Endava(US:DAVA)2020-02-14 19:24Financial Data and Key Metrics Changes - Endava reported revenue of £85.9 million for Q2 FY 2020, a growth of 19.6% year-on-year from £71.8 million in the same period last year [8][27] - Adjusted profit before tax for the quarter was £20.5 million, a 50.8% increase year-on-year from £13.6 million [29] - Adjusted profit before tax margin improved to 23.8% from 18.9% in the same period last year [29][30] Business Line Data and Key Metrics Changes - Revenue from payments and financial services grew 20.4%, accounting for 53% of total revenue [35] - Revenue from TMT (Technology, Media, and Telecommunications) grew 60%, accounting for 24% of revenue [36] - Revenue from other sectors grew 36%, now accounting for 23% of revenue [36] Market Data and Key Metrics Changes - North America accounted for 29% of revenue, up from 27% year-on-year, with revenue growth of 24.9% [34][35] - Europe accounted for 23% of revenue, down from 28% year-on-year, with flat revenue growth [34][35] - The UK maintained its share at 45% of revenue, with growth of 21.3% [34][35] Company Strategy and Development Direction - The company is focusing on expanding its presence in the retail and CPG (Consumer Packaged Goods) sectors, leveraging data-driven insights and immersive technologies [11][15] - The acquisition of Exozet is aimed at accelerating European expansion and enhancing capabilities in digital transformation [21][22] - The company is looking for tuck-in acquisitions to strengthen its geographic presence, particularly in Europe and the USA [65] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline for the upcoming year, indicating a similar picture to the previous year [42] - The company anticipates a reduction in adjusted gross margin due to increased employee costs and fewer working days in Q3 [44][46] - Management remains optimistic about growth opportunities, particularly in sectors where clients are continuing to invest [70][71] Other Important Information - The company ended the quarter with 6,267 employees, a 16.3% increase from the previous year [24] - Adjusted free cash flow was £8 million, down from £9.2 million in the same period last year, but underlying adjusted free cash flow was £18.7 million [37][38] - The company expects revenues for Q3 FY 2020 to be in the range of £87.5 million to £88 million, representing constant currency growth of 26% to 27% [39] Q&A Session Summary Question: Thoughts on the pipeline for the upcoming year - Management indicated that the pipeline metrics look similar to the previous year, with good clarity on client budgets [42] Question: Factors affecting margins in the second half of the year - Management noted that the adjusted gross margin would decrease due to employee pay adjustments and fewer working days [44][46] Question: Financial profiles of M&A targets - Management provided details on the financial profiles of Intuitus and Exozet, indicating growth rates and profitability [48][49] Question: Performance in Europe - Management acknowledged slower growth in Europe due to less investment but plans to ramp up sales efforts [51][52] Question: Exposure to recent M&A activity in verticals - Management confirmed that recent M&A activity in the payments space has generally opened up wider opportunities for the company [56] Question: Operational headcount growth versus revenue growth - Management explained that the average headcount growth was 12.9%, and revenue per head has increased, indicating a positive pricing environment [62] Question: Expected inorganic contribution for the rest of the year - Management indicated that around 2% of the increased constant currency growth would come from Exozet [64] Question: Long-term organic growth expectations - Management reiterated a growth expectation of over 20% constant currency year-on-year [73]