DocumentENDAVA ANNOUNCES FIRST QUARTER FISCAL YEAR 2024 RESULTS
Q1 FY2024
3.9% Year on Year Revenue Decrease to £188.4 million
0.6% Revenue Decrease at Constant Currency
Diluted EPS £0.21 compared to £0.55 in the prior year comparative period
Adjusted diluted EPS £0.39 compared to £0.54 in the prior year comparative period
London, U.K. – 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 September 30, 2023, the first quarter of its 2024 fiscal year ("Q1 FY2024").
"Delays in client decision making impacted our top line and led to a revenue decrease of 0.6% in constant currency in Q1 FY2024. Whilst we recognize that the world has become more unstable over the past two months, we are seeing signs of improvement in demand and continue to see sizable new business opportunities entering and progressing through our funnel, as well as new assignments commencing and scaling, which we expect to impact our revenue in the second half of fiscal year 2024,” said John Cotterell, Endava's CEO.
FIRST QUARTER FISCAL YEAR 2024 FINANCIAL HIGHLIGHTS:
•Revenue for Q1 FY2024 was £188.4 million, a decrease of 3.9% compared to £196.2 million in the same period in the prior year.
•Revenue decrease at constant currency (a non-IFRS measure)* was 0.6% for Q1 FY2024, compared to a growth rate of 25.9% in the same period in the prior year.
•Profit before tax for Q1 FY2024 was £17.3 million, compared to £38.6 million in the same period in the prior year.
•Adjusted profit before tax (a non-IFRS measure)* for Q1 FY2024 was £29.8 million, or 15.8% of revenue, compared to £39.5 million, or 20.1% of revenue, in the same period in the prior year.
•Profit for the period was £12.4 million, resulting in a diluted earnings per share ("EPS") of £0.21, compared to profit of £31.7 million and diluted EPS of £0.55 in the same period in the prior year.
•Adjusted profit for the period (a non-IFRS measure)* was £22.9 million, resulting in adjusted diluted EPS (a non-IFRS measure)* of £0.39, compared to adjusted profit for the period of £31.3 million and adjusted diluted EPS of £0.54 in the same period in the prior year.
CASH FLOW:
•Net cash from operating activities was £16.6 million in Q1 FY2024, compared to £25.2 million in the same period in the prior year.
•Adjusted free cash flow (a non-IFRS measure)* was £16.0 million in Q1 FY2024, compared to £21.8 million in the same period in the prior year.
•At September 30, 2023, Endava had cash and cash equivalents of £168.2 million, compared to £164.7 million at June 30, 2023.
* 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 SEPTEMBER 30, 2023:
•Headcount totaled 11,761 at September 30, 2023, with an average of 10,751 operational employees in Q1 FY2024, compared to a headcount of 12,065 at September 30, 2022 and an average of 10,956 operational employees in Q1 FY2023.
•Number of clients with over £1 million in revenue on a rolling twelve-month basis was 145 at September 30, 2023, compared to 140 clients at September 30, 2022.
•Top 10 clients accounted for 35% of revenue in Q1 FY2024, compared to 33% in the same period in the prior year.
•By geographic region, 30% of revenue was generated in North America, 25% was generated in Europe, 35% was generated in the United Kingdom and 10% was generated in the rest of the world in Q1 FY2024. This compares to 35% in North America, 22% in Europe, 40% in the United Kingdom and 3% in the rest of the world in the same period in the prior year.
•Starting in Q1 FY2024, we have updated the breakdown of industry verticals to provide additional granularity. By industry vertical, 27% of revenue was generated from Payments, 14% from Banking and Capital Markets (BCM), 8% from Insurance, 23% from Technology, Media and Telecommunications (TMT), 11% from Mobility, and 17% from
Other in Q1 FY2024. This compares to 30% from Payments, 16% from BCM, 6% from Insurance, 23% from TMT, 10% from Mobility, and 15% from Other in the same period in the prior year.
OUTLOOK:
Second Quarter Fiscal Year 2024:
Endava expects revenues will be in the range of £184.0 million to £185.0 million, representing a constant currency revenue decrease between 8.5% and 8.0%. Endava expects adjusted diluted EPS to be in the range of £0.28 to £0.29 per share.
Full Fiscal Year 2024:
Endava expects revenues will be in the range of £791.0 million to £805.0 million, representing constant currency growth between 1.0% and 2.5%. Endava expects adjusted diluted EPS to be in the range of £1.59 to £1.66 per share.
This above guidance for the second quarter and full fiscal year 2024 assumes the exchange rates on October 31, 2023 (when the exchange rate was 1 British Pound to 1.21 US Dollar and 1.15 Euro).
Endava is not able, at this time, to reconcile its expectations for the second quarter and full fiscal year 2024 for revenue decrease/growth rate at constant currency or adjusted diluted EPS, to their most directly comparable IFRS measures as a result of the uncertainty regarding, and the potential variability of, reconciling items such as share-based compensation expense, amortisation of acquired intangible assets, foreign currency exchange (gains)/losses, restructuring costs and fair value movement of contingent consideration, as applicable. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to Endava's results computed in accordance with IFRS.
The guidance provided above is forward-looking in nature. Actual results may differ materially. See “Forward-Looking Statements” below.
CONFERENCE CALL DETAILS:
The Company will host a conference call at 8:00 am ET today, November 15, 2023, to review its Q1 FY2024 results. To participate in Endava’s Q1 FY2024 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 Wednesday, December 13, 2023.
ABOUT ENDAVA PLC:
Endava is reimagining the relationship between people and technology. By leveraging next-generation technologies, its agile and 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, Banking and Capital Markets, Insurance, TMT, Consumer Products, Retail, Mobility and Healthcare. As of September 30, 2023, 11,761 Endavans provided services from our locations in European Union countries (Austria, Bulgaria, Croatia, Denmark, Germany, Ireland, the Netherlands, Poland, Romania, Slovenia and Sweden), non-European Union countries (Bosnia & Herzegovina, Moldova, North Macedonia, Serbia, Switzerland and the United Kingdom), Latin America (Argentina, Colombia, Mexico and Uruguay), Asia-Pacific (Australia, Malaysia, Singapore and Vietnam), North America (Canada and the United States), and the Middle East (United Arab Emirates).
NON-IFRS FINANCIAL INFORMATION:
To supplement Endava’s Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows presented in accordance with IFRS, the Company uses non-IFRS measures of certain components of financial performance in the press release. 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 decrease/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 currency rates in effect for the fiscal quarter ended September 30, 2022 were used to convert revenue for the fiscal quarter ended September 30, 2023 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, restructuring costs and fair value movement of contingent consideration, all of which are non-cash items except for the restructuring costs and realised foreign currency exchange (gains)/ losses.
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 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 second fiscal quarter of fiscal year 2024 and the full fiscal year 2024; expectations of increased current and prospective client demand for Endava offerings in upcoming periods and resulting impact on revenue; and Endava’s ability to achieve its anticipated growth and future financial performance, including management's financial outlook for the second quarter and full fiscal year 2024. 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 military conflict and related sanctions, conflict in the Middle East or if general economic conditions in Europe, the United States or the global economy continue to worsen, including increased inflation and recent and potential future bank failures; 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 Endava's Annual Report for the year ended June 30, 2023 filed with the SEC on September 19, 2023 and in other filings that Endava makes from time to time with the SEC. 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.
INVESTOR CONTACT:
Endava plc
Laurence Madsen, Investor Relations Manager
Investors@endava.com
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | | | | | | | | | |
| | Three Months Ended September 30 |
| | | 2023 | 2022(1) |
| | | £’000 | £’000 |
| REVENUE | | | 188,421 | 196,169 |
| Cost of sales | | | | |
| Direct cost of sales | | | (127,319) | (122,971) |
| Allocated cost of sales | | | (6,632) | (5,783) |
| Total cost of sales | | | (133,951) | (128,754) |
| GROSS PROFIT | | | 54,470 | 67,415 |
| Selling, general and administrative expenses | | | (38,363) | (40,182) |
| | | | |
| OPERATING PROFIT | | | 16,107 | 27,233 |
| Net finance income | | | 1,206 | 11,335 |
| | | | |
| PROFIT BEFORE TAX | | | 17,313 | 38,568 |
| Tax on profit on ordinary activities | | | (4,947) | (6,840) |
| PROFIT FOR THE PERIOD | | | 12,366 | 31,728 |
| OTHER COMPREHENSIVE INCOME | | | | |
| Items that may be reclassified subsequently to profit or loss: | | | | |
| Exchange differences on translating foreign operations | | | 4,742 | 7,980 |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT | | | 17,108 | 39,708 |
| | | | |
| EARNINGS PER SHARE (EPS): | | | | |
| Weighted average number of shares outstanding - Basic | | | 57,901,454 | | 56,705,849 | |
| Weighted average number of shares outstanding - Diluted | | | 58,438,198 | | 58,128,971 | |
| Basic EPS (£) | | | 0.21 | | 0.56 | |
| Diluted EPS (£) | | | 0.21 | | 0.55 | |
CONDENSED CONSOLIDATED BALANCE SHEETS | | | | | | | | | | | |
| September 30, 2023 | June 30, 2023 | September 30, 2022 |
| £’000 | £’000 | £’000 |
| | | |
| ASSETS - NON-CURRENT | | | |
| Goodwill | 259,092 | | 240,818 | | 152,604 | |
| Intangible assets | 66,193 | | 66,216 | | 56,354 | |
| Property, plant and equipment | 24,506 | | 25,940 | | 23,460 | |
| Lease right-of-use assets | 65,100 | | 65,084 | | 59,490 | |
| Deferred tax assets | 20,601 | | 20,156 | | 19,611 | |
| Financial assets and other receivables | 3,177 | | 5,242 | | 2,793 | |
| TOTAL | 438,669 | | 423,456 | | 314,312 | |
| ASSETS - CURRENT | | | |
| | | |
| Trade and other receivables | 185,750 | | 177,866 | | 190,760 | |
| Corporation tax receivable | 5,547 | | 4,042 | | 2,940 | |
| Financial assets | 67 | | 56 | | 346 | |
| Cash and cash equivalents | 168,191 | | 164,703 | | 182,395 | |
| TOTAL | 359,555 | | 346,667 | | 376,441 | |
| TOTAL ASSETS | 798,224 | | 770,123 | | 690,753 | |
| LIABILITIES - CURRENT | | | |
| Lease liabilities | 14,698 | | 14,573 | | 12,945 | |
| Trade and other payables | 83,948 | | 91,159 | | 102,244 | |
| Corporation tax payable | 8,087 | | 5,940 | | 11,878 | |
| Contingent consideration | 8,067 | | 7,650 | | 1,340 | |
| Deferred consideration | 155 | | 1,267 | | 12,401 | |
| | | |
| TOTAL | 114,955 | | 120,589 | | 140,808 | |
| LIABILITIES - NON CURRENT | | | |
| Lease liabilities | 54,253 | | 54,441 | | 51,321 | |
| Deferred tax liabilities | 14,236 | | 14,623 | | 10,507 | |
| Contingent consideration | 9,336 | | 3,809 | | 3,040 | |
| | | |
| Deferred consideration | 5,676 | | 4,837 | | — | |
| Other liabilities | 522 | | 516 | | 512 | |
| TOTAL | 84,023 | | 78,226 | | 65,380 | |
| EQUITY | | | |
| Share capital | 1,155 | | 1,155 | | 1,135 | |
| Share premium | 14,635 | | 14,625 | | 9,173 | |
| Merger relief reserve | 42,805 | | 42,805 | | 30,003 | |
| Retained earnings | 546,111 | | 522,926 | | 441,943 | |
| Other reserves | (5,434) | | (10,176) | | 2,466 | |
| Investment in own shares | (26) | | (27) | | (155) | |
| TOTAL | 599,246 | | 571,308 | | 484,565 | |
| TOTAL LIABILITIES AND EQUITY | 798,224 | | 770,123 | | 690,753 | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | |
| | Three Months Ended September 30 |
| | | 2023 | 2022 |
| | | £’000 | £’000 |
| OPERATING ACTIVITIES | | | | |
| Profit for the period | | | 12,366 | | 31,728 | |
| Income tax charge | | | 4,947 | | 6,840 | |
| Non-cash adjustments | | | 15,800 | | 6,099 | |
| Tax paid | | | (2,348) | | (1,610) | |
| | | | |
| Net changes in working capital | | | (14,178) | | (17,821) | |
| Net cash from operating activities | | | 16,587 | | 25,236 | |
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Purchase of non-current assets (tangibles and intangibles) | | | (807) | | (3,443) | |
| Proceeds from disposal of non-current assets | | | 3 | | 19 | |
| Payment for acquisition of subsidiary, net of cash acquired | | | (4,182) | | — | |
| Other acquisition related settlements | | | (6,680) | | — | |
| | | | |
| Interest received | | | 1,565 | | 365 | |
| Net cash used in investing activities | | | (10,101) | | (3,059) | |
| | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from sublease | | | 56 | | 145 | |
| | | | |
| | | | |
| Repayment of lease liabilities | | | (3,920) | | (3,099) | |
| Interest and debt financing costs paid | | | (287) | | (217) | |
| Grant received | | | 207 | | — | |
| | | | |
| | | | |
| Proceeds from exercise of options | | | 11 | | 21 | |
| Net cash used in financing activities | | | (3,933) | | (3,150) | |
| Net change in cash and cash equivalents | | | 2,553 | | 19,027 | |
| | | | |
| Cash and cash equivalents at the beginning of the period | | | 164,703 | | 162,806 | |
| Exchange differences on cash and cash equivalents | | | 935 | | 562 | |
| Cash and cash equivalents at the end of the period | | | 168,191 | | 182,395 | |
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:
| | | | | | | | | | |
| | Three Months Ended September 30 |
| | | 2023 | 2022 |
| REVENUE GROWTH RATE AS REPORTED UNDER IFRS | | | (3.9) | % | 33.0 | % |
| Foreign exchange rates impact | | | 3.3 | % | (7.1 | %) |
| REVENUE GROWTH RATE AT CONSTANT CURRENCY | | | (0.6) | % | 25.9 | % |
| | | | |
| | | | |
RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX AND ADJUSTED PROFIT FOR THE PERIOD:
| | | | | | | | | | |
| | Three Months Ended September 30 |
| | | 2023 | 2022 |
| | | £’000 | £’000 |
| | | | |
| PROFIT BEFORE TAX | | | 17,313 | | 38,568 | |
| Adjustments: | | | | |
| Share-based compensation expense | | | 9,939 | | 9,544 | |
| | | | |
| Amortisation of acquired intangible assets | | | 3,401 | | 3,019 | |
| Foreign currency exchange gains | | | (2,079) | | (7,414) | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Fair value movement of contingent consideration | | | 1,236 | | (4,249) | |
| Total adjustments | | | 12,497 | | 900 | |
| ADJUSTED PROFIT BEFORE TAX | | | 29,810 | | 39,468 | |
| | | | |
| PROFIT FOR THE PERIOD | | | 12,366 | | 31,728 | |
| Adjustments: | | | | |
| Adjustments to profit before tax | | | 12,497 | | 900 | |
| Tax impact of adjustments | | | (1,939) | | (1,330) | |
| ADJUSTED PROFIT FOR THE PERIOD | | | 22,924 | | 31,298 | |
| | | | |
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE:
| | | | | | | | | | |
| | Three Months Ended September 30 |
| | | 2023 | 2022 |
| | | £’000 | £’000 |
| | | | |
| DILUTED EARNINGS PER SHARE (£) | | | 0.21 | | 0.55 | |
| Adjustments: | | | | |
| Share-based compensation expense | | | 0.17 | | 0.16 | |
| Amortisation of acquired intangible assets | | | 0.06 | | 0.05 | |
| Foreign currency exchange gains | | | (0.04) | | (0.13) | |
| | | | |
| Fair value movement of contingent consideration | | | 0.02 | | (0.07) | |
| Tax impact of adjustments | | | (0.03) | | (0.02) | |
| Total adjustments | | | 0.18 | | (0.01) | |
| ADJUSTED DILUTED EARNINGS PER SHARE (£) | | | 0.39 | | 0.54 | |
RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW
| | | | | | | | | | |
| | Three Months Ended September 30 |
| | | 2023 | 2022 |
| | | £’000 | £’000 |
| | | | |
| Net cash from operating activities | | | 16,587 | | 25,236 | |
| Adjustments: | | | | |
| Grant received | | | 207 | | — | |
| Purchase of non-current assets (tangible and intangible) | | | (804) | | (3,424) | |
| Adjusted Free cash flow | | | 15,990 | | 21,812 | |
SUPPLEMENTARY INFORMATION
SHARE-BASED COMPENSATION EXPENSE
| | | | | | | | | | |
| | Three Months Ended September 30 |
| | | 2023 | 2022 |
| | | £’000 | £’000 |
| | | | |
| Direct cost of sales | | | 6,802 | | 5,957 | |
| Selling, general and administrative expenses | | | 3,137 | | 3,587 | |
| Total | | | 9,939 | | 9,544 | |
DEPRECIATION AND AMORTISATION
| | | | | | | | | | |
| | Three Months Ended September 30 |
| | | 2023 | 2022 |
| | | £’000 | £’000 |
| | | | |
| Direct cost of sales | | | 5,196 | | 4,087 | |
| Selling, general and administrative expenses | | | 4,223 | | 3,618 | |
| Total | | | 9,419 | | 7,705 | |
EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT
| | | | | | | | | | |
| Six Months Ended December 31 | | Three Months Ended September 30 |
| | | 2023 | 2022 |
| | | | |
| Closing number of total employees (including directors) | | | 11,761 | 12,065 |
| Average operational employees | | | 10,751 | 10,956 |
| | | | |
| Top 10 customers % | | | 35% | 33% |
Number of clients with > £1m of revenue
(rolling 12 months) | | | 145 | 140 |
| | | | |
| Geographic split of revenue % | | | | |
| North America | | | 30% | 35% |
| Europe | | | 25% | 22% |
| UK | | | 35% | 40% |
| Rest of World (RoW) | | | 10% | 3% |
| Industry vertical split of revenue % | | | | |
| Payments | | | 27% | 30% |
| Banking and Capital Markets | | | 14% | 16% |
| Insurance | | | 8% | 6% |
| TMT | | | 23% | 23% |
| Mobility | | | 11% | 10% |
| Other | | | 17% | 15% |
FOOTNOTES
(1) The presentation of the income statement has been changed to no longer separately disclose the net impairment gains/losses on financial assets on the face of the Condensed Consolidated Statements of Comprehensive Income, but include them within Selling, general and administrative expenses.
