Endava (NYSE:DAVA) Q2 2026 Earnings call February 19, 2026 08:00 AM ET Company ParticipantsAntonio Jaramillo - VP of Equity ResearchBryan Bergin - Managing DirectorJohn Cotterell - CEOJonathan Lee - Managing Director of Equity ResearchLaurence Madsen - Head of Investor Relations and ESGMark Thurston - CFOPuneet Jain - Equity Research AssociateOperatorGood day, and welcome to the Endava second quarter 2026 results. All participants will be in listen-only mode. Should you need assistance, please signal a conf ...

Financial Data and Key Metrics Changes - Revenue totaled GBP 184.1 million, representing a 5.9% decrease year-on-year and a 3.3% increase from Q1 FY2026 [6][21] - Loss before tax for the quarter was GBP 7.2 million, compared to a profit of GBP 2.5 million in the same period last year [21] - Adjusted PBT was GBP 10.7 million, down from GBP 21.8 million year-on-year, with an adjusted PBT margin of 5.8% compared to 11.2% [22] - Adjusted diluted earnings per share were 16 pence, down from 30 pence year-on-year [23] - Adjusted free cash flow was GBP 20.1 million, down from GBP 31.6 million in the same period last year [25] Business Line Data and Key Metrics Changes - Revenue from the 10 largest clients accounted for 35% of total revenue, down from 36% year-on-year, with average spend per client decreasing from GBP 7.1 million to GBP 6.5 million [23] - North America accounted for 40% of revenue, Europe for 23%, and the UK for 31%, with North America revenue decreasing by 5.1% year-on-year [24] - Revenue from Europe declined 8.5%, primarily due to weakness in payments and mobility [24] - The rest of the world saw a revenue increase of 21.8%, driven mainly by the payments and TNT verticals [25] Market Data and Key Metrics Changes - The company experienced a 5.1% revenue decrease in constant currency terms year-on-year [21] - The UK revenue decreased by 9.1%, mainly due to the reclassification of a large payments client to North America [25] - The rest of the world increased significantly, indicating growth opportunities in emerging markets [25] Company Strategy and Development Direction - The company is heavily investing in AI to establish itself as a leader in AI-native solutions, focusing on recruitment, training, and building partnerships [5][6] - Strategic partnerships with OpenAI and other hyperscalers are being leveraged to enhance service offerings and drive demand [12][14] - The launch of Endava Rise aims to convert startup innovations into enterprise-ready solutions, enhancing the company's capabilities [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing challenges posed by currency fluctuations and competitive pressures but remains optimistic about the long-term growth potential driven by AI adoption [27][28] - The company expects revenue guidance for Q3 FY2026 to be in the range of GBP 182 million to GBP 185 million, indicating a constant currency revenue decrease of 4% to 2.5% year-on-year [28] - For the full fiscal year 2026, revenue is expected to be between GBP 736 million and GBP 750 million, reflecting a constant currency decrease of 3.5% to 1.5% [28] Other Important Information - The company ended the quarter with 11,385 employees, a 2.4% decrease from the same period last year [19] - Capital expenditure for the quarter was 4.4% of revenue, significantly higher than 0.2% in the same period last year, due to investments in a payments accelerator [26] Q&A Session Summary Question: Fiscal year guidance and growth drivers for Q4 - Management indicated that Q4 growth is expected due to secured deals and an increase in working days compared to Q3 [31][33] Question: Details on commitments with largest payment clients - Management confirmed extensions of work with two largest payment clients, focusing on switch/gateway type projects [36] Question: Margin impact from increased investments - Management acknowledged that investments in partnerships and AI-native delivery models are heavier than expected, impacting margins [40][41] Question: OpenAI adoption trends and market displacement concerns - Management expressed confidence in the strong relationship with OpenAI and the enterprise market opportunities, addressing concerns about service displacement [43][45] Question: Top client spending and pipeline assumptions - Management noted stability in top clients, with expectations for sequential growth and a strong pipeline for Q3 and Q4 [53][58]

Core Insights - Rackspace Technology has been awarded the 2025 Geography and Global AWS Partner Award, highlighting its role in driving innovation and building solutions on Amazon Web Services (AWS) [1] - The company was recognized as the Collaboration Partner of the Year for its partnership with MontyCloud, achieving significant improvements in deployment cycles and operational efficiencies [2][4] Company Achievements - Rackspace Technology and MontyCloud's joint solution resulted in 60% faster deployment cycles and a 45% improvement in operational efficiencies [2][8] - The company was also a finalist in two additional AWS award categories: Data and Analytics Consulting Partner of the Year and Public Sector Solution Provider Program Partner of the Year [6] Customer Success - A San Francisco-based digital marketing company partnered with Rackspace and MontyCloud to address scaling and security challenges, leveraging MontyCloud's DAY2 platform and AWS Landing Zone Accelerator [5] - The collaboration provided a secure and scalable foundation for the customer, positioning them for long-term growth and innovation [5] Industry Context - The AWS Partner Network (APN) is a global program that supports partners in innovating and accelerating their cloud journey, emphasizing the importance of collaboration and specialization among AWS partners [3][6] - Rackspace Technology's focus on customer success through partnerships and innovative cloud solutions is underscored by its recognition from AWS [4]