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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 2022
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
twks-20220630_g1.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 11, 2022, there were approximately 311,131,085 shares of the registrant's common stock outstanding.


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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:
we may be unable to implement our growth strategy;
our ability to generate and retain business depends on our reputation in the marketplace;
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;
increases in wages, equity compensation and other compensation expenses could prevent us from sustaining our competitive advantage and increase our costs;
our business and operations may be harmed if we cannot positively evolve and preserve our Thoughtworks culture;
our global business exposes us to operational, geopolitical, regulatory, legal and economic risks;
our business, financial condition and results of operations may be adversely affected by fluctuations in foreign currency exchange rates or changes in our effective tax rates;
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 may not be successful at attracting new clients or retaining and expanding our relationships with our existing clients;
we face intense competition and operate in a rapidly evolving industry, which makes it difficult to evaluate our future prospects;
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 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;
the COVID-19 pandemic has impacted our business and operations, and future business and operational challenges posed by the COVID-19 pandemic could materially adversely affect us;
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;
we may not be able to prevent unauthorized use of our intellectual property, and our intellectual property rights may not be adequate to protect our business and competitive position;
investment funds advised by Apax Partners L.L.P. control us, and such control may give rise to actual or perceived conflicts of interests;
our status as a “controlled company” will grant us exemptions from certain corporate governance requirements, and our status as an “emerging growth company” will allow us to comply with reduced public company reporting requirements; and

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other factors disclosed in the section entitled “Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 8, 2022 (the "2021 Annual 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 2021 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 Securities and Exchange Commission (“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, 2022December 31, 2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents$274,527 $368,209 
Trade receivables, net of allowance of $11,774 and $8,916, respectively
160,490 145,874 
Unbilled receivables149,554 104,057 
Prepaid expenses and other current assets33,940 60,799 
Total current assets618,511 678,939 
Property and equipment, net36,593 34,500 
Right-of-use assets43,621  
Intangibles and other assets:
Goodwill401,810346,719
Trademark273,000273,000
Customer relationships, net131,437125,867
Other non-current assets33,434 25,125 
Total assets$1,538,406 $1,484,150 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$6,643 $4,773 
Long-term debt - current7,150 7,150 
Income taxes payable25,154 15,693 
Accrued compensation80,275 79,460 
Deferred revenue5,601 13,807 
Value-added tax and sales tax payable3,998 7,954 
Accrued expenses37,324 51,693 
Lease liabilities, current16,411  
Total current liabilities182,556 180,530 
Lease liabilities, non-current30,042  
Long-term debt, less current portion494,193 497,380 
Deferred tax liabilities68,835 78,944 
Other long-term liabilities18,934 18,805 
Total liabilities794,560 775,659 
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 100,000,000 shares authorized, zero issued and outstanding at June 30, 2022 and December 31, 2021, respectively
  
Common stock, $0.001 par value; 1,000,000,000 shares authorized, 361,742,758 and 356,117,752 issued, 310,964,304 and 305,132,181 outstanding at June 30, 2022 and December 31, 2021, respectively
362 356 
Treasury stock, 50,778,454 and 50,985,571 shares at June 30, 2022 and December 31, 2021, respectively
(626,845)(629,424)
Additional paid-in capital1,538,418 1,390,630 
Accumulated other comprehensive loss(35,144)(10,863)
Retained deficit (132,945)(42,208)
Total stockholders' equity743,846 708,491 
Total liabilities and stockholders' equity$1,538,406 $1,484,150 
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) INCOME AND COMPREHENSIVE (LOSS) INCOME (unaudited)
(In thousands, except share and per share data)

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenues$332,107 $260,432 $653,047 $498,094 
Operating expenses:
Cost of revenues239,741 152,311 503,090 287,102 
Selling, general and administrative expenses96,294 68,831 208,028 135,347 
Depreciation and amortization4,215 4,488 10,061 8,834 
Total operating expenses340,250 225,630 721,179 431,283 
(Loss) income from operations(8,143)34,802 (68,132)66,811 
Other (expense) income:
Interest expense(4,984)(7,388)(9,631)(13,582)
Net realized and unrealized foreign currency (loss) gain(13,432)994 (8,487)(1,674)
Other (expense) income, net(413)83 (325)144 
Total other expense(18,829)(6,311)(18,443)(15,112)
(Loss) income before income taxes(26,972)28,491 (86,575)51,699 
Income tax expense3,020 10,339 3,321 14,962 
Net (loss) income$(29,992)$18,152 $(89,896)$36,737 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments(18,602)2,075 (24,281)(1,893)
Comprehensive (loss) income$(48,594)$20,227 $(114,177)$34,844 
Net loss per common share:
Basic loss per common share$(0.10)$(0.18)$(0.29)$(0.10)
Diluted loss per common share$(0.10)$(0.18)$(0.29)$(0.10)
Weighted average shares outstanding:
Basic 310,575,050 228,078,205 308,394,443 234,995,786 
Diluted 310,575,050 228,078,205 308,394,443 234,995,786 
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 REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (unaudited)
(In thousands, except share data)


Redeemable, Convertible Preferred StockCommon StockTreasuryAdditional
Paid-In Capital
Accumulated Other Comprehensive LossRetained (Deficit)
Earnings
SharesAmountSharesAmountSharesAmountTotal
Balance as of December 31, 202023,493,546 $322,800 278,322,716 $279 572,711 $(1,608)$381,172 $(1,589)$106,458 $484,712 
Net income— — — — — — — — 18,585 18,585 
Other comprehensive loss, net of tax— — — — — — — (3,968)— (3,968)
Issuance of common stock on exercise of options— — 27,184 — — — 62 — — 62 
Issuance of common stock— — 133,313 — — — 1,873 — — 1,873 
Issuance of Series A redeemable convertible preferred stock, net of issuance costs of $9.0 million
27,765,084 380,994 — — — — — — — — 
Other— — — — — — (104)— — (104)
Tender offer— — (50,412,860)— 50,412,860 (627,816)(10,391)(79,222)(717,429)
Stock-based compensation expense— — — — — — 1,874 — — 1,874 
Balance as of March 31, 202151,258,630 $703,794 228,070,353 $279 50,985,571 $(629,424)$374,486 $(5,557)$45,821 $(214,395)
Net income— — — — — — — — 18,152 18,152 
Other comprehensive income, net of tax— — — — — — — 2,075 — 2,075 
Issuance of common stock on exercise of options— — 10,297 — — — 24 — — 24 
Issuance of Series B Redeemable Convertible Preferred Stock, net of issuance costs of $2.8 million
8,231,328 122,228 — — — — — — — — 
Dividends— — — — — — (279,191)— (45,821)(325,012)
Other— — — — — — 104 — — 104 
Stock-based compensation expense— — — — — — 8,362 — — 8,362 
Balance as of June 30, 202159,489,958 $826,022 228,080,650 $279 50,985,571 $(629,424)$103,785 $(3,482)$18,152 $(510,690)









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Redeemable, Convertible Preferred StockCommon StockTreasuryAdditional
Paid-In Capital
Accumulated Other Comprehensive LossRetained (Deficit)
Earnings
SharesAmountSharesAmountSharesAmountTotal
Balance as of December 31, 2021 $ 305,132,181 $356 50,985,571 $(629,424)$1,390,630 $(10,863)$(42,208)$708,491 
Net loss— — — — — — — — (59,904)(59,904)
Other comprehensive loss, net of tax— — — — — — — (5,679)— (5,679)
Issuance of common stock for equity incentive awards, net of withholding taxes— — 4,736,820 5 — — (28,047)— — (28,042)
Reissuance of treasury shares for equity incentive awards— — 155,806 — (155,806)1,940 (1,796)— — 144 
Stock-based compensation expense— — — — — — 120,737 — — 120,737 
Cumulative effect related to adoption of ASU 2016-13— — — — — — — — (841)(841)
Balance as of March 31, 2022 $ 310,024,807 $361 50,829,765 $(627,484)$1,481,524 $(16,542)$(102,953)$734,906 
Net loss— — — — — — — — (29,992)(29,992)
Other comprehensive loss, net of tax— — — — — — — (18,602)— (18,602)
Issuance of common stock for equity incentive awards, net of withholding taxes— — 888,186 1 — — 2,442 — — 2,443 
Reissuance of treasury shares for equity incentive awards— — 51,311 — (51,311)639 (496)— — 143 
Stock-based compensation expense— — — — — — 54,948 — — 54,948 
Balance as of June 30, 2022 $ 310,964,304 $362 50,778,454 $(626,845)$1,538,418 $(35,144)$(132,945)$743,846 
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,
20222021
Cash flows from operating activities:
Net (loss) income$(89,896)$36,737 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization expense16,656 14,041 
Bad debt expense (recovery)2,038 (515)
Deferred income tax benefit(20,865)(1,923)
Stock-based compensation expense175,685 10,236 
Unrealized foreign currency exchange losses9,507 2,519 
Non-cash lease expense on right-of-use assets8,870  
Other operating activities, net1,134 1,091 
Changes in operating assets and liabilities:
Trade receivables(20,069)14,067 
Unbilled receivables(48,629)(26,734)
Prepaid expenses and other assets(2,690)(36,838)
Lease liabilities(6,951) 
Accounts payable1,699 3,615 
Accrued expenses and other liabilities(5,012)44,000 
Net cash provided by operating activities21,477 60,296 
Cash flows from investing activities:
Purchase of property and equipment(12,459)(13,824)
Proceeds from disposal of fixed assets267 193 
Acquisitions, net of cash acquired(65,410)(44,759)
Net cash used in investing activities(77,602)(58,390)
Cash flows from financing activities:
Proceeds from issuance of Series A redeemable convertible preferred stock, net of issuance costs 380,994 
Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs 122,228 
Proceeds from issuance of common stock 1,873 
Payments of obligations of long-term debt(3,575)(133,134)
Payments of debt issuance costs (7,098)
Proceeds from borrowings on long-term debt 401,285 
Proceeds from issuance of common stock on exercise of options, net of employee tax withholding3,928 86 
Shares and options purchased under tender offer (701,960)
Dividends paid (315,003)
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(29,026) 
Other financing activities, net(48)36 
Net cash used in financing activities(54,199)(250,693)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(8,884)(662)
Net decrease in cash, cash equivalents and restricted cash(119,208)(249,449)
Cash, cash equivalents and restricted cash at beginning of the period394,942 492,199 
Cash, cash equivalents and restricted cash at end of the period$275,734 $242,750 









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THOUGHTWORKS HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
Six Months Ended June 30,
20222021
Supplemental disclosure of cash flow information:
Interest paid$8,987 $12,373 
Income taxes paid$10,554 $13,189 
Supplemental disclosures of non-cash financing activities:
Withholding taxes payable included within accrued expenses$ $25,478 
Withholding taxes payable included within accrued compensation$219 $ 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$274,527 $215,950 
Restricted cash included in other current assets 25,478 
Restricted cash included in other non-current assets1,207 1,322 
Total cash, cash equivalents and restricted cash$275,734 $242,750 
    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 and the United States. 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 2021 Annual Report.
Certain amounts in the prior period consolidated financial statements and notes have been reclassified to conform to the 2022 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 the 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.
Stock Split
Prior to the Company's initial public offering (the "IPO") which closed on September 17, 2021, the Company effected an approximate 43.6-for-1 split of each outstanding share of common stock (the "Stock Split"). All share and per share information has been retroactively adjusted to effect the Stock Split for all periods presented.
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.
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Business Combinations
The Company accounts for business combinations using the acquisition method of accounting which requires it to allocate the fair value of purchase consideration to the assets acquired and liabilities assumed based on the estimated fair values at the acquisition date. The fair value of the net assets acquired for the business is determined utilizing expectations and assumptions believed reasonable by management. The excess of the purchase consideration transferred over the fair values of assets acquired and liabilities assumed is recorded as goodwill. 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, the Company may record adjustments to the assets acquired and liabilities assumed with an offset to goodwill. After the measurement period, any adjustments are recorded in the condensed consolidated statements of (loss) income and comprehensive (loss) income. Acquisition costs are expensed as incurred.
Some business combinations may include a contingent consideration agreement. The Company determines the fair value of the contingent consideration liability using a Monte Carlo Simulation. The liability is remeasured to fair value at each reporting date with adjustments recorded within other income, net in the condensed consolidated statements of (loss) income and comprehensive (loss) income.
Government Assistance
The Company has historically received government subsidies in the form of cash in China and Singapore related to expenses such as rent, wages, training benefits and taxes. The subsidies are recorded against the related expense within selling, general and administrative ("SG&A") expense or cost of revenues in the condensed consolidated statements of (loss) income and comprehensive (loss) income. The Company recorded an immaterial amount for the three and six months ended June 30, 2022.
Allowance for Credit Losses
The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) in the first quarter of 2022. See “—Recently Adopted Accounting Standards” below for further discussion. The Company is exposed to credit risk primarily through trade receivables and unbilled receivables. Activity related to the Company’s allowance for credit losses is as follows (in thousands):
Six Months Ended June 30,
2022
Allowance for credit losses, beginning balance$(8,916)
Impact of accounting standard adoption(841)
Current provision for expected credit losses(2,038)
Write-offs charged against allowance42 
Recoveries of amounts previously written off 
Changes due to exchange rates(21)
Allowance for credit losses, ending balance$(11,774)
Recently Adopted Accounting Standards
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), which amends existing accounting standards for lease accounting and requires lessees to recognize virtually all leases on the balance sheet by recording a right-of-use asset and a lease liability (for other than short term leases). The Company early adopted the standard effective January 1, 2022. The Company elected the modified retrospective transition method, and as a result, the Company did not adjust its comparative period financial information or make the new required lease disclosures for periods before the date of adoption. The Company elected to use the package of practical expedients, which permits the Company to not reassess: (i) whether a contract is or contains a lease, (ii) lease classification, and (iii) initial direct costs resulting from the lease. The Company did not elect the
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hindsight practical expedient, which permits the use of hindsight when determining lease term and impairment of operating lease assets. The Company is electing not to apply the recognition requirements to short-term leases of 12 months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term. The Company also elected the option to combine lease and non-lease components as a single component for the Company's entire population of lease assets. Upon adoption, the Company recorded $40.9 million of right-of-use assets ("ROU") and $43.7 million of lease liabilities. Refer to Note 7, Leases, for further discussion.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions, and reasonable and supportable forecasts, or a current expected credit loss (“CECL”) model. For trade receivables, loans, and other financial instruments, companies are required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. In November 2019, the FASB issued ASU 2019-10 which delayed the effective date for the CECL standard. The guidance and related amendments are effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date.
The Company early adopted the accounting standard by recording a cumulative effect adjustment to retained earnings as of January 1, 2022 using a modified retrospective approach. The adoption mainly impacts trade receivables and unbilled receivables. The Company analyzed its historical credit loss experience and considered current conditions and reasonable forecasts in developing the expected credit loss rates. The adoption of this new standard did not have a material impact on the Company's condensed consolidated financial statements.
In November 2021, the FASB issued ASU 2021-10, Disclosures by Business Entities About Government Assistance (Topic 832), which requires business entities to provide certain disclosures when they (1) have received government assistance and (2) use a grant or contribution accounting model by analogy to other accounting guidance. The guidance is effective for all entities for fiscal years beginning after December 15, 2021. Entities may apply the ASU’s provisions either (1) prospectively to all transactions within the scope of Accounting Standards Codification ("ASC") 832 that are reflected in the financial statements as of the adoption date and all new transactions entered into after the date of adoption or (2) retrospectively. The Company adopted the standard on January 1, 2022 on a prospective basis. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
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 LIBOR and other interbank offered rates to alternative reference rates. The optional amendments are effective as of March 12, 2020 through December 31, 2022, and upon adoption may be applied prospectively through December 31, 2022. The Company is currently assessing the impact of this ASU on the condensed consolidated financial statements and will adopt this new standard in the fiscal year beginning January 1, 2023.
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 is currently assessing the impact of this ASU on the condensed consolidated financial statements and will adopt this new standard in the fiscal year beginning January 1, 2023.

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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, 2022 and 2021 was 62% and 65%, respectively, and 63% and 65% for the six months ended June 30, 2022 and 2021, respectively.
As of June 30, 2022 and December 31, 2021, approximately 70% and 73%, respectively, of trade accounts receivable and unbilled accounts receivable was due from customers located outside the United States. At June 30, 2022 and December 31, 2021, the Company had net fixed assets of $27.7 million and $26.6 million, respectively, outside the United States.
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,
2022202120222021
North America (1)$131,486 $97,391 $253,435 $187,185 
APAC (2)109,674 89,581 211,880 162,171 
Europe (3)76,603 62,840 159,529 126,955 
LATAM14,344 10,620 28,203 21,783 
Total revenues$332,107 $260,432 $653,047 $498,094 
(1)For the three months ended June 30, 2022 and 2021, the United States represented 37.2%, or $123.5 million, and 35.6%, or $92.6 million, respectively, of the Company’s total revenues. For the six months ended June 30, 2022 and 2021, the United States represented 36.5%, or $238.6 million, and 35.8%, or $178.5 million, of the Company’s total revenues, respectively. Canadian operations were determined to be immaterial given the revenues as a percentage of total North America revenues was less than 10% for the three and six months ended June 30, 2022 and 2021.
(2)For the three months ended June 30, 2022 and 2021, Australia represented 12.0%, or $39.8 million, and 10.1%, or $26.2 million, respectively, of the Company’s total revenues. For the six months ended June 30, 2022 and 2021, Australia represented 11.7%, or $76.1 million, and 10.6%, or $52.7 million, respectively, of the Company’s total revenues.
(3)For the three months ended June 30, 2022 and 2021, 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, 2022 and 2021, the United Kingdom represented 10.8%, or $70.3 million, and 10.7%, or $53.5 million, respectively, 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%. For the three and six months ended June 30, 2021, Germany represented 10.8%, or $28.1 million, and 10.9%, or $54.1 million, respectively, of the Company’s total revenues.
Other foreign 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, 2022 and 2021.
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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,
2022202120222021
Technology and business services$95,247 $69,930 $180,596 $136,140 
Energy, public and health services76,605 70,245 153,715 133,909 
Retail and consumer62,628 47,790 125,063 88,923 
Financial services and insurance59,671 40,855 118,135 75,109 
Automotive, travel and transportation37,956 31,612 75,538 64,013 
Total revenues$332,107 $260,432 $653,047 $498,094 
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,
2022202120222021
Time-and-material$275,932 $208,901 $547,295 $398,075 
Fixed-price56,175 51,531 105,752 100,019 
Total revenues$332,107 $260,432 $653,047 $498,094 
Contract Balances
The following table is a summary of the Company’s contract assets and contract liabilities (in thousands):
As of
June 30, 2022
As of
December 31, 2021
Contract assets included in unbilled receivables$29,237 $25,408 
Contract liabilities included in deferred revenue$5,601 $13,807 
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, 2022 and 2021, the Company recognized $2.5 million and $4.5 million, respectively, of revenues that were included in current liabilities at the prior year end. For the six months ended June 30, 2022 and 2021, the Company recognized $12.6 million and $10.7 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 SG&A expenses. The Company did not have long term contracts to capitalize related costs prior to the fourth quarter of 2021.
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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,
2022202120222021
Balance at beginning of period$1,814 $ $2,039 $ 
Costs to obtain contracts capitalized147  238  
Amortization of capitalized costs(310) (625) 
Impairment of costs to obtain contracts    
Changes due to exchange rates(9) (10) 
Balance at end of period$1,642 $ $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 April 26, 2022, the Company completed the acquisition of Connected Lab Inc. ("Connected"), an end-to-end product design and development firm that partners with their clients to discover and deliver products that drive business impact, in an all-cash transaction for a gross purchase price of approximately $83.8 million, or $79.4 million net of cash acquired of $4.4 million, which is inclusive of a $14.0 million contingent consideration liability as discussed below and other adjustments. Connected is now wholly owned by the Company. The acquisition will advance the Company's capabilities in solving business problems through product-led design processes, from defining the strategy to discovery and delivery and enhance the Thoughtworks customer experience, product and design service line in North America.
In connection with the acquisition, 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 will be remeasured to fair value at each reporting date with adjustments recorded within other income, net in the condensed consolidated statements of (loss) income and comprehensive (loss) income. As of June 30, 2022, the maximum potential payout is $17.1 million and is expected to occur in the second quarter of 2023.
The following table presents the change in the contingent consideration liability (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Balance at beginning of period$ $ $ $ 
Additions in the period13,996  13,996  
Change in fair value528  528  
Change due to exchange rates(142) (142) 
Balance at end of period$14,382 $ $14,382 $ 
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
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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) income and comprehensive (loss) income 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.
Aggregate acquisition-related costs of $1.3 million for the three and six months ended June 30, 2022, respectively, were included within SG&A expenses within the condensed consolidated statements of (loss) income and comprehensive (loss) income.
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$4,394 
Trade receivables, net of allowance3,678 
Unbilled receivables2,594 
Customer relationships, net15,800 
Goodwill66,032 
Accrued compensation(1,364)
Accrued expenses(3,733)
Other assets/liabilities, net(3,600)
Total gross purchase price$83,801 
Cash consideration paid$69,805 
Fair value of contingent consideration13,996 
Total gross purchase price$83,801 
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.
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, 2020$318,151 
Additions due to acquisitions32,615 
Changes due to exchange rates(4,047)
Balance as of December 31, 2021346,719 
Additions due to acquisitions66,032 
Changes due to exchange rates(10,941)
Balance as of June 30, 2022$401,810 
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The following is a summary of other intangible assets (in thousands):
June 30, 2022December 31, 2021
Customer relationships$192,900 $177,100 
Less accumulated amortization52,498 46,184 
Customer relationships, net140,402 130,916 
Trademark273,000 273,000 
Total intangible assets, after amortization413,402 403,916 
Changes due to exchange rates(8,965)(5,049)
Intangible assets, net$404,437 $398,867 
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 $3.3 million and $6.3 million for the three and six months ended June 30, 2022, respectively, and $3.0 million and $6.0 million for the three and six months ended June 30, 2021, respectively.
As of June 30, 2022, estimated amortization expense for the next five years and thereafter is as follows (in thousands):
Remainder of 2022$7,279 
202314,557 
202414,557 
202514,557 
202614,557 
Thereafter74,895 
$140,402 
The weighted average remaining useful life of the Company’s finite-lived intangible assets was 9.7 years as of June 30, 2022 and 10.6 years as of December 31, 2021.
Note 5 – Income Taxes
Prior to the IPO, 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, 2022 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, 2022 and June 30, 2021 was (11.2)% and 36.3%, respectively and (3.8)% and 28.9% for the six months ended June 30, 2022 and June 30, 2021, respectively. The effective tax rate in each period differed from the U.S. statutory rate of 21% for such period 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, offset by excess tax benefits on stock-based compensation. The change in the effective tax rate for the three and six months ended June 30, 2022, as compared to the prior periods, was primarily due to the non-deductibility of China SAFE restricted stock units ("RSUs"), the unfavorable impact of valuation allowances on deferred tax assets of select foreign operations, and the non-deductibility of executive compensation expense in compliance with §162(m) of the Internal Revenue Code. The negative effective tax rate for the three and six months ended June 30, 2022 is a
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result of the aforementioned unique net unfavorable items when compared to the pre-tax loss recorded for the respective periods.
Note 6 – Loss Per Common Share
Basic loss per common share is computed by dividing the net loss allocated to common shareholders by the weighted average of common shares outstanding for the period.
Diluted loss per common share is computed by giving effect to all potential shares of common stock of the Company, including outstanding stock options, unvested RSUs, and unvested PSUs, to the extent the shares are dilutive. PSU shares are not included in dilution during the performance period. Once the performance period is completed, the PSU shares will be included in dilution during the remaining service period, to the extent they are dilutive. Basic and diluted loss per common share are the same for all periods presented, as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive. For comparability purposes, all prior period share amounts presented have been retroactively adjusted to give effect to the Stock Split, and share counts below also reflect the conversion of preferred stock to common stock on a 1-for-1 basis upon the occurrence of the IPO.
The components of basic and diluted loss per common share are as follows (in thousands, except share and per share data):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Basic loss per common share:
Net (loss) income$(29,992)$18,152 $(89,896)$36,737 
Preferred stock dividends (59,642) (59,642)
Net loss allocated to common shareholders – Basic$(29,992)$(41,490)$(89,896)$(22,905)
Weighted average common shares outstanding – Basic and diluted310,575,050 228,078,205 308,394,443 234,995,786 
Basic and diluted loss per common share$(0.10)$(0.18)$(0.29)$(0.10)
The following potentially dilutive securities were excluded from the computation of diluted loss per common share calculations because the impact of including them would have been anti-dilutive:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Employee stock options and RSUs25,974,965 18,916,111