort as discussed above, lower utilization, and onshore/offshore mix.
For the six months ended June 30, 2023, the decrease in Adjusted EBITDA as compared to the six months ended June 30, 2022 of $67.2 million, or 51.1%, and the decrease in Adjusted EBITDA Margin as compared to the six months ended June 30, 2022 was primarily due to a decrease in revenue due to lower revenue actualization in our top 50 client cohort as discussed above and lower utilization.
Results of Operations
The following table sets forth a summary of our condensed consolidated results of operations for the periods indicated (in thousands, except percentages):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Revenues$287,215 $332,107 $594,271 $653,047 
Operating expenses:
Cost of revenues (1)196,338 250,462 405,860 500,227 
Selling, general and administrative expenses (1)86,626 99,352 172,966 204,117 
Depreciation and amortization5,874 4,215 11,416 10,061 
(Loss) income from operations(1,623)(21,922)4,029 (61,358)
Other (expense) income:
Interest expense(6,150)(4,984)(13,012)(9,631)
Net realized and unrealized foreign currency (loss) gain(30)(11,512)1,155 (6,774)
Other income (expense), net135 (413)(588)(325)
Total other (expense) income(6,045)(16,909)(12,445)(16,730)
Loss before income taxes(7,668)(38,831)(8,416)(78,088)
Income tax expense4,604 477 11,963 4,805 
Net loss$(12,272)$(39,308)$(20,379)$(82,893)
Effective tax rate(60.0)%(1.2)%(142.1)%(6.2)%
(1) Includes stock-based compensation as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Cost of revenues$10,696 $49,573 $21,226 $119,482 
Selling, general and administrative expenses6,910 19,392 14,059 49,666 
Total stock-based compensation expense$17,606 $68,965 $35,285 $169,148 
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Summary Comparison of the Three and Six Months Ended June 30, 2023 with the Three and Six Months Ended June 30, 2022
Revenues
We have a global footprint with the ability to deliver services from multiple geographic regions. While we continue to derive a substantial part of our overall revenues from existing clients, we maintain relatively low client concentration among our largest clients. We remain focused on acquiring new clients through programs designed to generate new business demand and position us as a trusted partner, and we have dedicated new business teams working with marketing using data-driven approaches to focus on client acquisition efforts.
The following table presents our number of clients, number of clients generating greater than $10 million in revenues and net dollar retention rate:
Trailing twelve months ended
June 30, 2023June 30, 2022
Number of clients (1)452395
Number of clients generating greater than $10 million in revenues
3533
Net dollar retention rate (2)100%124%
(1) We define clients as those with spend in excess of $25,000 within the preceding twelve months.
(2) The decrease was driven by slower pipeline conversion, incremental start ups, and client budget caution, due to the continued impact of the macroeconomic environment and pressures on client behavior across all regions, and particularly in our retail and consumer and technology and business services verticals.
The following table presents the percentage of revenues from new and existing clients:
Three Months Ended June 30,Six Months Ended June 30,
Trailing twelve months ended June 30,
202320222023202220232022
Existing clients (1)94.2%88.9%95.8%92.1%91.8%86.5%
New clients5.8%11.1%4.2%7.9%8.2%13.5%
(1) For the three and six months ended June 30, 2023 and 2022, we define existing clients as clients for whom we have done work and generated revenues in excess of $25,000 within the preceding fiscal year. For the trailing twelve months ended June 30, 2023 and 2022, we define existing clients as clients for whom we have done work and generated revenues in excess of $25,000 within the preceding twelve months.
During the three months ended June 30, 2023, we contracted with 29 new logos with a higher concentration within the technology and business services, energy, public and health services and financial services and insurance industry verticals.
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Revenues by Industry Vertical
The following table presents our revenues by industry vertical and revenues as a percentage of total revenues by industry vertical for the periods indicated (in thousands, except percentages):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Technology and business services$69,69524.3%$95,24728.6%$143,82824.2%$180,59627.6%
Energy, public and health services75,31326.2%76,60523.1%159,35226.8%153,71523.5%
Retail and consumer44,48515.5%62,62818.9%92,39715.5%125,06319.2%
Financial services and insurance52,77818.4%59,67118.0%107,93318.2%118,13518.1%
Automotive, travel and transportation44,94415.6%37,95611.4%90,76115.3%75,53811.6%
Total revenues$287,215100.0%$332,107100.0%$594,271100.0%$653,047100.0%
During the three months ended June 30, 2023, we saw a decrease in revenue in the retail and consumer, technology and business services, financial services and insurance, and energy, public and health services industry verticals of (29.0)%, (26.8)%, (11.6)%, and (1.7)%, respectively, compared to the three months ended June 30, 2022. During the six months ended June 30, 2023, we saw a decrease in revenue in the retail and consumer, technology and business services and financial services and insurance industry verticals of (26.1)%, (20.4)%, and (8.6)%, respectively, compared to the six months ended June 30, 2022. The decreases in these verticals were driven by slower pipeline conversion, incremental start ups, and client budget caution as discussed above.
During the three months ended June 30, 2023, the automotive, travel and transportation industry vertical grew by 18.4%, compared to the three months ended June 30, 2022. During the six months ended June 30, 2023, the automotive, travel and transportation and the energy, public and health services industry verticals grew by 20.2% and 3.7%, respectively, compared to the six months ended June 30, 2022. Revenue growth in the automotive, travel and transportation vertical was driven by enterprise modernization, platforms and cloud, and the energy, public and health services industry vertical was driven by data & artificial intelligence.
Revenues by Customer Location
Our revenues are sourced from four geographic markets: North America, Asia-Pacific region ("APAC"), Europe and Latin America ("LATAM"). We present and discuss our revenues by the geographic location where the revenues are under client contract; however, the delivery of those client contracts could be supported by offshore delivery locations.
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The following table presents our revenues by customer location and revenues as a percentage of total revenues by customer location for the periods indicated (in thousands, except percentages):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
North America$105,77536.8%$131,48639.6%$218,08936.7%$253,43538.8%
APAC100,46535.0%109,67433.0%200,62733.8%211,88032.5%
Europe70,18224.4%76,60323.1%153,23225.8%159,52924.4%
LATAM10,7933.8%14,3444.3%22,3233.7%28,2034.3%
Total revenues$287,215100.0%$332,107100.0%$594,271100.0%$653,047100.0%
For the three and six months ended June 30, 2023, we had a decrease in revenue of (19.6)% and (13.9)%, respectively, in North America, with the United States contributing revenues of $102.7 million and $211.1 million, respectively, compared to $123.5 million and $238.6 million, respectively, for the same periods in 2022. The largest revenue concentration came from the energy, public and health services vertical followed by the technology and business services industry vertical.
For the three and six months ended June 30, 2023, we had a decrease in revenue of (8.4)% and (5.3)%, respectively, in APAC where the top revenue contributing customer location country was Australia with revenues of $30.3 million and $59.2 million, respectively, compared to $39.8 million and $76.1 million, respectively, for the same periods in 2022. The largest revenue concentration came from the financial services and insurance industry vertical.
For the three and six months ended June 30, 2023, we had a decrease in revenue of (8.4)% and (3.9)% in Europe where the top revenue contributing customer location country was the Germany with revenues of $30.5 million and $63.3 million compared to $30.3 million and $62.1 million for the same periods in 2022. The largest revenue concentration came from our automotive, travel and transportation industry vertical.
For the three and six months ended June 30, 2023, we had a decrease in revenue of (24.8)% and (20.8)%, respectively, in LATAM, compared to the same periods in 2022 with Brazil being our largest customer location. The largest revenue concentration came from our financial services and insurance vertical.
Revenues by Client Concentration
We have long-standing relationships with many of our clients. We seek to grow revenues from our existing clients by continually increasing the value we provide and expanding the scope and size of our engagements. Revenues derived from these clients may fluctuate as these accounts mature or upon beginning or completing multi-year projects. We believe there is significant potential for future growth as we expand our capabilities and offerings within existing clients. In addition, we remain committed to diversifying our client base and adding new clients to our client mix.
The following table presents revenues contributed by our largest clients by amount and as a percentage of total revenues for the periods indicated (in thousands, except percentages):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Top five clients$52,08918.1%$50,74915.3%$101,28417.0%$98,86915.1%
Top ten clients$79,07227.5%$83,76925.2%$159,92026.9%$166,50425.5%
Top fifty clients$192,70267.1%$219,54166.1%$397,73866.9%$428,38565.6%
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People Metrics
Number of employeesAverage revenue per employee (1)Trailing Twelve Months Voluntary Attrition
As ofSix Months EndedAnnualized as ofAs of
June 30, 2023June 30, 2022June 30, 2023June 30, 2022June 30, 2023June 30, 2022June 30, 2023June 30, 2022
11,57412,120$50,000$58,000$100,000$116,00012.6%12.9%
(1) We define average revenue per employee as total revenues for the period divided by the average number of employees in such period.
The decrease in average revenue per employee compared to the six months ended June 30, 2022 was driven by the negative impact from client budget caution and onshore/offshore mix. We believe our relatively flat voluntary attrition and thus stable employee retention was due to our unique, cultivating culture, our focus on career development, our intensive training programs and our interesting work opportunities.
Bookings
We use Bookings ("Bookings") as a forward-looking metric that measures the value of new contracts, renewals, extensions and changes to existing contracts during the fiscal period. We believe Bookings provides a broad measure of useful trend information regarding changes in the volume of our business. We use Bookings to evaluate the results of our operations, generate future operating plans and assess the performance of our company. However, Bookings can vary significantly quarter to quarter due to both timing and demand from our clients and thus the conversion of Bookings to revenues is uncertain. The amount of Bookings involves estimates and judgments and is not a reliable predictor of revenues over time. There is no standard definition or measurement of Bookings thus our methodology may not be comparable to other companies. Bookings were $1.5 billion and $1.5 billion for the trailing twelve months ended June 30, 2023 and 2022, respectively.
Cost of Revenues
Three Months Ended June 30,Six Months Ended June 30,
20232022% Change20232022% Change
(in thousands, except percentages)
Cost of revenues$196,338$250,462(21.6)%$405,860$500,227(18.9)%
During the three and six months ended June 30, 2023, cost of revenues (including stock-based compensation) decreased (21.6)% and (18.9)%, respectively, compared to the three and six months ended June 30, 2022. The decreases were primarily driven by a decrease in stock-based compensation expense of $38.9 million and $98.3 million, respectively.
Gross Profit and Gross Margin
Three Months Ended June 30,Six Months Ended June 30,
20232022% Change20232022% Change
(in thousands, except percentages)
Gross profit$90,877$81,64511.3%$188,411$152,82023.3%
Gross margin31.6%24.6%31.7%23.4%
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Our gross margin increased by 7.0 percentage points for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 and 8.3 percentage points for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to decreases in stock-based compensation of $38.9 million and $98.3 million, respectively.
SG&A Expenses and SG&A Margin
Three Months Ended June 30,Six Months Ended June 30,
20232022% Change20232022% Change
(in thousands, except percentages)