Endava(DAVA)2024-05-23 19:04Financial Data and Key Metrics Changes - The company's revenue totaled £174.4 million for the three months ended March 31, 2024, representing a 14.3% decrease compared to £203.5 million in the same period last year [72] - Adjusted diluted earnings per share was £0.22, down from £0.59 in the same period last year [73] - Adjusted profit before tax margin was 8.9%, compared to 21.3% for the same period last year [103] Business Line Data and Key Metrics Changes - Revenue from payments declined 27% and accounted for 24% of total revenue [75] - Revenue from banking and capital markets declined 24.2%, accounting for 14% of revenue [75] - Revenue from insurance grew 1.7%, accounting for 9% of revenue [75] - Revenue from TMT declined 4%, accounting for 24% of revenue [75] - Revenue from mobility declined 22.4%, accounting for 10% of revenue [75] - Revenue from other grew 3.2%, accounting for 19% of revenue [75] Market Data and Key Metrics Changes - North America accounted for 30% of revenue, Europe for 28%, the UK for 35%, and the rest of the world for 7% [74] - Revenue from North America declined 19.4% [74] - Revenue from Europe grew 0.9%, while the UK declined 22.3% [105] Company Strategy and Development Direction - The company is focusing on diversifying its geographic and industry footprint, particularly expanding in LATAM and Asia PAC [13] - The acquisition of GalaxE is expected to enhance capabilities in the US healthcare sector, which is seen as a significant growth area [63] - The company aims to leverage patented technology and digital transformation capabilities to drive enterprise modernization [91] Management's Comments on Operating Environment and Future Outlook - Management noted a challenging operating environment with macroeconomic uncertainty affecting client spending priorities [89] - There is significant pent-up demand for technology services, particularly for digital transformation and generative AI [89] - The company expects to see stabilization in revenue as new business begins to offset previous declines [41] Other Important Information - Adjusted free cash flow was £2.2 million, down from £21.2 million in the same period last year [106] - The company ended the quarter with 11,025 employees, a 6.1% decrease from the previous year [100] - The integration of GalaxE is progressing well, with early wins already being realized [110] Q&A Session Summary Question: How is the integration of GalaxE Solutions progressing? - The integration is going very well, with new business already being won together, including a contract for a European telco [110] Question: What are the revenue and EPS implications over the next few quarters? - GalaxE is expected to contribute about £21 million run rate on revenue, but negligible to zero EPS contribution in the current quarter due to integration costs [111] Question: Can you provide insights on client behavior and deal closures? - Client behavior is improving, with a larger backlog of business where discovery work is being done, indicating potential future spending [115] Question: How is the company navigating cost pressures in Central Europe? - The company is not experiencing inflationary impacts in Central Europe and is managing costs effectively [85] Question: What is the outlook for the payments vertical? - The payments vertical is under pressure, but there are signs of improvement with Worldpay as restructuring progresses [119] Question: What is the expected growth for fiscal year 2025? - The company is cautious in guidance due to integration challenges with GalaxE, but expects to provide clearer guidance in September [150]