Endava(DAVA)2024-09-19 11:26Revenue Performance - Revenue for the year ended June 30, 2024, decreased by 6.8% year-on-year to £740.8 million from £794.7 million in 2023[23] - Revenue for the year ended 30 June 2024 was £740.8 million, a decrease of £54.0 million, or 6.8%, compared to 2023[25] - Revenue from clients in the Payments vertical decreased by £53.5 million, or 23.0%, to £178.8 million in 2024 from £232.3 million in 2023[27] - Revenue from clients in the BCM vertical decreased by £17.9 million, or 13.9%, to £110.7 million in 2024 from £128.7 million in 2023[27] - Revenue from clients in the Insurance vertical increased by £7.4 million, or 13.4%, to £62.5 million in 2024 from £55.1 million in 2023[27] - Revenue from North America decreased by 6.4% and from Europe by 4.7% from fiscal year 2023 to fiscal year 2024, while revenue from North America and Europe accounted for 32.6% and 25.8% of total revenue, respectively[129] Client and Market Dynamics - The Payments and Financial Services segment generated £352.0 million, accounting for 47.5% of total revenue, down from 52.3% in the previous year[23] - North America contributed £241.7 million, representing 32.6% of total revenue, while the United Kingdom accounted for £247.6 million or 33.4%[24] - The number of clients with a minimum annual spend of at least £1.0 million remained stable at 146 in fiscal year 2024[12] - The number of clients generating over £1 million in revenue remained stable at 146, with 65 clients in the £1-£2 million range, an increase from 56 in 2023[52] - 91.7% of revenue for the financial year ended June 30, 2024, was generated from clients who had previously contributed revenue in prior fiscal years[105] - The top 10 clients represented 32.5% of total revenue for the financial year ended June 30, 2024[105] Acquisitions and Growth Strategy - The company completed five major acquisitions in the past three years to enhance its capabilities and geographic reach[17] - The acquisition of GalaxE in April 2024 expanded the company's healthcare footprint in North America and added delivery units in India[17] - The company plans to continue selectively pursuing acquisitions to augment core capabilities and enhance expertise in new technologies[17] - Endava plc completed three acquisitions in the past fiscal year: GalaxE Group, Inc. in April 2024, EQ Tek SP z.o.o. in February 2024, and TLM Partners, Inc. in August 2023[143] - The company has begun expanding into new verticals such as consumer products, healthcare, mobility, insurance, and retail, but faces challenges due to less experience in these areas[104] Financial Health and Profitability - Gross margin reduced to 24.3% in 2024 from 33.2% in 2023, a decrease of 8.9%[32] - Selling, general and administrative expenses increased by £8.3 million, or 5.5%, in 2024 compared to 2023[33] - Profit before taxes was £27.0 million in 2024, down from £114.2 million in 2023, representing a profit margin of 3.6% compared to 14.4%[38] - Net current assets decreased to £113.8 million as at 30 June 2024 from £227.4 million as at 30 June 2023[39] - Adjusted free cash flow for the year ended 30 June 2024 was £58,401,000, down from £111,525,000 in 2023, reflecting a decrease in liquidity position[60] Operational Challenges and Risks - The company faces risks related to economic conditions, client retention, and operational challenges, which could impact future performance[62] - The company's operating results may fall below estimates due to factors such as fluctuations in currency exchange rates and general economic conditions, including high inflation and interest rate fluctuations[72] - Profitability is dependent on maintaining favorable pricing for services, which is influenced by client perceptions, competitor pricing, and economic conditions[73] - The company faces evolving cybersecurity threats, including ransomware attacks, which could disrupt operations and result in loss of sensitive information[79] - A hybrid working model has increased risks to information technology systems, as employees work from various locations, potentially exposing the company to security vulnerabilities[83] - The company faces challenges in delivering contracted services, which could damage client relationships and impact revenue[152] Strategic Focus and Future Outlook - The company aims to leverage its expertise in data analytics and augmented reality to expand its presence in the healthcare industry[13] - The company aims to grow its client base in North America and Europe, focusing on innovation and emerging technologies to remain competitive[65] - The company is focused on geographic expansion in North America and Europe, but faces challenges from economic downturns and increased competition[131] - The company’s revenue growth is contingent on continued demand from existing industry verticals, particularly in the context of macroeconomic uncertainties[103] Legal and Compliance Issues - The company is exposed to regulatory changes that could impact its ability to provide services in a cost-effective manner, particularly in the UK and EU[170] - The company may face litigation related to intellectual property rights, which could result in substantial damages or require the development of non-infringing technology[186] - Clients purchasing services are typically indemnified against potential infringement claims, exposing the company to costly litigation risks[187] Environmental and Social Responsibility - A significant portion of the company's greenhouse gas emissions comes from the buildings it occupies, necessitating measures to reduce emissions to meet carbon-reduction targets[177]