Executive Summary

Revenue of $251.7M declined 12.4% YoY but was flat QoQ, landing inside prior guidance; margins deteriorated sharply with Adjusted EBITDA margin at 2.3% and GAAP diluted EPS at $(0.11), driven by pricing pressure from offshore mix, FX losses, and restructuring costs .
Significant misses versus Q1 guidance: Adjusted EBITDA margin (actual 2.3% vs guided 5.5%–7.5%) and Adjusted diluted EPS (actual $(0.03) vs guided $(0.01)–$0.01); management cited lower bill rates from offshore delivery, macro caution, and FX as primary drivers .
Thoughtworks entered an agreement to be taken private by Apax-affiliated funds at $4.40 per share; earnings call was canceled given the transaction; restructuring savings target was raised to $185–$210M with additional headcount reductions (6%–7%) .
Near-term stock catalyst is merger arbitrage to $4.40 offer; fundamentals reflect stabilizing top-line but continued margin and FX headwinds during accelerated restructuring .

What Went Well and What Went Wrong

What Went Well

Revenue stabilized QoQ ($251.7M vs $248.6M), within the prior Q2 guidance range ($250–$255M), despite macro caution .
Operating cost actions advanced: YTD cost savings achieved rose to $108M and program widened to $185–$210M of annualized savings; wage-related restructuring execution ongoing .
Segment/geography resilience: APAC and Germany contributions held up (APAC $89.1M; Germany $33.3M), supporting diversified revenue base .

Management quote (Q1 call): “We expect adjusted EBITDA margin…to expand throughout 2024 as we focus on supply side efficiency, including utilization and the continued mix shift to offshore delivery.” .

What Went Wrong

Margins compressed: Adjusted EBITDA margin fell to 2.3% (from 10.2% YoY; 2.7% in Q1), missing guidance; GAAP net loss margin widened to (14.5%) due to lower revenue, FX losses, and restructuring charges .
Pricing pressure persisted: high single-digit like-for-like pricing declines and shift to offshore lowered average bill rates; utilization below targets, notably onshore .
FX headwinds and restructuring burden: net realized/unrealized FX loss of $(5.9)M in Q2 and $(16.3)M YTD; $7.2M restructuring in Q2 .

Financial Results

Metric	Q4 2023	Q1 2024	Q2 2024
Revenue ($USD Millions)	$252.4	$248.6	$251.7
GAAP Diluted EPS ($)	$(0.07)	$(0.10)	$(0.11)
Adjusted EBITDA Margin (%)	5.5%	2.7%	2.3%
Net Loss Margin (%)	(8.9%)	(12.4%)	(14.5%)

Segment breakdown (Q2 2024 vs Q2 2023 revenue):

Vertical ($USD Thousands)	Q2 2023	Q2 2024
Technology & Business Services	$69,695	$64,120
Energy, Public & Health Services	$75,313	$63,530
Retail & Consumer	$44,485	$42,687
Financial Services & Insurance	$52,778	$36,928
Automotive, Travel & Transportation	$44,944	$44,406
Total	$287,215	$251,671

Geography breakdown (Q2 2024):

Region ($USD Thousands)	Q2 2024
North America	$88,255
APAC	$89,095
Europe	$63,054
LATAM	$11,267
Total	$251,671

KPIs:

KPI	Q1 2024	Q2 2024
# Clients (TTM, >$25K spend)	—	502
Clients with TTM revenue >$10M	27	27
Net Dollar Retention (TTM)	—	85%

Guidance Changes

Metric	Period	Previous Guidance (from Q1)	Current Guidance	Change
Revenue ($M)	Q2 2024	$250–$255	Not updated (call canceled)	—
Adjusted EBITDA Margin (%)	Q2 2024	5.5%–7.5%	Not updated	—
Adjusted Diluted EPS ($)	Q2 2024	$(0.01)–$0.01	Not updated	—
Full-year Revenue ($B)	FY 2024	$0.995–$1.020	Not updated	—
Full-year Adjusted EBITDA Margin (%)	FY 2024	8%–10%	Not updated	—
Restructuring Savings (Annualized)	Program	$100–$115M (raised May 7)	$185–$210M (raised Aug 2)	Raised

Actual vs Q2 guidance:

Metric	Guidance	Actual
Revenue ($M)	$250–$255	$251.7
Adjusted EBITDA Margin (%)	5.5%–7.5%	2.3%
Adjusted Diluted EPS ($)	$(0.01)–$0.01	$(0.03)

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2023, Q1 2024)	Current Period (Q2 2024)	Trend
AI/technology initiatives	Over 50 GenAI projects; expanding AI-first delivery, data platforms; talent ramp (3,200 trained)	No call; continued emphasis in filings on service mix and modernization	Steady interest; monetization still early
Macro/pricing	Year-end renegotiations drove high single-digit like-for-like pricing declines; longer sales cycles, smaller deals	Pricing pressure persisted; offshore mix lowered bill rates; macro remained cautious	Ongoing pressure
Go-to-market (verticalization, partners)	Vertical focus improved new logos; partner pipeline doubled	No call; diversified regional revenue maintained	Structural — continued
Utilization & offshore mix	Onshore utilization below target; shift to offshore improving utilization but lowering average rates	Utilization still below plan; margins impacted	Improving gradually
Restructuring & savings	$81M annualized savings by Q4; raised to $100–$115M (May 7)	Raised to $185–$210M; more charges; 6%–7% headcount impact	Accelerating
FX	Minor in prior quarters	FX loss $(5.9)M Q2; $(16.3)M YTD	Worsened

Management Commentary

“We expect our average price to start stabilizing in 2024 as most of our contract portfolios have turned over to reflect the new pricing environment.” (Q4 2023 prepared remarks) .
“We are seeing stability among our client base… For the second quarter of 2024, we expect revenues…$250–$255 million…adjusted EBITDA margin…5.5% to 7.5%.” (Q1 2024 guidance) .
“We have identified further savings opportunities…targeted range of total cost savings to $100–$115 million.” (Q1 press release) .
“Board approved a second increase…total restructuring program savings of $185–$210 million.” (Q2 press release) .

Q&A Highlights

Pricing/Offshore mix: Management acknowledged “high single-digit” like-for-like pricing declines; offshore mix lowers average bill rates while boosting utilization .
Margin trajectory: Confidence in back-half margin improvement driven by utilization gains and cost control, though Q2 result missed near-term targets .
Vertical GTM: Vertical focus improving relevance and win rates in Energy/Public/Health, Auto, and Financial Services .
AI commercialization: Majority of work remains PoC and readiness; fine-tuning and proprietary LLM projects starting but still limited at scale .

Estimates Context

S&P Global consensus estimates for Q2 2024 were unavailable for TWKS via our data interface; as a result, formal comparisons to Wall Street consensus are omitted. Values retrieved from S&P Global were unavailable due to a mapping issue (GetEstimates error). We instead benchmark actuals versus company-issued guidance .

Key Takeaways for Investors

Revenue stability but margin stress: Flat QoQ revenue with sharp EBITDA margin miss underscores pricing/FX/restructuring drag; watch utilization recovery and pricing stabilization to lift margins in H2 .
Restructuring acceleration: Savings target raised to $185–$210M with 6%–7% headcount impact; near-term charges and disruption likely, medium-term margin optionality increases .
Deal catalyst dominates: Go-private at $4.40 per share shifts near-term focus to merger timing and approvals; earnings call cancellation reduces near-term disclosure cadence .
Segment/geography diversification: APAC and Germany steady; Automotive/Travel resilient; Financial Services and Energy/Public/Health softer YoY, suggesting portfolio mix shifts .
FX risk: Elevated realized/unrealized FX losses weighed on results; hedging/operational currency alignment could be incremental levers .
Guidance vs actual: Revenue aligned with guidance, but profitability metrics missed materially — expect continued margin rebuild via utilization and cost actions .
Trading implication: Near term anchored by merger spread; fundamental upside contingent on post-restructuring margin normalization and AI/DAMO monetization scaling .

Sources

Q2 2024 8-K and press releases (Exhibits 99.1, 99.2): revenue, restructuring updates, merger details, call cancellation .
Q2 2024 10‑Q: consolidated financials, segment/geography, FX impact, KPIs .
Q1 2024 8-K and press release: quarter results, updated guidance .
Q1 2024 earnings call transcript: pricing/offshore mix, vertical GTM, AI initiatives, margin trajectory .
Q4 2023 8-K and transcript: baseline KPIs, prior guidance context .

Thoughtworks Holding, Inc. (TWKS)·Q2 2024 Earnings Summary