We are really pleased to see the improvements in our utilization profile, but we are not done. Similarly to the offshore tailwinds, those won’t all come at one time. There’s a few supply-demand imbalances that we’re working through. Offshore-onshore is one of them, but also a little bit from a skills mix. And so we’re continuing to push on that. The digital engineering center, we believe, will continue to deliver results. And so we expect to see that be an improvement to margins overall. And then again, the restructuring costs we’ve made a lot of headway already in our overall program. As a reminder, we expect that we will have cost take out on an annualized basis of $75 million to $85 million. The actions we took locked in $68 million already by the end of Q3.
So very good progress. Our view right now is we think that we’ll be towards the upper end of that, and that certainly will be a benefit in 2024. On the whole, as I mentioned earlier, I believe that some of the pricing dynamics, supply-demand dynamics that are coming from a more challenged macro will continue to persist into certainly at least the start of 2024, and so we’re not expecting those just to move away. Where this all gets us in summary is, from a margin perspective, again, not being too specific on numbers. We’ll wait for that, but 2023 has been a more challenging year from a margin point of view for reasons that we’ve talked about. We do think that we will see improvements in 2024, but unlikely to be at the levels of the high teens where we were in ’21 and ’22?
Operator: [Operator Instructions] Our next question comes from Matthew Roswell with RBC.
Matthew Roswell: I guess if I get a little more color on your pricing commentary and what you’re seeing from the competitors? I mean, is it the competitors that are pulling down pricing? Or is it clients coming back to you and sort of looking for pricing reductions?
Xiao Guo: Sure. It’s a little bit of both with existing customers, where we tend to have large program of work, but sometimes with new asset value — a new statement work getting renewed on the six months, annual basis. We’re seeing clients coming to us saying that, “Hey, I got a budget constraint, but I still need to get the same amount of work value and more work down, help me with that.” And pricing is often a conversation that resulted in a lower pricing from a discount or giving short-term discount perspective. So that’s one source of the discussion. With new work, especially a new client, it’s becoming very competitive. And that, I think pricing pressure is mostly coming from all over the place from competitions where everyone is sharpening their pencils trying to put in a bid that’s commercially aggressive, trying to win the deal. So that’s where we see the pressure coming from competition.
Matthew Roswell: Has that competition affected your win rates any?
Xiao Guo: The what rate, sorry?
Matthew Roswell: The win rates on the contracts?
Xiao Guo: Our win rate actually remains quite stable with both extensions and new work. Our strategy at this current climate is obviously trying to win work and then figure out margin later. So when are we go into the bidding situation, especially with the new work we’re also becoming very aggressive ourselves from a commercial perspective, it’s not just pricing, obviously, the entire commercial model, including outcome-based or potentially similar type of variant commercial models. Our win rate remains very similar to what we have seen before. And then as we called out, we acquired 31 new logos in on top of the 29% in Q2 and 47% in Q1. So still pretty good track record of winning deals and new logos.
Matthew Roswell: Okay. And then a question for you, Erin. How should we think about fourth quarter free cash flow, especially in regards to potential further cash restructuring charges. And then is there anything as we go into FY ’24 and the resumption of sequential growth we should keep in mind around cash flow, maybe working capital needs and things like that.
Erin Cummins: With respect to cash flow for fourth quarter, largely the dynamics that impacted third quarter will be the same in fourth quarter. Matthew, you mentioned the restructuring charges. Q3 was impacted by the $11 million in restructuring charges. So as a reminder, on the whole, we expect $20 million to $25 million. So that means we’ve paid about half of that, a little bit more than half, depending on where you land in Q3, and there will be more in Q4. So those dynamics will be similar cash flow as a consequence likely to be similar to what we saw in Q3. In terms of 2024, those are onetime charges, and so cash flow will benefit as a consequence. The cash flow also should be improved by an improving margin profile. And then finally, earlier this year, we did have the payment with respect to the contingent earn-out from our Canada acquisition. And so that is a factor that impacted 2023, but wouldn’t continue in 2024.
Operator: There are no further questions at this time. I’d like to turn the call back over to Guo, Xiao for any closing remarks.
Xiao Guo: Thank you for joining us today for our Q4 earnings call. I would like to acknowledge the continued support of our Board and our shareholders. And in closing, I want to thank all Thoughtworkers, clients and partners for the extraordinary impact we’re delivering every day together. Stay well, and we look forward to catching up with you in the next quarter.
Operator: Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.
