Thoughtworks Holding, Inc.

Thoughtworks reported Q1 revenue of $249 million, down 19% year over year in both USD and constant currency. Adjusted gross margin was 31% versus 36.4% a year ago, adjusted EBITDA was $7 million, and adjusted EBITDA margin was 2.7%. GAAP diluted loss per share was $0.10 versus $0.03 in the prior year, and adjusted diluted loss per share was $0.02 versus adjusted diluted EPS of $0.03. Free cash flow was negative $20 million versus positive $31 million a year ago. For Q2 2024, the company expects revenue of $250 million to $255 million, adjusted EBITDA margin of 5.5% to 7.5%, and adjusted diluted EPS of negative $0.01 to positive $0.01. For full-year 2024, revenue is expected to be $995 million to $1.02 billion, adjusted EBITDA margin 8% to 10%, and adjusted diluted EPS $0.02 to $0.08. The company also expects positive cash flow in Q2.

Xiao Guo framed the quarter as a transition point, saying Thoughtworks exceeded revenue expectations and is expecting sequential growth in Q2. He emphasized that the company is not changing its strategic direction: verticalized go-to-market, more system integration and packaged software implementation, and a stronger focus on AI and data services remain central. He also described the CEO transition to Mike Sutcliff as a deliberate move to add external experience while preserving Thoughtworks’ culture and technology-led identity.

Erin Cummins focused on the financial reset underway: Q1 revenue came in above plan, but margin underperformance was driven by offshore/onshore supply rebalancing, lower onshore utilization, and high single-digit pricing declines. She highlighted 62% of Q1 bookings coming from outbound efforts, $87 million in annualized cost savings already realized, and a raised restructuring savings target of $100 million to $115 million versus the prior $75 million to $85 million range. She also noted term loan debt of $294 million, cash of $73 million, an undrawn $300 million revolver, and said the company expects Q2 positive cash flow and more margin improvement in the back half of the year.

Analysts focused on pricing, the CEO transition, demand durability, and whether restructuring cuts were too aggressive. Management said pricing declines should be much less significant from Q1 to Q2 and should stabilize, with most of the current pricing reset already embedded in the portfolio; the offshore/onshore mix is still a margin headwind, but the prior supply issues have been addressed. On demand, management said sales cycles remain long and deal sizes smaller than a few years ago, but pipeline conversion, outbound demand generation, and vertical focus are improving win rates and supporting confidence in Q2 sequential growth. Questions also probed Gen AI timing, and Xiao said larger-scale LLM work is still early but likely to expand later this year or next year, helped by the Watchful acquisition.