endava investor presentation 2022

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In this section, you can explore our archive of financial results, annual reports, presentations, and other essential publications. Our interactive analysis tool allows you to dive deeper into the data.

Annual report

Endava Announces Second Quarter Fiscal Year 2023 Results

Related documents.

Q2 FY2023  30.2% Year on Year Revenue Growth to £205.2 million  23.4% Revenue Growth at Constant Currency  IFRS diluted EPS £0.26 compared to £0.27 in the prior year comparative period  Adjusted diluted EPS £0.57 compared to £0.46 in the prior year comparative period

LONDON--(BUSINESS WIRE)-- Endava plc (NYSE: DAVA) ("Endava" or the "Company") a global provider of digital transformation, agile development and intelligent automation services, today announced results for the three months ended December 31, 2022, the second quarter of its 2023 fiscal year ("Q2 FY2023").

“Endava reported another solid quarter for Q2 FY2023 as demand for our services across all regions and verticals in which we operate remained healthy,” said John Cotterell, Endava's CEO. "Even with the global economic uncertainty, digital transformation remains a priority for our clients and they value the transformation services we are delivering. Demand from new and existing clients continued to drive revenue growth in the quarter, leading to a revenue increase of 23.4% in constant currency for Q2 FY2023.”

SECOND QUARTER FISCAL YEAR 2023 FINANCIAL HIGHLIGHTS:

• Revenue for Q2 FY2023 was £205.2 million, an increase of 30.2% compared to £157.7 million in the same period in the prior year.
• Revenue growth rate at constant currency (a non-IFRS measure)* was 23.4% for Q2 FY2023, compared to 53.4% in the same period in the prior year.
• Profit before tax for Q2 FY2023 was £20.3 million, compared to £19.1 million in the same period in the prior year.
• Adjusted profit before tax (a non-IFRS measure)* for Q2 FY2023 was £41.9 million, compared to £33.0 million in the same period in the prior year, or 20.4% of revenue, compared to 20.9% of revenue in the same period in the prior year.
• Profit for the period was £15.0 million in Q2 FY2023, resulting in a diluted EPS of £0.26, compared to profit of £15.4 million and diluted EPS of £0.27 in the same period in the prior year.
• Adjusted profit for the period (a non-IFRS measure)* was £33.2 million in Q2 FY2023, resulting in adjusted diluted EPS (a non-IFRS measure)* of £0.57, compared to adjusted profit for the period of £26.5 million and adjusted diluted EPS of £0.46 in the same period in the prior year.
• Net cash from operating activities was £40.9 million in Q2 FY2023, compared to £35.0 million in the same period in the prior year.
• Adjusted free cash flow (a non-IFRS measure)* was £37.0 million in Q2 FY2023, compared to £31.2 million in the same period in the prior year.
• At December 31, 2022, Endava had cash and cash equivalents of £185.3 million, compared to £162.8 million at June 30, 2022.

* Definitions of the non-IFRS measures used by the Company and a reconciliation of such measures to the related IFRS financial measure can be found under the sections below titled “Non-IFRS Financial Information” and “Reconciliation of IFRS Financial Measures to Non-IFRS Financial Measures.”

OTHER METRICS FOR THE QUARTER ENDED DECEMBER 31, 2022:

• Headcount reached 12,183 at December 31, 2022, with 11,107 average operational employees in Q2 FY2023, compared to a headcount of 10,391 at December 31, 2021 and 9,167 average operational employees in the same quarter of the prior year.
• Number of clients with over £1 million in revenue on a rolling twelve month basis was 156 at December 31, 2022, compared to 107 at December 31, 2021.
• Top 10 clients accounted for 31% of revenue in Q2 FY2023, compared to 34% in the same period in the prior year.
• By geographic region, 33% of revenue was generated in North America, 23% was generated in Europe, 39% was generated in the United Kingdom and 5% was generated in the rest of the world in Q2 FY2023. This compares to 35% in North America, 21% in Europe, 41% in the United Kingdom and 3% in the rest of the world in the same period in the prior year.
• By industry vertical, 53% of revenue was generated from Payments and Financial Services, 22% from TMT and 25% from Other in Q2 FY2023. This compares to 51% from Payments and Financial Services, 25% from TMT and 24% from Other in the same period in the prior year.

Third Quarter Fiscal Year 2023:

Endava expects revenues will be in the range £201.0 million to £203.0 million, representing constant currency revenue growth of between 14.0% and 15.0%. Endava expects adjusted diluted EPS to be in the range of £0.52 to £0.54 per share.

Full Fiscal Year 2023:

Endava expects revenues will be in the range of £812.0 million to £817.0 million, representing constant currency growth of between 19.0% and 20.0%. Endava expects adjusted diluted EPS to be in the range of £2.20 to £2.25 per share.

This above guidance for Q3 Fiscal Year 2023 and the Full Fiscal Year 2023 assumes the exchange rates at the end of January 2023 (when the exchange rate was 1 British Pound to 1.23 US Dollar and 1.14 Euro).

Endava is not able, at this time, to provide an outlook for IFRS diluted EPS for Q3 FY2023 or FY2023 because of the unreasonable effort of estimating on a forward-looking basis certain items that are excluded from adjusted diluted EPS, including, for example, share-based compensation expense, amortisation of acquired intangible assets and foreign currency exchange (gains)/losses, the effect of which may be significant. Endava is also not able, at this time, to reconcile to an outlook for revenue growth not at constant currency because of the unreasonable effort of estimating foreign currency exchange (gains)/losses, the effect of which may be significant, on a forward-looking basis.

The guidance provided above is forward-looking in nature. Actual results may differ materially. See the cautionary note regarding “Forward-Looking Statements” below.

RECENT BUSINESS HIGHLIGHTS:

• On February 9, 2023, Endava announced the successful closing of a £350 million unsecured, multicurrency revolving credit facility. This facility is for general business purposes, including future capital investments and development activities. The facility replaced Endava’s previous unsecured revolving credit facility of £200 million, which was due to expire on October 12, 2024. It also provides for uncommitted accordion options for up to an aggregate of £150 million in additional borrowing and has two renewal options for one year each.
• On October 6, 2022, Endava announced the acquisition of Lexicon Digital Pty Ltd and Lexicon Consolidated Holdings Pty Ltd, headquartered in Melbourne, Australia (“Lexicon”). Lexicon is an Australian-based technology consulting, design and engineering firm who partners with clients to build new digital solutions or accelerate digital transformation programs across enterprise systems, products and IoT using an agile delivery methodology. Lexicon’s clients include Australia’s market leaders in the insurance and wealth management sectors and an array of companies in other sectors, including entertainment, retail, agribusiness and automotive. Lexicon has 127 billable staff member in Australia (with offices in Melbourne and Sydney) and Vietnam (Ho Chi Minh).

CONFERENCE CALL DETAILS:

The Company will host a conference call at 8:00 am ET today, February 14, 2023, to review its Q2 FY2023 results. To participate in Endava’s Q2 FY2023 earnings conference call, please dial in at least five minutes prior to the scheduled start time (844) 481-2736 or (412) 317-0665 for international participants, Conference ID: Endava Call

Investors may listen to the call on Endava’s Investor Relations website at http://investors.Endava.com . The webcast will be recorded and available for replay until Tuesday, March 14, 2023.

ABOUT ENDAVA PLC:

Endava is reimagining the relationship between people and technology. By leveraging next-generation technologies, our agile, multi-disciplinary teams provide a combination of product & technology strategies, intelligent experiences, and world class engineering to help clients become digital, experience-driven businesses by assisting them in their journey from idea generation to development and deployment of products, platforms and solutions. Endava collaborates with its clients, seamlessly integrating with their teams, catalysing ideation and delivering robust solutions.

Endava services clients in Payments and Financial Services, TMT, Consumer Products, Retail, Mobility and Healthcare. As of December 31, 2022, 12,183 Endavans served clients from locations in Asia-Pacific, Middle East, North America and Western Europe and delivery locations in Argentina, Bosnia & Herzegovina, Bulgaria, Colombia, Croatia, Malaysia, Mexico, Moldova, North Macedonia, Poland, Romania, Serbia, Slovenia, Uruguay and Vietnam.

NON-IFRS FINANCIAL INFORMATION:

To supplement Endava’s Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flow presented in accordance with IFRS, the Company uses non-IFRS measures of certain components of financial performance. These measures include: revenue growth rate at constant currency, adjusted profit before tax, adjusted profit for the period, adjusted diluted EPS and adjusted free cash flow.

Revenue growth rate at constant currency is calculated by translating revenue from entities reporting in foreign currencies into British Pounds using the comparable foreign currency exchange rates from the prior period. For example, the average rates in effect for the fiscal quarter ended December 31, 2021 were used to convert revenue for the fiscal quarter ended December 31, 2022 and the revenue for the comparable prior period.

Adjusted profit before tax ("Adjusted PBT") is defined as the Company’s profit before tax adjusted to exclude the impact of share-based compensation expense, amortisation of acquired intangible assets, realised and unrealised foreign currency exchange (gains)/losses and fair value movement of contingent consideration, all of which are non-cash items. Adjusted PBT margin is Adjusted PBT as a percentage of total revenue.

Adjusted profit for the period is defined as Adjusted PBT together with the tax impact of these adjustments.

Adjusted diluted EPS is defined as Adjusted profit for the period, divided by weighted average number of shares outstanding - diluted.

Adjusted free cash flow is the Company’s net cash from operating activities, plus grants received, less net purchases of non-current assets (tangible and intangible).

Management believes these measures help illustrate underlying trends in the Company's business and uses the measures to establish budgets and operational goals, communicated internally and externally, for managing the Company's business and evaluating its performance. Management also believes the presentation of its non-IFRS financial measures enhances an investor’s overall understanding of the Company’s historical financial performance. The presentation of the Company’s non-IFRS financial measures is not meant to be considered in isolation or as a substitute for the Company’s financial results prepared in accordance with IFRS, and its non-IFRS measures may be different from non-IFRS measures used by other companies. Investors should review the reconciliation of the Company’s non-IFRS financial measures to the comparable IFRS financial measures included below, and not rely on any single financial measure to evaluate the Company’s business.

FORWARD-LOOKING STATEMENTS:

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by the use of terms and phrases such as “believe,” “expect,” "outlook," “may,” “will,” and other similar terms and phrases. Such forward-looking statements include, but are not limited to, the statements regarding Endava’s projected financial performance for the third fiscal quarter of fiscal year 2023 and the full fiscal year 2023. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to: Endava’s business, results of operations and financial condition may be negatively impacted by the Russia-Ukraine armed conflict or if general economic conditions in Europe, the United States or the global economy continue to worsen, including increased inflation; Endava’s ability to manage its rapid growth or achieve anticipated growth; Endava’s ability to retain existing clients and attract new clients, including its ability to increase revenue from existing clients and diversify its revenue concentration; Endava’s ability to attract and retain highly-skilled IT professionals at cost-effective rates; Endava's ability to penetrate new industry verticals and geographies and grow its revenue in current industry verticals and geographies; Endava’s ability to maintain favorable pricing and utilization rates; Endava’s ability to successfully identify acquisition targets, consummate acquisitions and successfully integrate acquired businesses and personnel; the effects of increased competition as well as innovations by new and existing competitors in its market; Endava’s ability to adapt to technological change and innovate solutions for its clients; Endava’s ability to collect on billed and unbilled receivables from clients; Endava’s ability to effectively manage its international operations, including Endava's exposure to foreign currency exchange rate fluctuations; Endava’s ability to maintain an effective system of disclosure controls and internal control over financial reporting; and Endava’s future financial performance, including trends in revenue, cost of sales, gross profit, selling, general and administrative expenses, finance income and expense and taxes, as well as other risks and uncertainties discussed in the “Risk Factors” section of our Annual Report filed with the SEC on October 31, 2022. In addition, the forward-looking statements included in this press release represent Endava’s views and expectations as of the date hereof and are based on information currently available to Endava. Endava anticipates that subsequent events and developments may cause its views to change. Endava specifically disclaims any obligation to update the forward-looking statements in this press release except as required by law. These forward-looking statements should not be relied upon as representing Endava’s views as of any date subsequent to the date hereof.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

RECONCILIATION OF IFRS FINANCIAL MEASURES TO NON-IFRS FINANCIAL MEASURES

RECONCILIATION OF REVENUE GROWTH RATE AS REPORTED UNDER IFRS TO REVENUE GROWTH RATE AT CONSTANT CURRENCY:

RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX AND ADJUSTED PROFIT FOR THE PERIOD:

RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW

SUPPLEMENTARY INFORMATION

SHARE-BASED COMPENSATION EXPENSE

DEPRECIATION AND AMORTISATION

EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT

(1) The Condensed Consolidated Balance Sheet as of December 31, 2021 has been restated to include the effects of IFRIC agenda decision on cloud configuration and customisation costs and to include the effect of revisions arising from provisional to final acquisition accounting for Five and Levvel (refer to note 3C from our Annual Report on Form 20-F for the fiscal year ended June 30, 2022 for details).

View source version on businesswire.com: https://www.businesswire.com/news/home/20230213005495/en/

INVESTOR CONTACT: Endava Plc Laurence Madsen, Investor Relations Manager [email protected]

Source: Endava plc

Released February 14, 2023

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Endava plc (DAVA) Q4 2022 Earnings Call Transcript

Endava plc ( NYSE: DAVA ) Q4 2022 Earnings Conference Call September 27, 2022 8:00 AM ET

Company Participants

Laurence Madsen - Head of Investor Relations John Cotterell - Chief Executive Officer Mark Thurston - Chief Financial Officer

Conference Call Participants

Zack Ajzenman - Cowen Kyle Peterson - Needham Maggie Nolan - William Blair James Faucette - Morgan Stanley

Good morning and welcome to the Endava Fourth Quarter and Fiscal Year 2022 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Laurence Madsen, Head of Investor Relations. Please go ahead.

Laurence Madsen

Thank you. Good afternoon, everyone, and welcome to Endava's fourth quarter and fiscal year 2022 conference call. As a reminder, this conference call is being recorded. Joining me today are John Cotterell, Endava's Chief Executive Officer; and Mark Thurston, Endava's Chief Financial Officer. Before we begin, a quick reminder to our listeners.

Our remarks today include forward-looking statements, including our guidance for Q1 fiscal year 2023 and for the full fiscal year 2023 and statements regarding our perceived opportunities and anticipated future growth and geographic expansion. Our expectations regarding digital transformation of businesses and industries, and our industry trends.

The necessity of digital transformation for many companies and Endava's ability to benefit therefrom, potential technological advances, our expectations for future partnerships, and ability to expand our existing relationships, anticipated client demand for Endava services, our ability to attract and retain employees and be the employer of choice in multiple geographies, and our ability to execute on our sustainability objectives, as well as other forward-looking statements.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Actual results, and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements and reported results should not be considered as an indication of future performance.

Please note that these forward-looking statements made during this conference call speak only as of today's date, and the company undertakes no obligation to update them to reflect subsequent events or circumstances other than to the extent required by law.

Please refer to the Risk Factors section of our annual report filed with the Securities and Exchange Commission or the SEC on September 28, 2021, and in any subsequent filings we have made with the SEC, which contains a discussion of important factors that could cause actual results to differ materially from those contained in any forward-looking statements.

Also, during this call, we'll present both IFRS and non-IFRS financial measures. A reconciliation of non-IFRS to IFRS measures is included in today's earnings press release, which you can find on our Investors Relations website. The link to the replay of this call will also be available there.

With that, I'll turn the call over to John.

John Cotterell

Thank you, Laurence. I'd like to thank you all for joining us today and I hope you're all well. We're pleased to be here to provide an update on our business and financial performance for the three months ended June 30, 2022 and for the full 2022 fiscal year. We continue to be in a strong demand environment, despite continued global macroeconomic uncertainty and volatility.

Given the current environment, I'd like to highlight that we remain focused on leading companies with strong balance sheets helping them to be more agile and react faster to market changes. We see them continuing to invest in driving change, while our exposure to startups and the crypto industry continues to be low.

For the quarter, and the full fiscal year ended June 30, 2022, I'm pleased to report Endava's business remains strong across all our verticals and locations. Before going into the details of our latest results, I'd like to start by putting our growth in perspective. It has been just over four years since we became a public company, with our listing on the New York Stock Exchange. And it is with great pride that I look back at our accomplishments since then.

Since we listed in July 2018, we have tripled revenues from £217.6 million for the fiscal year 2018 to £654.8 million for the fiscal year 2022. At the same time, we have significantly progressed our object of diversification, moving from a concentration of 79% in the UK and Europe in fiscal year 2018 to 62% for fiscal year 2022 and seeing North America grow from 21% of revenue to 35%, and rest of the world commence now at 3%.

We've also diversified our delivery footprint, which moved from 82% of our people in Central Europe to 76%, most of which is in NATO countries. With LATAM now 17%, compared to 14% in fiscal year 2018, supporting our near-shore delivery for our growing North American business.

Our total headcount has grown by 146% from 4,819 in June 2018 to 11,853 in June 2022. This strong headcount growth came with a solid increase in revenue per operational person from £55,000 in fiscal year 2018 to £69,000 in fiscal year 2022, a very strong trend and a real demonstration of the growth in value delivered to our customers by Endava. It is worth reflecting that at the time of IPO, we set a medium-term adjusted PBT margin target of 17% from a fiscal year 2018 reported figure of 15.4%.

Since IPO, we have annually achieved an adjusted PBT margin in excess of 17% and we ended fiscal year 2022 with a margin of 21.1%. As we look to the next four years, we aim to continue this level of growth with revenue tripling again. We will continue to diversify our client footprint, both in the geographies we operate in and in the industry mix across the business.

Driving the shift is the acceleration in our target industry is driven by new and emerging technologies. As we scan the horizon for technologies that we believe will have a significant impact on our business, we are building a picture of how technologies such as autonomous vehicles, cobots, and frictionless payments may have a broad impact on multiple verticals.

We believe 5G technologies, as well as new devices providing broader access to the [Metaverse] [ph] will revolutionize the experiences individuals will have, bringing people together in ways that will enhance the requirement for seamless commerce experiences. Further forward, we see an increasing impact on our verticals with the broader adoption of language prediction model-based AI integrated alongside traditional technology, leading to innovation in human centric tasks that require deep understanding of language.

We will also continue to further diversify our delivery footprint to see a higher proportion of work delivered from LATAM and Asia Pacific. Together, these shifts will enable a more balanced, scaled, and impactful operation, making us even more attractive to the large enterprise customers that we target.

Moving now to this current quarter and annual results. Endava reported revenue of £180.4 million for Q4 of our fiscal year 2022, representing a 35% year-on-year increase from £133.6 million in the same period in the prior year. We ended the quarter with an adjusted profit before tax for the period of £36.2 million, representing a 23.5% year-on-year increase from the £29.3 million in the same period in the prior year.

Our strong revenue growth continues to be driven by both the expansion of work for our existing clients and the acquisitions of new ones during the quarter. We continue to scale existing projects and accounts to drive the growth of larger clients and increase the spend by these clients.

We ended the quarter with 732 active clients, up from 615 at the end of the same period in the prior year, a 19% year-on-year increase. Importantly, we continued growing the number of larger clients with a total of 134 clients paying us in excess of £1 million per year, compared to [£85 million] [ph] in the same period last year, representing an impressive 57.6% year-on-year increase. Additionally, the average spend of our Top 10 clients continues to grow strongly and was up 21% year-on-year in the three months ended June 30, 2022.

Moving on to our results for the full fiscal year 2022, we reported revenue of £654.8 million, representing a 46.7% year-on-year increase. In the last fiscal year, we grew nicely in all our regions and verticals. Our strong revenue growth continues to translate into strong profitability and we ended the year with an adjusted PBT margin of £138.3 million, compared to £92.1 million in the fiscal year 2021.

Today, I'd like to highlight some of the work we're doing for our clients in the financial sector. In the banking sector, there is a strong move towards the provision of extensible API based platforms rather than large single purpose monolithic applications. API-based platforms increase organizational agility and allow banks to offer an evolving range of services through a single integrated platform and better compete with new fintech entrants to their markets.

An example is the move by a number of banks to offer a range of integrated digital first banking services. Our proven skills in developing flexible API-based solutions have allowed us to work with a range of organizations on their journeys to create application platforms for their businesses.

For instance, we are working with a top U.S. bank on building a full suite of software design, engineering, testing, and integration services for a new cloud-based digital banking product that will eventually offer a new generation of lending and deposit products. We're also working with Primis Bank based in Virginia and servicing individuals and SMEs. Primis embarked on a greenfield implementation of a digital core platform, and this new cloud-based tech stack will allow for broader product offerings, greatly enhance speed to market and expanded geographic boundaries.

We are helping them with this transformation effort by providing solution architecture, system configuration, engineering, and overarching domain expertise. First Bank, headquartered in Colorado and serving the Southwest region of the U.S. is undergoing payments modernization and is leveraging Endava's domain expertise to guide their product strategy and technical approach to the work.

In addition, First Bank is leveraging our architectural and engineering expertise to execute on implementation. In addition to working directly with these financial institutions, we are also partnering with companies such as Backbase and Snowflake in order to facilitate the modernization of these banking platforms.

We help the asset management industry address the challenges of fee compression, flattening returns, regulatory pressure, and evolving distribution models by enabling their platforms to be future proof through designing and building real time data platforms, self-service reporting solutions, and advanced trading analytics, which together facilitate enhanced predictive decisioning for the front office and enable rapid automated reporting to clients and regulators alike.

We're working with Royal London Asset Management to establish their central data platform, to provide a cloud-based central data spine, that acts as a central source for all the firm's data needs to serve the business for years to come as regulation and products evolve. With Janus Henderson, we are consolidating reporting onto a modern cloud-based platform, which delivers self-service efficiencies and data visualization to gain additional insights across the business operations.

Market infrastructure providers are having to modernize their platforms, due to the ever-increasing complexity and real-time demands. Some recent high-profile outages are forcing the industry to modernize technology stacks. This is forcing large legacy replacement, as well as innovation brought upon by crypto tokenization of assets and the more forward-thinking incumbents driving ahead with blockchain tokenization, and expanded offerings based on digital technologies.

We, have been designing, building, and evolving an award-winning cloud-based derivatives trading platform for TP ICAP, a world-leading provider of market infrastructure and information. Branded Fusion, the platform encompasses everything from market connectivity to tailor-made matching engines and algorithms to high performance UI for a consistent responsive user experience for brokers and clients alike.

We also have a rich heritage of working with hedge funds, helping with their innovation in gaining competitive insights through the front office decisioning process. We work with [comp firms] [ph] on data warehouses supporting third-party structured and unstructured data, trading strategies, and modeling sitting at the heart of their business. In the U.S., we're working with a leading alternative investment firm helping define and drive their data strategy alongside the modernization of their core architecture.

Our experience and credentials in the financial industry continue to gather momentum and we believe we offer our clients the ability to differentiate their offerings, despite the rigid frameworks and controls that they need to operate within. Over the last five years, 88.6% of our revenue on average was generated from clients in the previous year. We take client satisfaction extremely seriously, and we have in place a customer satisfaction program known as CSAT that reaches out to our clients and allows for systematic feedback.

We have a dedicated customer experience team who analyze and manage the feedback to constantly help create the best service experience for our teams and clients. Our latest CSAT survey reported a 95% likelihood of repurchase. We continue our geographical expansion and diversification. While competition for talent remains intense, we remain very successful in recruiting the people we need and our attrition rate remains low.

We are continuing to expand our team in LATAM with strong recruiting in Mexico, and we recently opened a new office in Cali, Columbia. We are also moving along with our global expansion and expanded our footprint in Australia with a new office in Brisbane.

We have an ongoing commitment to make a positive impact in support of our people, customers, and the communities where we operate, and we are delighted to share an important milestone in our We Care Sustainability Journal. We have been awarded a bronze medal by EcoVadis in recognition of a very good ESG performance, placing us in the top 50% of companies in our industry.

In summary, as demonstrated by our financial results, demand for our services remains strong. We are successfully navigating a challenging global macroeconomic environment and remain excited about the opportunities in front of us and confident in our ability to execute on our objectives.

I'll now pass the call on to Mark who will walk you through our financial results for the quarter and provide guidance for the coming quarter and the new fiscal year.

Mark Thurston

Thanks, John. Endava's revenue totaled £180.4 million for three months ended June 30, 2022, compared to £133.6 million in the same period in the prior year, a 35.0% increase over the same period in the prior year. In constant currency, our revenue growth rate was 30.9%. Profit before tax for Q4 fiscal year 2022 was £32.5 million, compared to £18.5 million in the same period in the prior year.

Our adjusted profit before tax for the three months ended June 30, 2022, was £36.2 million, compared to £29.3 million for the same period in the prior year. Our adjusted profit before tax margin was 20.1% for the three months ended June 30, 2022, compared to 22.0% for the same period in the prior year.

Adjusted profit before tax or adjusted PBT is defined as the company's profit before tax adjusted to exclude the impact of share-based compensation expense, amortization of acquired intangible assets, and realized and unrealized foreign currency exchange gains and losses, all of which are non-cash items. Adjusted PBT margin is adjusted PBT as a percentage of total revenue.

Our adjusted diluted EPS was [£0.51] [ph] for the three months ended June 30, 2022, calculated on 58.0 million diluted shares, as compared to [£0.41] [ph] for the same period in the prior year calculated on 57.5 million diluted shares.

Revenue from our 10 largest clients accounted to 32% of revenue for the three months ended June 30, 2022, compared to 36%, the same period last fiscal year. Additionally, the average spend per client from our 10 largest clients increased from £4.8 million to £5.8 million for the three months ended June 30, 2022, representing a 21.0% year-over-year increase.

In the three months ended June 30, 2022, North America accounts for 35% of revenue, compared to 37% in the same period last fiscal year. Europe accounted for 22% of revenue, compared to 21% in the same period last fiscal year, and the UK accounted for 40% of revenue unchanged from the same period last fiscal year, while the rest of world accounted at 3%, compared to 2% in the same period last fiscal year.

Revenue from North America grew 27.0% for the three months ended June 30, 2022 over the same quarter of fiscal year 2021. Comparing the same periods, revenue from Europe grew 42.6%, the UK grew 36.8% and the rest of world grew 63.0%. We grew in all three of our industry verticals during the quarter.

Revenue from payments and financial services grew 34.3% for three months ended June 30, 2022. Revenue from payments and financial services accounted for 51% of revenue unchanged compared to the same period last fiscal year. Revenue from TMT grew 32.5% for the three months ended June 30, 2022 of the same quarter of 2021 and accounted for 25% of revenue unchanged compared to the same period in the prior year.

Revenue from other grew 39.1% for three months ended June 30, 2022 over the same quarter of 2021 and now accounts for 24% of revenue unchanged, compared to the same period in the prior year.

We now turn to our adjusted free cash flow, which is our net cash provided by operating activities, plus grants received, less net purchases of non-current tangible and intangible assets. Our adjusted free cash flow was £43.4 million for the three months ended June 30, 2022, compared to £32.6 million during the same period last fiscal year.

Our cash and cash equivalents at the end of the period remained strong at £162.8 million at June 30, 2022, compared to £69.9 million at June 30, 2021. CapEx for the three months ended June 30, 2022 as a percentage of revenue was 2.1%, compared to 1.2% in the same period last fiscal year.

I'd now like to move on to some highlights for our fiscal year 2022. Endava's revenue totaled £654.8 million for the fiscal year 2022, compared to £446.3 million in the previous fiscal year, a 46.7% increase over prior year. In constant currency, our revenue growth rate was 47.6%. Profit before tax for the fiscal year 2022 was £102.4 million, compared to profit before tax of £54.4 million in the prior year.

Our strong revenue growth continues to translate into solid profitability and our adjusted profit before tax for the fiscal year 2022 totaled £138.3 million, compared to £92.1 million in the prior year, a 50.2% year-over-year increase. Our adjusted profit before tax margin was 21.1% for the fiscal year 2022, compared to 20.6% for last year. The year-over-year improvement in our adjusted profit before tax margin is mainly due to continued positive pricing environment and control of SG&A expenses.

Our adjusted diluted EPS was [£1.93] [ph] for the fiscal year ended June 30, 2022, calculated on 58.0 million diluted shares as compared to [£1.30] [ph] for the previous fiscal year calculated on 57.1 million diluted shares up 48.5% year-over-year. Revenue from our 10 largest clients accounted for 34% of revenue for the fiscal year ended June 30, 2022, compared to 35% for the previous fiscal year.

Additionally, the average spend per client from our 10 largest clients increased from £15.6 million to £22.2 million, up 42.1% year-over-year. We grew in all geographies on a year-over-year basis with North America, up 62.8% year-over-year, Europe up 27.8%, UK up 44.8%, and the rest of the world up 59.0%.

On a year-over-year basis, revenue from payments and financial services increased 46.6%, TMT increased 35.1%, and other increased 61.2%. The year-over-year growth in other came mainly from Mobility, Retail and Healthtech. Our adjusted free cash flow was £107.2 million for the fiscal year ended June 30, 2022, compared to £82.7 million, during the same period last year. CapEx for the fiscal year ended June 30, 2022, as a percentage of revenue, was 2.1%, compared to 1.2% during the same period last year.

Our guidance for Q1 fiscal year 2023 is as follows: Endava expects revenues to be in the range of £191 million to £193 million, representing constant currency revenue growth of between 22% and 24%. Endava expects adjusted EPS to be in the range of £0.50 to £0.51 per share.

Our guidance for full-year fiscal year 2023 is as follows. Endava expects revenues to be in the range of £840 million to £850 million, representing constant currency growth of between 23% and 24%. Endava expects adjusted diluted EPS to be in the range of £2.35 to £2.38 per share.

This above guidance for Q1 fiscal year 2023 and the full fiscal year 2023 assumes the exchange rates at the end of August 2022, when the exchange rate was [1 British Pound to 1.17 US Dollar and 1.16 Euro] [ph]. This guidance seeks to take into account potential macroeconomic headwinds. This concludes our prepared comments.

Operator, we are now ready to open the line for Q&A.

Question-and-Answer Session

Thank you. [Operator Instructions] Our first question comes from Bryan Bergin from Cowen. Please go ahead.

Zack Ajzenman

Hi, thanks. This is Zack Ajzenman on for Brian. Just wanted to pick up on that last comment on the macro considerations that were embedded in the fiscal 2023 guide and hoping that you can provide some more color there. Was there an extra level of conservatism embedded in the guide just given kind of the lack of visibility in the second half of the year, and perhaps just some color on the revenue trajectory over the course of the one half versus the second half of the year?

Sure. Thanks, Zack. Yes, I mean, we did look forward as we were putting the guide together and just take into account the fact that there's increasing macro uncertainty out there. And therefore, just pulled back a little bit to a sensible level. I have to say that today in terms of the operation of the business, we're not actually seeing any of those impacts, we're still seeing strong demand coming through. But looking out 12 months, I suppose 9 months now, we did take the view that we should just scale it back a bit. Anything you want to add on?

Yes. I mean, Zack, we have our normal forecasted process where we look at contracted and committed and pipeline. The visibility remains as it always has, which is strong, six months ahead. So, we have confidence very much into March. It gets a little bit less visible, let's say, that's 6 months to 9 months, but the guides will reflect that.

Got it. That's helpful. And just a follow-up on gross margin. Just hoping for more color on perhaps the considerations for the fiscal year as we think about pricing and wage inflation and the dynamics going on there. Any color on that front, please?

Sure. I think this [indiscernible] hasn't been much actual change in terms of the outlook for wage pressure and pricing. I mean, our Q4 gross margin basically reflected us building bench, you [think about] [ph] we've come out of an odd time with COVID, etcetera, where we had very strong demand and as a consequence had a pretty low bench, and we believe that we need to rebuild that bench back to levels pre-COVID.

So, the gross margin that we're using in Q4 were at 37.8 on an adjusted basis, basically reflects about a percentage point of rebuilding that bench. And we anticipate and is included in the guide for Q1, we will still continue to build that bench up to levels that we saw pre-COVID. So, I think in terms of the near-term outlook, we will see a gross margin stepping up from Q4, but as we progress through the year, certainly the second half, we will be in that 40%, 41% gross margin.

Great. Thanks very much.

The next question comes from Mayank Tandon from Needham. Please go ahead.

Kyle Peterson

Hey, morning guys. It's actually Kyle Peterson on for Mayank. Appreciate you guys taking the question. Just wanted to touch a little bit on wage inflation and attrition, kind of a two-part question. Has that changed at all, I know looks like you guys are rebuilding the bench a little bit and appreciate the color on that, but how much of the gross margin pressure at least in the last two quarters has been whether it's wage inflation and merit increases versus rebuilding that bench?

Sure. Thanks. Yes, I mean, the wage inflation and attrition pressures that were running as we were at the height of that growth 6 months to 12 months ago has definitely come off the peak. So, wage inflation is actually pretty much normalizing to historic levels and our attrition is falling again. So, we were around 12.7% in Q4, which was down on the position we had in Q2. So, from a staff point of view, actually just adding recruitment to it, the access to good people, the wages that we're paying and the attrition levels that we're experiencing are normalized back towards pre-COVID levels.

Great. That's really good to hear. And just a quick follow-up, particularly in the UK revenue. I guess it looked a little light on a sequential basis to us. Obviously, I know the comps are pretty tough from last quarter, is there anything else going on there either in a macro or demand perspective or is that just, kind of tough comps and looking at sequentially is a little wonky quarter-to-quarter?

Did you say U.K. revenue there?

No, I think, I mean, the year-on-year growth was 37% in the quarter. Demand remains strong. So, [indiscernible] so I'm not seeing the slight slowdown that you're referring to.

Alright. That's helpful. Thanks guys

Thanks a lot.

The next question comes from Maggie Nolan from William Blair. Please go ahead.

Maggie Nolan

Thanks. Hi. I wanted to follow-up on that gross margin question from earlier. Last year you, kind of successfully balanced that gross margin decline with some declining SG&A as a percentage of revenue, can you give some insight into what dynamics you're expecting for the coming fiscal year on SG&A in particular?

Yes. So, SG&A, we've done a very good job historically in leveraging over it. So, part of the – if we refer to Q4, the PBT, we kept our adjusted PBT margin of 20.1% as you pointed out, Maggie, we had a slight dip in gross margin, but SG&A was pretty low about 15.5%. There are, you know sort of one-off reasons for some of that, but we expect the SG&A to, sort of pick up. as we go through FY 2023, there'll be increased spending on sales and marketing, and we anticipate also some corporate development activity as well.

So, the SG&A I think is a low point of [15.5% in Q4] [ph]. I don't anticipate it being at that level going forward. And I think the Q4 gross margin that we reported for Q4, I think things will pick up from here. We'll see a little bit of near-term pressures as we will rebuild that bench, but I think we'll, this is a, sort of low point and we will rebuild back to the 40%, 41% in the second half of the fiscal year.

Okay, thank you. And then, John, you gave some comments about the client portfolio, it seems like there's an emphasis on maybe growing some larger accounts. You talked about low exposure to startups, but can you talk a little bit more about how you're assessing risk in that client portfolio areas like where you have about a quarter of revenue tied to private equity?

Can you just repeat that last bit again?

I'm trying to reconcile, kind of you mentioned the low exposure to start-ups amongst your client base with comments you've made in the past about how you have a, roughly a quarter of revenue tied to private equity?

Sure. Okay. So, the PE firms that we tend to be working with are the larger Pes who essentially bought large companies and are putting them through a transformation program. So, actually in the payment space, in the insurance space and some other sectors. They're actually fairly large businesses or in some cases very large businesses that have been acquired by some of the large PE firms. Whereas start-ups, we think of as big businesses that have been around for five years or so or less, and actually, our exposure to those businesses is pretty low.

That's helpful. Thank you.

Thanks Maggie.

[Operator Instructions] Our next question comes from James Faucette from Morgan Stanley. Please go ahead.

James Faucette

Great. Thank you. I wanted to ask a couple of things related to engagement and hiring generally, can you talk about if and how your customers are responding to, kind of the volatility in FX rates and if that's impacting how they're evaluating project scope and details if at all?

So, we're not seeing any client sensitivity to FX rates and their decisions on progressing with projects. I mean, a lot of our clients are very global organizations in – by nature. And so, they may switch from investing in a project in one currency to another. And we've seen a little bit that, not that much, but actually, the sensitivity to FX rates doesn't seem to be impacting their decision making on both progressive projects.

I mean, the environment that we're experiencing is that there are a small number of clients who are trimming or delaying, but that's balanced, more than balanced by others who are accelerating their path to production and growing spend with us. And we're not seeing under the surface of that any particular geographic sensitivities. We're not seeing sensitivities to FX rates just across the portfolio, across the industries we're seeing [indiscernible].

That's helpful. And then on the hiring side, I think you made comment that you were seeing wage inflation and that, kind of thing return back to normalized levels, can you just give a little more color on the hiring environment more generally? And is roughly 30% headcount growth still the maximum you’d feel comfortable with? And how are you thinking about your current recruiting algorithms?

Yes. So, in terms of hiring, and the rates that we're paying in the market, it is normalizing, stabilizing back to pre-COVID levels, i.e., before that surge of activity that was driving high rates, high changes in the market, and we’re also seeing the effect of that more normalized environment on attrition rates, which are dropping again. In terms of the range at which we're comfortable growing our headcount, we do see 30% as being [sensible max] [ph].

We had a short period as we accelerated out of COVID, where we pushed it above that level. And that was because we had a more senior organization because we've grown slower for a couple of quarters as COVID hit, but we carried on promoting people. And that gave us the ability to just surge a little bit past that 30% headcount growth during that period, but that is no longer in the bag. And so, we see 30% headcount growth going forward as being our sensible organic growth maximum.

That does convert to slightly higher revenue growth because we see rate rises coming through with clients still. And so, our maximum organic growth pushes a little bit higher than that 30% headcount growth.

That's really helpful. Thanks a lot.

Thanks James.

There are no more questions in the queue. This concludes our question-and-answer session. I like to turn the conference back over to John Cotterell for any closing remarks.

Thank you, and thank you all for joining us today. As you all have noted, demand for our services remains strong. We're seeing good demand right across all our verticals and geographies. And so, we remain positive about the business position despite the macro uncertainty. And we look forward to speaking to you in a month and a half or so on our next earnings call. Thank you.

Conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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• REMINDER - Endava PLC Investor Alert: Robbins LLP Reminds Shareholders of the DAVA Class Action Lawsuit

Robbins LLP reminds investors that a shareholder filed a class action on behalf of all persons and entities that purchased or otherwise acquired Endava PLC (NYSE: DAVA) securities between May 23, 2023 and February 28, 2024. Endava provides technology services for clients in consumer products, healthcare, mobility, and retail verticals in North America.

For more information, submit a form , email attorney Aaron Dumas, Jr., or give us a call at (800) 350-6003.

The Allegations: Robbins LLP is Investigating Allegations that Endava PLC (DAVA) Misled Investors Regarding its Business Prospects

According to the complaint, during the class period, defendants failed to disclose to investors that: (1) demand for the Company’s services was declining; (2) the Company’s clients delayed or canceled projects; (3) as a result, the Company’s fiscal 2023 and 2024 revenue and earnings would be adversely affected; and (4), as a result, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.

On February 29, 2024, Endava issued a press release reporting disappointing financial results for second quarter 2024, announcing a disappointing outlook for third quarter and full fiscal year 2024, and noting that some of the Company's clients had delayed their orders due to economic uncertainty. On this news, the price of Endava’s ADS plummeted $26.65, or nearly 42%, to close at $37.17.

What Now : You may be eligible to participate in the class action against Endava PLC. Shareholders who want to serve as lead plaintiff for the class must submit their application to the court by October 25, 2024. A lead plaintiff is a representative party who acts on behalf of other class members in directing the litigation. You do not have to participate in the case to be eligible for a recovery. If you choose to take no action, you can remain an absent class member. For more information, click here .

All representation is on a contingency fee basis. Shareholders pay no fees or expenses.

About Robbins LLP : Some law firms issuing releases about this matter do not actually litigate securities class actions; Robbins LLP does. A recognized leader in shareholder rights litigation, the attorneys and staff of Robbins LLP have been dedicated to helping shareholders recover losses, improve corporate governance structures, and hold company executives accountable for their wrongdoing since 2002. Since our inception, we have obtained over $1 billion for shareholders.

To be notified if a class action against Endava PLC settles or to receive free alerts when corporate executives engage in wrongdoing, sign up for Stock Watch today.

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View source version on businesswire.com: https://www.businesswire.com/news/home/20240902854114/en/

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