Hello everyone, and welcome to Thoughtworks Earnings Call for the First Quarter of 2024. We will be recording today's call, and during the presentations all lines will be on listen only. Joining us today will be Thoughtworks President and CEO Guo Xiao and CFO Erin Cummins. The earnings press release was issued earlier today and is also available on our investor relations page at thoughtworks.com. Some of the matters we'll discuss on this call include our expected business outlook and anticipated costs and benefits of our restructuring actions, our forward-looking, and as such are subject to known and unknown risks and uncertainties. These include, but are not limited to, those factors described in today's press release and discussed in the risk factors section of our annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports we may file with the SEC from time to time. These risks and uncertainties could cause actual results to differ materially from those expressed on this call. These forward-looking statements are made only as of the date when made. During our call today we'll reference certain non-GAAP financial measures. We'll also provide growth rates and constant currency as a framework for assessing how our underlying business performed, excluding the effect of foreign currency rate fluctuations. We include non-GAAP to GAAP reconciliations in our press release furnished as an exhibit to our Form 8-K. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. Thoughtworks assumes no obligation to update or revise the information presented on this conference call. I will now hand over to Xiao. Thank you, Rob. Hello everyone. Earlier today we announced that I will be stepping down from my role and that the board has selected Mike Sutcliff as my successor, effective June 17th. I have spent 25 years at Thoughtworks, starting as a software developer in 1999 before taking on various leadership roles around the world, and I'm grateful for the many opportunities I've had. It has been a privilege to be a Thoughtworker and to be able to learn from the best and brightest in our industry. I'm proud of what we have accomplished together, growing this business and delivering extraordinary impact for our clients around the world, and now it's the right time to pass the baton. We're expecting to return to sequential growth in Q2, and I know I'm leaving this business in very capable hands. I'll continue to support as an advisor to ensure a smooth transition. In Q1 we exceeded our revenue expectations. We delivered in the context of a macroeconomic environment that though stable, isn't yet showing signs of improvement. Our sales cycles are still elongated, but our client portfolio remains steady. We're having more client conversations around growth-oriented work and seeing strong demand for AI and data services, enterprise modernization, and DAMO Managed Services. However, in Q1 we fell short of our Adjusted EBITDA margin guidance. This is primarily due to the timing of our ongoing supply rebalancing program, which includes adjustments to our offshore-onshore mix. This has resulted in a lower-than-expected gross margin. Our ongoing restructuring program focuses on efficiencies, and we're committed to improving our margin profile, and we're executing our plan to achieve it. Our client strategies are centered around technology. Our investments in sales and marketing, partners, and new services are paying off, and we continue to focus on delivering extraordinary impact for our clients. Now let me share our first quarter results. We generated revenue of $249 million during the first quarter with Adjusted EBITDA margin of 2.7%. Our industry-based go-to-market is gaining momentum. We delivered strong bookings in the quarter and expect to return to sequential quarter-over-quarter growth in Q2 2024. We remain focused on growing our client relationships, as reflected in the 57 clients with trailing 12-month bookings of over $5 million at quarter-end. New client acquisition remains a strength. We contracted with 49 new clients in the first quarter, compared to 46 in the fourth quarter of 2023. We have seen traction from our vertical-based sales model, with higher new logo acquisitions in our energy, public, and health services, technology, and business services. These are verticals that we have intentionally focused on. We have outstanding technologies and a reputation for innovation and thought leadership. We're well positioned to help our clients evolve their operations and harness the power of cloud, data, and AI to adapt for future success. Now let me hand over to Erin. Thanks, Xiao, and thank you to everyone for joining our call today. We continue to invest in strengthening our client relationships, and we are driving engagement with clients across all verticals. Our focused approach to building demand continues to provide ongoing returns, with 62% of quarterly bookings in Q1 coming from outbound efforts. Our teams are converting pipeline opportunities, helping us achieve top-line results ahead of our expectations in Q1. Our team's execution comes against the backdrop of a still-challenged macro environment. That said, the macro remains steady, and we have not seen the development of incremental client budget pressure since last quarter. Their digital needs remain intact, and we are partnering with our clients as they put their plans into action. Now let's turn to more detail about the first quarter. Revenues were $249 million, representing a year-over-year decline of 19% in both USD and constant currency. Acquisitions completed in the last 12 months were immaterial to the revenue growth rate in Q1. During the quarter, we saw year-over-year declines of 11% in APAC, 21% in Europe, 23% in North America, and 31% in LATAM. Among our industry verticals, revenue declined by 8% year-over-year in automotive, travel, and transportation, 12% in technology and business services, 19% in retail and consumer, 25% in energy, public, and health services, and 29% in financial services and insurance. Compared to Q4 of 2023, we saw sequential growth in automotive, travel, and transportation, energy, public, and health, and technology and business services. During Q1, as a percentage of total revenue, our top five, top 10, and top 50 clients generated 18%, 29%, and 68%, respectively. As of the end of Q1, we had 27 clients with TTM revenues greater than $10 million. On a TTM basis, around 95% of our business came from existing clients. As of Q1 of 2024, our annualized average revenue per employee was $92,000. We continue to believe that this metric, which remains above the industry average, reflects the strategic importance of our work. On a trailing 12-month basis, we finished Q1 with bookings of $1.2 billion, down 20% compared to Q1 of 2023. Our year-over-year TTM bookings reflect the change in client behavior that developed over the prior year, which pressured contract length and sizing. However, we continue to see relative stability among our clients, and TTM bookings were unchanged sequentially from Q4 of 2023. As Xiao mentioned, our Q1 bookings were strong. Adjusted gross margin was 31% for Q1 compared to 36.4% during the prior year. Our Q1 adjusted gross margin continued to be impacted by lower onshore utilization and high single-digit pricing declines on a like-for-like basis. In the first quarter, our adjusted SG&A as a percentage of revenue was 28.3% compared to 25.1% in the prior year. We've seen a year-over-year reduction of $7 million in adjusted SG&A through proactive cost management while still investing in demand generation. Adjusted EBITDA was $7 million for the first quarter for an Adjusted EBITDA margin of 2.7%. Q1 GAAP diluted loss per share was $0.10 compared to $0.03 in the prior year period. Our adjusted diluted loss per share was $0.02 compared to adjusted diluted EPS of $0.03 during the first quarter of 2023. Free cash flow was negative $20 million during Q1 compared to free cash flow of $31 million in the prior year period. The timing of certain items, in addition to year-over-year revenue headwinds, impacted cash flow in the quarter. We expect positive cash flow in Q2. As of March 31, 2024, our term loan balance stood at $294 million. We continue to have good liquidity, ending the quarter with a cash balance of $73 million and an undrawn $300 million revolving credit facility. Our outstanding employees make our achievements possible, and we continue to believe that we have the best technologists in the industry. Our attrition rate remains below industry averages. In Q1, voluntary attrition on a TTM basis was 12.4%, slightly up sequentially from 12% in Q4 2023 and an improvement year-over-year from 13.1% in Q1 of 2023. At the end of Q1 2024, our headcount was around 11,000. We are hiring selectively, focusing on specific skill sets such as data and infrastructure. Now let me hand the call back to Xiao to share a broader update on the business. Thanks, Erin. We're making steady progress, and we're pleased to receive recent recognition from Forrester, a leading global market research company. Thoughtworks was named in the Innovation Consulting Services Landscape Q1 2024 report by Forrester Research. We were pleased to be the only listed service provider with a geographic focus on four continents. We continue to execute our vision to deliver extraordinary impact for our clients. Let me share some of the client stories to bring this to life. Foxtel Group, Australia's leading subscription television company, has worked with Thoughtworks since 2021. We actively engage with Foxtel Group to integrate their innovative streaming services aggregator platform Kayo Sports, Binge, and Hubbl. We also aim to shape the future of Kayo Sports, a thriving sports streaming service under the Foxtel Group umbrella that is affiliated with American conglomerate News Corp. Auto Trader is the U.K.'s largest automotive marketplace, providing access to over 80% of U.K.'s automotive retailers. Auto Trader brings together the largest and most engaged consumer audience with the largest pool of vehicle sellers. Auto Trader partnered with Thoughtworks seven years ago on a major transformation. Today, Auto Trader is working with Thoughtworks to realize their aspirations to provide an industry-defining, connected customer experience. At our client, Total Wine & More, we're building upon our enterprise modernization focus and expanding to drive broader organizational change with a product-thinking approach. Having grown into the largest independent retailer of fine wine in the U.S., operating 265 stores, Total Wine prioritized applying this approach to its ERP systems for impactful business outcomes. Total Wine applied product thinking to internal systems supporting the buyer's response for reviewing and acting on extensive and intricate data sets while adhering to a tight schedule for product to get it on store shelves in time. Using a product-led approach, Total Wine aims to improve the ERP experience for buyers and streamline buyer tasks, making them easier and more efficient. The initiative is also expected to cut down tedious work and reduce operational costs. Together with our partner, Google, we have enabled Brazil's leading communication entertainment group, Grupo Globo, to migrate one of its key products, Globoplay, from a legacy system to Google Cloud Platform in just nine months. This project was driven by the need to increase efficiencies, reduce costs, optimize processes, integrate teams, and link to ESG commitments. Through this migration, Grupo Globo saw a 78% cost reduction in marketing and commercial intelligence and better financial transparency. The streamlined reuse of data and code allowed it to reduce the size of its data set by 34% and improve scalability and processing efficiency. In these examples, you can see that our technologists are intensely focused on solving our clients' toughest challenges by harnessing our expertise with cutting-edge technology. Now let's turn to AI. Client interest and demand for AI and AI-related work remain strong, and our team of world-class service professionals is working to bring clients' AI ambitions to reality. At the end of the first quarter, we were working on over 50 AI-related projects. We're delighted to announce the successful acquisition of the talented individual's IP and technology from Watchful. Watchful is a San Francisco-based company that helps organizations accelerate the creation, enhancement, and deployment of AI models. This acquisition enables Thoughtworks' strategy to become a leading AI transformation partner globally. The integration of Watchful's technology into Thoughtworks' suite of data and AI services will expedite client AI deployment, moving projects from proof of concepts to production rapidly and effectively, thereby providing clients with faster returns on their AI investments. Our clients are still early in the AI journey. We're pleased that some are moving from proof of concepts to operational deployment, and we see a long runway of direct and indirect opportunities. In the first quarter, we powered up our services launch engine, launching eight new AI services. For example, AI-first software delivery, AI-powered digital products, and AI platforms. We believe these AI technologies and services, covering a wide range of use cases, will be a source of value for our clients and Thoughtworks. We're also seeing AI increase demand for our enterprise modernization and data service offerings as clients focus on improving their systems and data to harness AI's potential. Let me share a few client examples. We have worked with a global top 10 bank to streamline its customer complaints process. We have been working with this bank for a decade on data platforms and, more recently, large language models. The bank's complaint team faced many challenges, resulting in a poor customer experience. We built and delivered a system to extract and summarize complaint texts and audio based on large language models. Additionally, we delivered a webpage summary for complaint analysis and a customer web chatbot. To minimize hallucinations, we employed common keyword techniques, conducted structural analysis, and filtered out irrelevant and harmful information. We achieved 75% of efficiency improvement, and agents can now save approximately 40 seconds per customer complaint interaction. We used data modeling to reduce maintenance costs at one of the world's top 20 airlines by revenue. We built an optimization algorithm to find the optimal maintenance sequence to reduce the number of days airplanes are grounded due to maintenance activities. We integrated this with the airline's internal system to visualize and update the maintenance chain in real time. We developed data models to evaluate and optimize the trade-offs between operational disruptions and holding inventory costs. This ongoing program has already delivered double-digit million dollar cost savings ahead of schedule. All this is built on our expertise and commitment to ethical technology. More than ever, this is critical to our clients as they look to deploy and scale fast-moving AI technology in complex, often regulated environments. Diversifying our service portfolio is a priority. We're pleased that Thoughtworks' DAMO Managed Services are getting good uptake with 16 new deals in Q1. Thoughtworks' AI-powered DAMO Managed Services go beyond simply sustaining client applications. We help them continuously enhance and transform, and we expect to deliver 10 times the productivity that labor-intensive managed services providers offer. DAMO Managed Services is strategic for Thoughtworks to shift longer-term contracts and for service expansion. Our clients often tell me that our technologists and thought leadership differentiate Thoughtworks. They look to us to help them make the right technology decisions, which is arguably never being more challenging. Clients turn to us because we write the books that shape the future of technology. This quarter, Thoughtworks Luminaries published two new books. Software architecture can be a tricky area to get started with, even for relatively experienced software developers. The book "Head First: Software Architecture" takes a radically different approach to technical books, bringing the key concepts and ideas behind software architecture to life in a visual and engaging way. Demand for machine learning solutions has grown significantly in recent years. The book "Effective Machine Learning Teams" bridges the gaps between software engineering, lean product practices, and machine learning models. It is an essential guide for practitioners who want to better understand how to deliver machine learning-backed products. I'm also proud to share that we published the 30th edition of the Thoughtworks Technology Radar. This twice-yearly snapshot of tools, techniques, platforms, languages, and frameworks is based on the experience of Thoughtworks' global teams working with clients. Through a series of blips, it highlights to clients what they should adopt, trial, assess, and hold. Edition 30 includes over 100 blips, and the third relates to AI. Back to you, Erin. Thanks, Xiao. Now let me discuss our business outlook for Q2 2024 and the full year. We are seeing stability among our client base, and the macroeconomic environment is unchanged. Clients remain focused on achieving more with less, but we did not see incremental budget pressures develop during Q1. Our teams are focused on converting pipeline opportunities within the framework of client budgets. We are seeing the benefits of our vertical-focused approach, which helped drive faster conversion in Q1 and into Q2. For the second quarter of 2024, we expect revenues to be in the range of $250 million-$255 million, reflecting a year-over-year decline of 13%-11%. At current rates, guidance incorporates an immaterial FX impact in Q2. We expect Adjusted EBITDA margin for the second quarter to be in the range of 5.5%-7.5%. For the second quarter, we expect adjusted diluted earnings per share to be in the range of -0.01 to +0.01, assuming a weighted average share count of approximately 323 million diluted shares outstanding. Turning to our full-year 2024 outlook, we now expect revenues in the range of $995 million-$1.02 billion, reflecting a year-over-year decline of 12%-9% in USD and 12%-10% in constant currency. Additionally, for the full year, we still expect Adjusted EBITDA margin of 8%-10%. We remain focused on driving efficiencies in both our supply and our G&A functions, and we continue to expect margin expansion as we progress through 2024. As of March 31, we have realized $87 million in annualized cost savings since we began our restructuring program last August. As we have undergone the process of improving our cost profile, we have identified further savings opportunities. Accordingly, we are raising our targeted range of total cost savings to $100 million-$115 million from our initial targeted range of $75 million-$85 million. With the increased cost savings target from our restructuring program, we now expect total pretax charges of $26.5 million-$33 million, of which we have already recorded $21 million through the end of Q1. Importantly, we do not anticipate any disruption to client service as we execute upon these incremental savings opportunities. For the full year, we now expect Adjusted Diluted EPS of $0.02-$0.08, assuming a weighted average share count of approximately 330 million diluted shares outstanding. For the full year, we expect share-based compensation will total $42 million. Altogether, we believe that we are at an inflection point and are seeing signs of stability. Our expected growth into Q2 is encouraging. We are intensely focused on improving results and driving margin expansion. We are building a more resilient company while delivering client impact through our thought leadership and technology excellence. Before we get into Q&A, I would like to say thank you to Xiao for his many years of leadership. You've seen this business through many changes, and your passion for the work and for all thoughtworkers has never wavered. We greatly appreciate all that you've contributed throughout your time here. It's been an honor to work with you. And with that, let's move to Q&A. Operator, will you please provide instructions for those on the call? Thank you. If you'd like to ask a question, please press star one one. If your question has been answered and you'd like to remove yourself from the queue, please press star one-one again. Our first question comes from Tien-Tsin Huang with JP Morgan. Your line is open. Yeah, thanks so much. Good morning, Xiao. Wish you the best, of course, with the transition here. I wanted to ask just on the transition and your successor, Mike, who's a great choice. We know Mike. But it is the first time, I think, bringing in an outsider to lead Thoughtworks, if I'm correct. So I'm just curious around the balance of that change together with the importance of the Thoughtworks culture, which I know is really important to you and everybody, just trying to think about that balance. And can we expect a continuation of some of the things you've talked about, like verticalization as well as bringing in more systems integration and package implementation type of work? Just whatever you can share before Mike officially joins would be great. Thank you. Sure. Hi, Tien-Tsin. Thank you for the question. So we are at a phase where I think we are looking at the next four- to five- years, obviously not just the next one or two quarters. We've done a good transition, restructuring, and then I think we're on the path to a growth trajectory, we believe. And then we think that it's time to look at a longer term to see what do we need to continue to grow the business. And one of the things we consider is to bring in more new blood, more external expertise and experience. As you mentioned, Tien-Tsin, we have a lot of long-tenured leaders in Thoughtworks. We think it's time to take what we believe and what we have and then combine that with more external experience. So that's the rationale. To the point of strategic change, we're on the path in terms of the restructuring, the vertical focus, and also the intention to bring more system integration and then package software implementation. We're not planning to change that. We do see our clients, for example, asking us very often about supporting them on system integration, package software implementation, especially because at Thoughtworks, we have a lot of experience on legacy modernization. We do believe that by expanding into those areas, help Thoughtworks to become a better strategic partner to our client and also increasing our team. At the end, I also just want to mention, as you asked, that we are proud of the unique culture that we have built that focuses on technology excellence, pursue excellence, continuous improvement. Then Mike has been in the industry for a long time, and he knows about Thoughtworks and has long admired our culture and is committed to our purpose of creating extraordinary impact through our culture and technology excellence. We're confident that it's going to be a win-win situation. Great. No, glad to hear it. I'm sure that's the case. Just my second follow-up question, just on the stability that you commented on, that's great to hear, no incremental pressures and whatnot. Just on the pricing front related to that, do you have good visibility here around the pricing environment and pushing projects forward? Sure. So the pricing drop we mentioned in Q4 2023, and then we're also seeing in Q1 this quarter, as we talked about it last quarter, it was mostly driven by the year-end client negotiation for 2024 budgets, especially some of the big deals that we signed during the quarter or during Q4 and during Q1. So we believe that the new pricing dynamics is already, at this moment, reflected in the majority of our contract portfolio. So further pricing declines from Q1- Q2 should be much less significant and should stabilize. In the meanwhile, the new logos we're signing up for and the new work tends to start at a higher rate than the bigger deals where we have to sometimes give volume discounts. So overall, it's normalizing and stabilizing. We don't expect a significant pricing drop to continue. Great. Thank you, Xiao. Thank you, Tien-Tsin. Thank you. Our next question comes from Moshe Katri with Wedbush Securities. Your line is open. Hey, thanks. And Xiao, it's been great interacting with you, and good luck. Just wanted to pick up the conversation on pricing again. So was there any factor here in terms of offshore mix that's been driving some of that pricing pressure rather than just like-for-like pricing pressure? That's my first question. Hi, Moshe. Yes, it's been great working with you. So thank you for the question. The pricing drop I mentioned earlier was referring mostly to like-to-like price comparison. The offshore/onshore mix definitely creates a pressure on what we call the average bill rates across the world. Then it is an impact to our average pricing. Then we expect that definitely; we expect that to continue as more work moves offshore. But that's also being offset by higher margin, higher utilization. Overall, we don't mind the pricing decrease if it were because of offshore/onshore mix. But I think I was mostly referring to the like-to-like pricing environments being stabilized. Understood. And my follow-up is on APAC. In the past, you guys provided us some updates on what you're seeing there: Singapore, Australia, and China, maybe some color there. Thanks a lot. Sure. APAC has been pretty resilient over the last quarter. And then we have seen stronger growth in Singapore and Indian local market, for that matter. As you mentioned, Australia has seen slower growth over a rather long period of time, mostly because of our exposure in the tech sector in the Australian local market. And then we're seeing recovery. It's stabilizing. It's definitely not declining further. We're seeing green shoots. Some of our long-term tech clients are now adding headcounts, ramping up projects. But it's not as fast as we were hoping for from a rebound perspective. So we're just continuing, I think, incrementally getting better. China, there are two perspectives. One is there's offshore work we do there. There's also local work we do there. The local work is getting back to growth. After After the country opened up, the economy started to return to growth. It's not as fast as the economy growth rebound is not as fast as a lot of the economies were expecting, but it's still growing. And then so we are. We're seeing the rebound. It's not growing as fast as it might have been otherwise, but it's still stabilizing and growing. Offshore market for China has been a constraint for a little while because of the geopolitical tension. And then we're also being conscious of the risk exposure. So we're not pushing hard on growing the offshore in China. Instead, we're looking at offshoring more to India, Latin America, Southeast Asia, and some of the other Eastern Europe, some of the other areas. Thanks. Thank you, Moshe. Thank you. Our next question comes from Bryan Bergin with TD Cowen. Your line is open. Hi, thanks. Zack Ajzenman on for Bryan Bergin. First question we had on demand. Just wanted to dig further into what's giving you confidence in the implied sequential growth view for 2Q, which would be the first time in almost two years. So what else could you say about how demand indicators have changed over the past three to six months and any notable vertical or geo callouts that you would highlight as a tailwind or headwind looking forward? Sure. Hi, Zack. From a macro perspective, as Erin called out earlier, the client behavior in the current environment is similar to what we have described in recent quarters. It hasn't fundamentally changed. It's stabilizing with respect to project term, but we continue to see longer sales cycles and smaller deal size compared with a couple of years ago, for example. But that said, we are seeing some opening of discretionary spending, especially where there's a strong case for ROI. I think probably more importantly, we're also seeing our restructuring efforts paying off with increased investments in sales and marketing and a vertical-focused approach. Our team did a good job converting pipeline opportunities in Q1. And then we also have strong bookings in Q1. So those give us confidence for the coming quarters. Putting this together, we do expect Q2 to return to sequential growth and then followed by a similar trajectory later this year. Got it. On the supply constraints, so it sounds like these internal limitations that initially emerged last quarter are still causing some friction, but this time more so on the margin front, whereas 4Q was a revenue fulfillment issue. Could you elaborate on the latest here and if it's expected to impact results in the coming quarters? I'll take that question, Zack. Just in terms of the internal frictions and what we touched on in the last earnings release, I'm pleased to say that has been addressed as we had expected. That was more around just some specifics, as you mentioned, with revenue fulfillment, just some of the change from the restructuring. But we did put in new processes, and things have normalized, and that's been fixed now. What Xiao touched on, as well as I did, that's impacting the margin is the adjustments on offshore/onshore mix. Really, what we're seeing is higher utilization with our offshore supply and then a little bit lower utilization with the onshore supply. And so that is what is impacting the margin. We had highlighted that issue, I should say, last quarter and did note that it would take a couple of quarters to work through all of that. So on the whole, the supply issues that we talked about in our Q4 release, they've been addressed. We're feeling very good, and we are focused on the rebalancing of our supply. It will take us a couple of quarters to get there, but that also is progressing to plan. Understood. Xiao, it's been good to work with you. We wish you luck on the next chapter. Thank you, Zack. Thank you. Our next question comes from Jason Kupferberg with Bank of America. Your line is open. Hi. Good morning, Xiao and Erin. This is Tyler DuPont on for Jason. Thanks for taking the questions. First, just want to start, if you could maybe just spend a minute and discuss sort of the types of projects you're working on and the visibility in demand across those projects. It sounds like the focus continues to be less on the more discretionary, high-bill rate consulting-oriented initiatives that Thoughtworks is known for and more on those projects with the short-term, realizable ROI. Given the historical focus of Thoughtworks, can you just discuss how your current go-to-market differs between the project types, particularly if there's a difference in any win rates between those two that are worth calling out, and if you're seeing in 1Q particularly sort of what pricing concessions you had to make as you compete more aggressively for work? Sure. Thank you for the question. So we do historically do a lot of consulting work. And then I think what we're doing right now is a lot of delivery work, but not necessarily everything is focused on short-term ROI. We do have a lot of long-term engagements with our clients that continue getting funded because they're strategically important. So from a go-to-market perspective, we do focus a lot more on expanding our service offerings, but not so much as kind of steering away from short-term consulting projects to just from consulting kind of projects just to delivery projects. And then what we're seeing, really, is just the client buying behavior. Their funding is not so much focused on or sometimes it's getting pulled back more on the consulting side of it, more focused on just executing and delivering products. So our go-to-market hasn't fundamentally changed. Our win rate has been consistent and then moving up over the last couple of quarters, especially this quarter. I think part of that is because we are turning over some of the contracts, and we are going to the market with a more aggressive, more realistic pricing in the current environment. And also, with our vertical-focused approach, we believe that giving us a lot more ability to be relevant to our clients from solving their domain-specific problem perspective, that we believe gives us another edge in increasing our win rate. So overall, we're feeling good about our win rate, both in terms of new projects and then extensions. From a consulting and then delivery perspective, the win rate is similar. There's not much difference there. I think the lack of consulting projects is more due to client pulling back on budget as opposed to competing against competition. Okay. That's very helpful, Xiao. Thanks for that. And then just as a follow-up on margins, it looks like 1Q came in modestly below the low end of the range. And based on full-year numbers, it looks like we're definitely more back-half weighted. I'm curious if you can walk us through the margin dynamics facing the business through the year and what gives you confidence in that back-half reacceleration, if you will. It sounded like many pricing concessions made were for projects across 2024, the budgets across 2024 broadly. So do you anticipate pricing strength in the back-half of the year on new projects to offset that, or just any clarity there would be helpful? Thanks for the question, Tyler. I'll start. In terms of the pricing dynamics, no, there's not an assumption of improved pricing dynamics included in the margin guide for the year or in the back-half. We are seeing a stabilized pricing environment, which Xiao talked about. But on the whole, our expectation is that the macro will stay largely unchanged. And then while we are seeing some discretionary work, we are not expecting the mix of consulting to change. But why do we have confidence in the increased margin? So I touched on this a little bit already, and I also talked about this last quarter. It's worth a reminder. As we look at 2024, the two key elements to our margin improvement, first of all, is increasing utilization. While we have seen some increase in utilization, there's still plenty of room to go. The second piece of that is the rebalancing of our onshore and offshore supply mix, particularly because we have lower utilization that is oriented towards the higher-cost locations. So that has been driving part of that margin headwind that we've experienced. As we go forward where we have confidence, first of all, as I touched on in my prepared remarks, we are at an inflection point for the year. We're feeling positive about the top-line momentum that we have in the strong bookings, and our Q2 guide incorporates sequential growth from Q1 to Q2. And so that obviously helps. At the same time, we are managing our costs very carefully, and we are aligning our supply base with that shift to offshore. So really, it's the combination of the stability in our revenue base plus continued discipline in improving our utilization and our cost management. That is what we expect to drive that consistent margin improvement. In Q2, I have guided to a margin uptick, and I expect to see more margin uptick in the second half of the year. That's helpful, Erin. Thank you for that. Thank you. As a reminder, if you'd like to ask a question, please press star one one. Our next question comes from Jacob Haggerty with Baird. Your line is open. Hey, guys. This is Jacob on for Dave. So thanks for taking my question. Just wanted to ask, you have bigger restructuring savings. You raised that, but the margin guide stayed intact. Why wasn't the margin guide raised in line with the restructuring savings? The restructuring savings, the additional savings, I guess, first of all, I will say as a reminder, we have delivered $87 million in annualized savings at the end of Q1. Now, there are some timing differences of when those savings will come through. Some of that will come through. Most of it will have been realized, certainly, in Q2, but some of it won't come through until Q3 and a little bit in Q4. So part of it is timing differences. Really, that would be the most of it. As we had talked about with the Q1 view, the shift of our supply mix is something that we're taking very thoughtfully and carefully actions around, making sure that we're not impacting client service. We've done an incredibly good job so far, and we intend to continue to do that. I would say, on the whole, we're focused on doing the right thing for our client. We're doing the right thing on the cost base, but the timing of the adjustments is shifted a little bit, and that is why we haven't updated the margin guidance. That makes sense. Thanks. And then just one more question for you. So the share count guide was down. Could you guys explain on why that was? The share count guide would just be from some changes that took place, some assumptions that took place in Q1 because we did have some issue of shares in the quarter. But for the fuller view, I will come back to you with the question. I don't have the specific answer now, but we'll make sure that we get an answer out that's clear. Thank you. Our next question comes from Matthew Roswell with RBC. Your line is open. Yes. Good morning. Thank you very much. Xiao, it's been a pleasure to work with you over the last couple of years. I guess following up on the restructuring question, what makes you think that you're maybe not cutting too much when it comes to the restructuring? I guess as part of that, what areas are you finding the extra cost savings in? As I mentioned earlier, in terms of the restructuring savings, we are being very thoughtful about the actions that we're taking, and we're very focused on client execution as well as making sure that we see continued momentum into our demand and our go-to-market. So where we are focused is areas where it's non-client-facing in particular. Again, there's some adjustments because of the onshore/offshore mix. And so where we don't expect to see improvements in utilization over the next six months or so, that would be a place where we're looking. In addition to that, we are seeing, from an operating expense perspective, we've really, by the end of Q1, fully realized what we expected. We had good movement with our function supporting our business as part of the restructuring around the globe. We see further opportunities for decreased operating expenses in some of our office space rationalization as well as some of our vendor expenses. So on the whole, it really is in line with the restructuring program that we started last year. It's very consistent. It's just an increase because we've identified more opportunities. We are treading very carefully to make sure that client service continues to go well. Yeah. Then just to add to that client services part, we do expect to see sequential growth. We do think that demand for services is increasing, but it's unevenly distributed. Now, we know that we're going to see more demand for offshore services. For example, we're going to see more demand for infrastructure skill sets, data skill sets, and cloud skill sets. Then that's slightly different from what we have developed so far over the last few years. As we move forward, we're trying to increase capacity skill sets in certain areas and reduce it in some of the other areas. All this is done in the spirit to support the growth, to empower the growth, as opposed to optimization at the cost of the growth. If I could follow up on the mix shift and increasing the utilization, the onshore utilization, what percentage of the improvement is sort of under your control, and what percentage is kind of based on the market stabilizing or improving? Hopefully, that question makes sense. It does make sense. 80% of it, Matthew, would be under our control. Part of it, of course, market dynamics matter. But what we've talked a lot about, we have seen stabilization in the market dynamics, which we're really pleased about. Again, worth mentioning the go-to-market momentum, the strong bookings that we had for the quarter, and the sequential growth we expect in Q2. So clearly, the market matters, but most of it is under our control, and we feel very confident about the path that we're on. Okay. Thank you very much. Thank you, Matthew. Thank you. Our next question comes from Darren Peller with Wolfe Research. Your line is open. Hi. Thanks. This is Paul Obrecht on for Darren. Can you provide some more detail on how the new industry-based go-to-market approach is resonating with customers, maybe both as it relates to winning new customers and maintaining existing ones who are going to them for renewals? And do you find that this model is mostly optimized at this point, or is there still some work to be done to further develop the sales and marketing capabilities? Thank you for the question. We're definitely only at the beginning of this journey. There's a lot more to be done. The vertical sales and go-to-market approach is the intention. The hypothesis is that our sales team, our go-to-market team, and then especially our professional services team on the ground would focus on a particular vertical over a longer period of time so that we build and retain a lot more domain expertise as opposed to they constantly being changed and diluted. So when we talk to our clients, we have more relevant point of views and then understand how to solve their biggest business problems with our technology. And then we're seeing that paying off, I think, at this moment, especially with new pursuits, new wins where we have people who are more savvy and then understand and then can speak the same language with our clients. That's why we are seeing higher new logos, especially in the verticals we've chosen to focus on, for example, energy, public sector, auto, and then financial services. And then for it definitely helps with ongoing clients. One of the challenges our clients have had over time with Thoughtworks is we keep rotating people out of their team, out of the vertical, and then they seem to believe that it's a lost opportunity given the domain knowledge they have built so far. So with this model, we have more key technical talents and delivery talents that's ring-fenced in a particular vertical over a longer period of time. So they get to becoming a better expert at helping our clients solving their problems. But like I said, it's only the beginning of the journey. We have only been doing this for a couple of quarters. We believe that over time, we're going to see this approach paying off even more. Great. Thanks. And then as a follow-up on the topic of GenAI, I know the majority of the work being done is mostly proof of concepts and getting the data platforms ready. But do you anticipate we could see GenAI work begin materially contributing to revenues maybe by year-end as clients start deploying it at scale, or do you expect this won't happen until 2025? I know it's early. Just trying to think about this from a timeline perspective. You're definitely spot on in terms of there's a lot of POC kind of short-term work, and there's a lot of preparation work building the data platforms. The GenAI work itself, especially large language model building, hasn't really been a main theme yet. We do expect it to pick up at some point. Now, it's going to be end of the year, probably some of them. Next year, definitely more of it. That's part of the reason that we have acquired Watchful. It's part of a company. It specializes in building tools to accelerate large language model development from POC to scaling, for example, especially the eval feature to tell you which model is more effective than the others. And this is definitely what we believe is going to be a key area for us later this year, early next year. We do expect to see more large language model development. We're seeing a few of them, but it's still not the norm. Your guess is as good as ours, which is probably going to be later at the end of the year or beginning of next year. Thank you. Our next question comes from Maggie Nolan with William Blair. Your line is open. Hi, everyone. It's Kate Kronstein on for Maggie. Congrats, Xiao, and we wish you luck on your transition. I wanted to start off asking about the top five and top 10 client buckets. It looks like those both increased sequentially. Can you guys talk a little bit more about the current dynamics you are seeing in those cohorts this quarter? Sure. So the top five and top 10 clients, as you pointed out, have increased incrementally by 1% from a revenue concentration perspective. It's still in the 18%-29% range, which is relatively well diversified. So we're not overly concerned about it. But the increase is mostly due to, given the current environment, we tend to focus more on retaining our top clients and then develop longer-term, more strategic relationships, for example, adding new service offerings like DAMO, packaged software, system integration. So we continue to expand our footprint. Given the macro, it's easier from a revenue perspective to expand with the current existing top customers, especially when some of them have an intention to consolidate their vendors. And then so we're actually benefiting from that, gaining more momentum with our top clients. That said, we are also seeing a longer tail, especially new logos, increasing. It's just that some of these new projects, given the current environment, are starting at a smaller size, smaller deal size. Then so we're not getting a lot of big deals at the get-go. Then we're following a lot of the land and expand approach there. Okay. Great. Thank you, Xiao. That's helpful. And then my next question is, last quarter, it was mentioned that Thoughtworks was seeing some supply constraints around certain skill sets. Can you maybe expand on what you are seeing now on the hiring front? I'll take that question. Thanks, Kate. We touched on it a little bit earlier. Xiao was speaking about some of the skill sets where we are seeing lots of demand. Where we are doing more hiring, it's particularly around data and infrastructure skills. That continues to be a place where we're seeing good demand. Some of the data skill sets do have specialized skill sets or experience requirements. And so that's been a focus for our recruiting team. We put quite a lot of effort in our recruiting in the last quarter and are seeing some very positive momentum from that. And so on the whole, we're feeling good about the ability to fulfill that supply and where we continue to expect to see strong demand. The other thing that I would touch on is that offshore has been pretty strong. So where we're continuing to hire is more in our offshore locations. On the whole, going well. The supply constraints, we think, are well in hand. The recruiting, where we are recruiting in particular areas, is going very well. We're pleased to see the momentum. Great. Thank you, Erin. Thank you, Kate. Thank you. And our last question comes from Arvind Ramnani with Piper Sandler. Your line is open. Yeah. Thanks for doing my question. Xiao, it was a pleasure working with you, and I wish you the very best on your next handover. I just had a question. I mean, on the demand environment, y'all kind of characterize it as still kind of really no change, but it's not getting worse. But is there something specific about kind of your offerings or your services? We are starting to see some signs of improvement. Is there something idiosyncratic to what you all have done or the type of work that you're doing where you're seeing an improvement, even though the overall demand environment has not necessarily improved? Sure. First of all, thank you, Arvind. It's been a pleasure working with you too. So from a demand perspective, we believe that what has made it better for us despite the macro environment is that we have invested in additional sales and marketing capacity, especially our focus after the restructuring to focus more on outbound demand generation capabilities. You might remember that historically, we have only 15% of our new bookings generated from outbound. 85% is from inbound, given the strong brand and then we have enjoyed. Right now, over 60% of our new bookings in Q1, for example, came from outbound efforts. That's definitely, I think, due to the effort the sales and then marketing team has put in. And then as a result, we're also seeing higher conversion from these opportunities. And then at the same time, I mentioned earlier, we continue to invest in this vertical-based approach. And then we're focused on the verticals that we believe are more resilient in this current environment, for example, public, energy, healthcare, automotive, and life science. And then we're seeing that paying off as well. A large number of our new logos come from these verticals. And finally, we are expanding our service offerings, especially in the efficiency and cost-saving programs, catering for the short-term but also the strategic nature of some of the work some of the clients are asking for. I mentioned DAMO, the digital application management operations services. Now, approximately 30% of our top 50 clients are using this service. It was obviously zero a couple of years ago. We are continuing to expand this. Again, this gives us the opportunity to increase our total addressable market, even with the same client portfolio we have. That's really helpful, and that explains it. Then one of the earlier questions, I think what you were saying is still a lot of the work around GenAI is proof of concept and pilot, so fairly small in scale. I just the one thing I want to clarify is, is there even a single large-scale kind of GenAI project you've seen at Thoughtworks or even at your clients and maybe Thoughtworks is not involved? Have you seen any large-scale GenAI project? And if you haven't, when it does come together, what kind of project would it be? Where would you see even if you look at the proof of concepts you've seen, where do you see this promise where there could be a much, much larger-scale GenAI project? It's a great question. So we do have a few fairly large GenAI-related projects. And then to peel down the layers, what tends to happen, some of the POCs is just using some of the open cloud-based platforms to use the existing large language model and then use that to perform simple tasks like content generation and some basic analysis. And then you move to another layer up. There's the RAG-based, which is very popular right now, the RAG-based, RAG-based approach that takes a bit more work to do before you feed any prompts into the large language model. So the work is around the large language model, but the large language model itself is still the commercial ones that's readily available. And then lower layer down, which is fine-tuning. We have certain projects that's doing the fine-tuning of the large language model. And that requires more effort, more data computing power. And then that's a little bit more heavy lifting from a cost perspective. The largest program we've seen so far is the final phase. That is developing your own large language model. And then that's fewer, definitely, than the others. But we already have them in flight. And then we do believe that as we progress, as the POC and adoption of GenAI progress, we're going to see more and more of this work moving from what I mentioned earlier, from left to right, slowly proceeding to finally building your own large language model. Now, you don't need to build your own LLM in every cases, but some of them will require that. And that's a significant effort. And then those will generate much bigger projects. Perfect. That's really helpful. Thank you very much. Once again, it was really a pleasure working with you. Thank you, Arvind. Same here. I'm just going to jump in quickly. While we're still on the call, I wanted to quickly follow up on the share count dynamics that Jacob asked about earlier. I would simply highlight that the share count dynamics reflect the share price and how it impacts the accounting treatment with respect to dilution. So that's a big part of the change from last quarter to this quarter. An example would be dilution from options. And with that, I'll hand over to you, operator. Thank you. There are no further questions. I'd like to turn the call over to Xiao for closing remarks. Thank you. Thank you, everyone, for joining us today for our Q1 Earnings Call. I want to thank all Thoughtworkers, clients, and partners for the extraordinary impact we're delivering every day together. Stay well, and all the best. Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.