Endava(DAVA) - 2025 Q3 - Quarterly Report

Executive Summary & Q3 FY2025 Highlights Endava achieved significant revenue growth and returned to profitability in Q3 FY2025, despite a challenging business environment, while also improving cash flow and authorizing a new share repurchase program Q3 FY2025 Financial Performance Endava reported a significant increase in revenue and a return to profitability in Q3 FY2025 compared to the prior year | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | YoY % Change | | :-------------------------------- | :-------- | :-------- | :--------- | :----------- | | Revenue | £194.8M | £174.4M | £20.4M | 11.7% | | Revenue (Constant Currency) | - | - | - | 12.4% | | Profit Before Tax | £13.6M | £(0.5)M | £14.1M | N/A | | Adjusted Profit Before Tax | £24.6M | £15.5M | £9.1M | 58.7% | | Profit for the Period | £10.9M | £(1.7)M | £12.6M | N/A | | Diluted EPS | £0.18 | £(0.03) | £0.21 | N/A | | Adjusted Diluted EPS | £0.34 | £0.22 | £0.12 | 54.5% | CEO's Business Environment Commentary Endava's CEO, John Cotterell, noted a challenging and rapidly evolving business environment, causing delays in larger contract signings despite strong innovation desire - The business environment is challenging, with clients slow to sign larger contracts despite strong innovation desire[2] - The opportunity pipeline continues to grow, but conversion into revenue is slower than expected[2] - Endava's Board of Directors authorized an additional $50 million share repurchase, reflecting confidence in cash flow and long-term strategy[2] Other Key Metrics Operational cash flow significantly improved in Q3 FY2025, with shifts in client concentration, geographic, and industry vertical revenue contributions | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | | :------------------------------------ | :-------- | :-------- | :--------- | | Net cash from operating activities | £18.7M | £3.0M | +£15.7M | | Adjusted free cash flow | £17.5M | £2.2M | +£15.3M | | Cash and cash equivalents (period end) | £68.3M | £62.4M (Jun 30, 2024) | +£5.9M | | Headcount (period end) | 11,365 | 11,025 | +340 | | Average operational employees | 10,272 | 10,127 | +145 | | Clients with >£1M revenue (rolling 12m) | 136 | 142 | -6 | | Top 10 clients revenue % | 39% | 34% | +5% | | North America Revenue % | 37% | 30% | +7% | | Europe Revenue % | 22% | 28% | -6% | | UK Revenue % | 35% | 35% | 0% | | Rest of World Revenue % | 6% | 7% | -1% | | Payments Revenue % | 19% | 24% | -5% | | BCM Revenue % | 21% | 14% | +7% | | Insurance Revenue % | 9% | 9% | 0% | | TMT Revenue % | 18% | 24% | -6% | | Mobility Revenue % | 8% | 10% | -2% | | Healthcare Revenue % | 12% | 4% | +8% | | Other Revenue % | 13% | 15% | -2% | Outlook & Strategic Initiatives Endava projects continued revenue growth and adjusted diluted EPS for Q4 and full FY2025, alongside an expanded share repurchase program to enhance shareholder value Financial Outlook Endava provided guidance for Q4 FY2025 and the full fiscal year 2025, projecting revenue and adjusted diluted EPS ranges | Metric | Q4 FY2025 Guidance | Full FY2025 Guidance | | :-------------------------- | :------------------- | :------------------- | | Revenue | £186.0M - £188.0M | £771.5M - £773.5M | | Constant Currency Revenue Change (YoY) | (1.0)% - 0.0% | 6.0% - 6.5% | | Adjusted Diluted EPS | £0.22 - £0.24 | £1.11 - £1.13 | - The guidance assumes exchange rates on April 30, 2025 (1 GBP to 1.34 USD and 1.18 EUR)[9] - Endava is unable to reconcile non-IFRS guidance to IFRS measures due to uncertainty and variability of reconciling items[10] Share Repurchase Program Endava has repurchased a significant number of ADS under its existing program and authorized an additional $50 million for future repurchases - As of April 30, 2025, 1,975,906 ADS were repurchased for $39.7 million[12] - $60.3 million remained for repurchase under the existing authorization[12] - An additional $50 million of share repurchases has been approved by the Board of Directors[12] Company Information Endava, a global provider of AI-native technology services with 11,365 employees, held a Q3 FY2025 results conference call and provides investor contact information About Endava plc Endava is a leading global provider of next-generation technology services, leveraging an AI-native approach to drive business transformation across diverse industries - Endava provides next-generation technology services, enabling clients to accelerate growth and tackle complex challenges[16] - The company utilizes an AI-native approach, combining innovative technologies with deep industry expertise[16] - Clients span diverse industries including payments, insurance, finance, banking, technology, media, telecommunications, healthcare, and mobility[17] - As of March 31, 2025, Endava had 11,365 employees across Europe, the Americas, Asia Pacific, and the Middle East[17] Conference Call Details Endava hosted a conference call on May 14, 2025, to discuss its Q3 FY2025 results, with webcast and replay options available - Conference call held on May 14, 2025, at 8:00 am ET to review Q3 FY2025 results[14] - Dial-in numbers: (844) 481-2736 (US) or (412) 317-0665 (International), Conference ID: Endava Call[14] - Webcast available on http://investors.Endava.com, with replay until June 11, 2025[15] Investor Contact For investor inquiries, Laurence Madsen, Head of Investor Relations, is the designated contact - Investor Contact: Laurence Madsen, Head of Investor Relations, Investors@endava.com[27] IFRS Financial Statements The IFRS financial statements detail Endava's Q3 FY2025 return to profitability, changes in balance sheet assets and liabilities, and improved operating cash flows Condensed Consolidated Statements of Comprehensive Income Endava's Condensed Consolidated Statements of Comprehensive Income for Q3 FY2025 show a significant turnaround from a loss to a profit compared to the prior year | Metric | Q3 FY2025 (£'000) | Q3 FY2024 (£'000) | YoY Change (£'000) | | :-------------------------------- | :----------------- | :----------------- | :----------------- | | REVENUE | 194,838 | 174,365 | 20,473 | | GROSS PROFIT | 53,589 | 37,193 | 16,396 | | OPERATING PROFIT / (LOSS) | 16,454 | (1,832) | 18,286 | | PROFIT / (LOSS) BEFORE TAX | 13,597 | (529) | 14,126 | | PROFIT / (LOSS) FOR THE PERIOD | 10,946 | (1,737) | 12,683 | | Diluted EPS (£) | 0.18 | (0.03) | 0.21 | Condensed Consolidated Balance Sheets The balance sheet as of March 31, 2025, shows a decrease in total assets, primarily from goodwill and intangible assets, with a modest increase in total equity | Metric | March 31, 2025 (£'000) | June 30, 2024 (£'000) | March 31, 2024 (£'000) | | :-------------------------- | :--------------------- | :-------------------- | :--------------------- | | Goodwill | 490,478 | 515,724 | 262,720 | | Intangible assets | 110,471 | 127,797 | 56,436 | | Cash and cash equivalents | 68,277 | 62,358 | 190,021 | | TOTAL ASSETS | 961,769 | 1,013,891 | 792,400 | | TOTAL LIABILITIES | 316,184 | 374,436 | 167,607 | | TOTAL EQUITY | 645,585 | 639,455 | 624,793 | Condensed Consolidated Statements of Cash Flows Endava's cash flow statement for Q3 FY2025 indicates a strong improvement in operating activities, while investing and financing activities resulted in net cash outflows | Metric | Q3 FY2025 (£'000) | Q3 FY2024 (£'000) | YoY Change (£'000) | | :-------------------------------- | :----------------- | :----------------- | :----------------- | | Net cash from operating activities | 18,659 | 3,008 | 15,651 | | Net cash used in investing activities | (1,660) | (11,869) | 10,209 | | Net cash used in financing activities | (8,664) | (310) | (8,354) | | Net change in cash and cash equivalents | 8,335 | (9,171) | 17,506 | | Cash and cash equivalents at period end | 68,277 | 190,021 | (121,744) | Non-IFRS Financial Information & Reconciliations This section defines Endava's non-IFRS financial measures and provides detailed reconciliations for revenue growth, adjusted profit before tax, adjusted profit for the period, adjusted diluted EPS, and adjusted free cash flow Non-IFRS Measures Definitions Endava utilizes several non-IFRS financial measures to provide a clearer view of its underlying business performance, excluding certain non-cash or non-recurring items - Revenue growth/(decline) rate at constant currency translates foreign currency revenue using prior period exchange rates[19] - Adjusted profit before tax (Adjusted PBT) excludes share-based compensation, amortization of acquired intangibles, foreign currency exchange (gains)/losses, restructuring costs, and fair value movement of contingent consideration[20] - Adjusted profit for the period is Adjusted PBT less the adjusted tax charge[21] - Adjusted diluted EPS is Adjusted profit for the period divided by diluted weighted average shares outstanding[21] - Adjusted free cash flow is net cash from operating activities plus grants received, less net purchases of non-current assets[22] Reconciliation of Revenue Growth Rate The reconciliation shows that foreign exchange rate fluctuations had a positive impact on reported revenue growth for Q3 FY2025 | Metric | Q3 FY2025 | Q3 FY2024 | | :------------------------------------------ | :-------- | :-------- | | REVENUE GROWTH / (DECLINE) RATE AS REPORTED UNDER IFRS | 11.7 % | (14.3 %) | | Impact of Foreign exchange rate fluctuations | 0.7 % | 2.5 % | | REVENUE GROWTH / (DECLINE) RATE AT CONSTANT CURRENCY | 12.4 % | (11.8 %) | Reconciliation of Adjusted Profit Before Tax and Adjusted Profit for the Period Adjustments for Q3 FY2025, primarily share-based compensation and amortization, significantly increased the adjusted profit before tax and adjusted profit for the period | Metric | Q3 FY2025 (£'000) | Q3 FY2024 (£'000) | | :------------------------------------ | :----------------- | :----------------- | | PROFIT / (LOSS) BEFORE TAX | 13,597 | (529) | | Total adjustments | 11,049 | 16,025 | | ADJUSTED PROFIT BEFORE TAX | 24,646 | 15,496 | | PROFIT / (LOSS) FOR THE PERIOD | 10,946 | (1,737) | | ADJUSTED PROFIT FOR THE PERIOD | 20,138 | 12,701 | Reconciliation of Adjusted Diluted Earnings Per Share The reconciliation highlights the impact of various adjustments, such as share-based compensation and amortization, on diluted EPS, leading to a higher adjusted diluted EPS | Metric | Q3 FY2025 (£) | Q3 FY2024 (£) | | :------------------------------------ | :------------ | :------------ | | DILUTED EARNINGS / (LOSS) PER SHARE | 0.18 | (0.03) | | Total adjustments | 0.16 | 0.25 | | ADJUSTED DILUTED EARNINGS PER SHARE | 0.34 | 0.22 | Reconciliation of Adjusted Free Cash Flow Adjusted free cash flow for Q3 FY2025 was £17.5 million, a substantial increase from the prior year, after accounting for grants and non-current asset purchases | Metric | Q3 FY2025 (£'000) | Q3 FY2024 (£'000) | | :------------------------------------ | :----------------- | :----------------- | | NET CASH FROM OPERATING ACTIVITIES | 18,659 | 3,008 | | Adjustments: | | | | Grant received | — | 592 | | Net purchase of non-current assets | (1,142) | (1,433) | | ADJUSTED FREE CASH FLOW | 17,517 | 2,167 | Supplementary Information Supplementary information details Endava's share-based compensation and depreciation expenses, along with employee count, customer concentration, and revenue splits by geography and industry vertical Share-Based Compensation Expense Total share-based compensation expense for Q3 FY2025 remained relatively stable compared to the prior year, primarily allocated to direct cost of sales | Category | Q3 FY2025 (£'000) | Q3 FY2024 (£'000) | | :---------------------------------- | :----------------- | :----------------- | | Direct cost of sales | 4,502 | 5,114 | | Selling, general and administrative expenses | 1,719 | 1,070 | | Total | 6,221 | 6,184 | Depreciation and Amortisation Total depreciation and amortisation expense for Q3 FY2025 increased, with increases in both direct cost of sales and selling, general and administrative expenses | Category | Q3 FY2025 (£'000) | Q3 FY2024 (£'000) | | :---------------------------------- | :----------------- | :----------------- | | Direct cost of sales | 5,158 | 4,849 | | Selling, general and administrative expenses | 4,805 | 3,698 | | Total | 9,963 | 8,547 | Employees, Top 10 Customers and Revenue Split Endava's employee count increased slightly, while client concentration grew, and revenue shares shifted significantly across geographies and industry verticals | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | | :------------------------------------ | :-------- | :-------- | :--------- | | Closing number of total employees | 11,365 | 11,025 | +340 | | Average operational employees | 10,272 | 10,127 | +145 | | Top 10 customers % | 39% | 34% | +5% | | Number of clients with > £1m of revenue | 136 | 142 | -6 | | Geographic split of revenue %: | | | | | North America | 37% | 30% | +7% | | Europe | 22% | 28% | -6% | | UK | 35% | 35% | 0% | | Rest of World (RoW) | 6% | 7% | -1% | | Industry vertical split of revenue %: | | | | | Payments | 19% | 24% | -5% | | Banking and Capital Markets | 21% | 14% | +7% | | Insurance | 9% | 9% | 0% | | TMT | 18% | 24% | -6% | | Mobility | 8% | 10% | -2% | | Healthcare | 12% | 4% | +8% | | Other | 13% | 15% | -2% | Legal & Disclosures This section outlines Endava's forward-looking statements, emphasizing inherent risks and uncertainties, and provides footnotes regarding financial statement restatements and cash flow presentation changes Forward-Looking Statements This section contains standard forward-looking statements regarding Endava's future expectations, highlighting that actual results may differ materially due to various risks and uncertainties - Statements regarding macroeconomic environment, share repurchase program, and financial outlook for Q4 and full FY2025 are forward-looking[25] - Actual results may differ materially due to known and unknown risks and uncertainties, including slower pipeline conversion, client retention, talent acquisition, and market competition[25][26] - Endava disclaims any obligation to update forward-looking statements except as required by law[26] Footnotes Footnotes clarify that certain financial statements were restated to reflect final acquisition accounting and changes in cash flow presentation - Financial statements were restated to include revisions from provisional to final acquisition accounting for DEK and Mudbath[39] - The presentation of Condensed Consolidated Statements of Cash Flows was changed to separately present repayment of lease interest[39]