Q1 FY2024 3.9% Year on Year
Revenue Decrease to £188.4 million 0.6% Revenue
Decrease at Constant Currency Diluted EPS £0.21
compared to £0.55 in the prior year comparative period
Adjusted diluted EPS £0.39 compared to £0.54 in the prior year
comparative period
Endava plc (NYSE: DAVA) (“Endava” or the “Company”), a global
provider of digital transformation, agile development and
intelligent automation services, today announced results for the
three months ended September 30, 2023, the first quarter of its
2024 fiscal year ("Q1 FY2024").
“Delays in client decision making impacted our top line and led
to a revenue decrease of 0.6% in constant currency in Q1 FY2024.
Whilst we recognize that the world has become more unstable over
the past two months, we are seeing signs of improvement in demand
and continue to see sizable new business opportunities entering and
progressing through our funnel, as well as new assignments
commencing and scaling, which we expect to impact our revenue in
the second half of fiscal year 2024,” said John Cotterell, Endava's
CEO.
FIRST QUARTER FISCAL YEAR 2024 FINANCIAL HIGHLIGHTS:
- Revenue for Q1 FY2024 was £188.4 million, a decrease of 3.9%
compared to £196.2 million in the same period in the prior
year.
- Revenue decrease at constant currency (a non-IFRS measure)* was
0.6% for Q1 FY2024, compared to a growth rate of 25.9% in the same
period in the prior year.
- Profit before tax for Q1 FY2024 was £17.3 million, compared to
£38.6 million in the same period in the prior year.
- Adjusted profit before tax (a non-IFRS measure)* for Q1 FY2024
was £29.8 million, or 15.8% of revenue, compared to £39.5 million,
or 20.1% of revenue, in the same period in the prior year.
- Profit for the period was £12.4 million, resulting in a diluted
earnings per share ("EPS") of £0.21, compared to profit of £31.7
million and diluted EPS of £0.55 in the same period in the prior
year.
- Adjusted profit for the period (a non-IFRS measure)* was £22.9
million, resulting in adjusted diluted EPS (a non-IFRS measure)* of
£0.39, compared to adjusted profit for the period of £31.3 million
and adjusted diluted EPS of £0.54 in the same period in the prior
year.
CASH FLOW:
- Net cash from operating activities was £16.6 million in Q1
FY2024, compared to £25.2 million in the same period in the prior
year.
- Adjusted free cash flow (a non-IFRS measure)* was £16.0 million
in Q1 FY2024, compared to £21.8 million in the same period in the
prior year.
- At September 30, 2023, Endava had cash and cash equivalents of
£168.2 million, compared to £164.7 million at June 30, 2023.
* Definitions of the non-IFRS measures used by the Company and a
reconciliation of such measures to the related IFRS financial
measure can be found under the sections below titled “Non-IFRS
Financial Information” and “Reconciliation of IFRS Financial
Measures to Non-IFRS Financial Measures.”
OTHER METRICS FOR THE QUARTER ENDED SEPTEMBER 30,
2023:
- Headcount totaled 11,761 at September 30, 2023, with an average
of 10,751 operational employees in Q1 FY2024, compared to a
headcount of 12,065 at September 30, 2022 and an average of 10,956
operational employees in Q1 FY2023.
- Number of clients with over £1 million in revenue on a rolling
twelve-month basis was 145 at September 30, 2023, compared to 140
clients at September 30, 2022.
- Top 10 clients accounted for 35% of revenue in Q1 FY2024,
compared to 33% in the same period in the prior year.
- By geographic region, 30% of revenue was generated in North
America, 25% was generated in Europe, 35% was generated in the
United Kingdom and 10% was generated in the rest of the world in Q1
FY2024. This compares to 35% in North America, 22% in Europe, 40%
in the United Kingdom and 3% in the rest of the world in the same
period in the prior year.
- Starting in Q1 FY2024, we have updated the breakdown of
industry verticals to provide additional granularity. By industry
vertical, 27% of revenue was generated from Payments, 14% from
Banking and Capital Markets (BCM), 8% from Insurance, 23% from
Technology, Media and Telecommunications (TMT), 11% from Mobility,
and 17% from Other in Q1 FY2024. This compares to 30% from
Payments, 16% from BCM, 6% from Insurance, 23% from TMT, 10% from
Mobility, and 15% from Other in the same period in the prior
year.
OUTLOOK:
Second Quarter Fiscal Year 2024:
Endava expects revenues will be in the range of £184.0 million
to £185.0 million, representing a constant currency revenue
decrease between 8.5% and 8.0%. Endava expects adjusted diluted EPS
to be in the range of £0.28 to £0.29 per share.
Full Fiscal Year 2024:
Endava expects revenues will be in the range of £791.0 million
to £805.0 million, representing constant currency growth between
1.0% and 2.5%. Endava expects adjusted diluted EPS to be in the
range of £1.59 to £1.66 per share.
This above guidance for the second quarter and full fiscal year
2024 assumes the exchange rates on October 31, 2023 (when the
exchange rate was 1 British Pound to 1.21 US Dollar and 1.15
Euro).
Endava is not able, at this time, to reconcile its expectations
for the second quarter and full fiscal year 2024 for revenue
decrease/growth rate at constant currency or adjusted diluted EPS,
to their most directly comparable IFRS measures as a result of the
uncertainty regarding, and the potential variability of,
reconciling items such as share-based compensation expense,
amortisation of acquired intangible assets, foreign currency
exchange (gains)/losses, restructuring costs and fair value
movement of contingent consideration, as applicable. Accordingly,
reconciliation is not available without unreasonable effort,
although it is important to note that these factors could be
material to Endava's results computed in accordance with IFRS.
The guidance provided above is forward-looking in nature. Actual
results may differ materially. See “Forward-Looking Statements”
below.
CONFERENCE CALL DETAILS:
The Company will host a conference call at 8:00 am ET today,
November 15, 2023, to review its Q1 FY2024 results. To participate
in Endava’s Q1 FY2024 earnings conference call, please dial in at
least five minutes prior to the scheduled start time (844) 481-2736
or (412) 317-0665 for international participants, Conference ID:
Endava Call.
Investors may listen to the call on Endava’s Investor Relations
website at http://investors.Endava.com. The webcast will be
recorded and available for replay until Wednesday, December 13,
2023.
ABOUT ENDAVA PLC:
Endava is reimagining the relationship between people and
technology. By leveraging next-generation technologies, its agile
and multi-disciplinary teams provide a combination of product &
technology strategies, intelligent experiences, and world class
engineering to help clients become digital, experience-driven
businesses by assisting them in their journey from idea generation
to development and deployment of products, platforms and solutions.
Endava collaborates with its clients, seamlessly integrating with
their teams, catalysing ideation and delivering robust
solutions.
Endava services clients in Payments, Banking and Capital
Markets, Insurance, TMT, Consumer Products, Retail, Mobility and
Healthcare. As of September 30, 2023, 11,761 Endavans provided
services from our locations in European Union countries (Austria,
Bulgaria, Croatia, Denmark, Germany, Ireland, the Netherlands,
Poland, Romania, Slovenia and Sweden), non-European Union countries
(Bosnia & Herzegovina, Moldova, North Macedonia, Serbia,
Switzerland and the United Kingdom), Latin America (Argentina,
Colombia, Mexico and Uruguay), Asia-Pacific (Australia, Malaysia,
Singapore and Vietnam), North America (Canada and the United
States), and the Middle East (United Arab Emirates).
NON-IFRS FINANCIAL INFORMATION:
To supplement Endava’s Condensed Consolidated Statements of
Comprehensive Income, Condensed Consolidated Balance Sheets and
Condensed Consolidated Statements of Cash Flows presented in
accordance with IFRS, the Company uses non-IFRS measures of certain
components of financial performance in the press release. These
measures include: revenue growth rate at constant currency,
adjusted profit before tax, adjusted profit for the period,
adjusted diluted EPS and adjusted free cash flow.
Revenue decrease/growth rate at constant currency is calculated
by translating revenue from entities reporting in foreign
currencies into British Pounds using the comparable foreign
currency exchange rates from the prior period. For example, the
average currency rates in effect for the fiscal quarter ended
September 30, 2022 were used to convert revenue for the fiscal
quarter ended September 30, 2023 and the revenue for the comparable
prior period.
Adjusted profit before tax ("Adjusted PBT") is defined as the
Company’s profit before tax adjusted to exclude the impact of
share-based compensation expense, amortisation of acquired
intangible assets, realised and unrealised foreign currency
exchange (gains)/losses, restructuring costs and fair value
movement of contingent consideration, all of which are non-cash
items except for the restructuring costs and realised foreign
currency exchange (gains)/ losses.
Adjusted profit for the period is defined as Adjusted PBT
together with the tax impact of these adjustments.
Adjusted diluted EPS is defined as Adjusted profit for the
period, divided by weighted average number of shares outstanding -
diluted.
Adjusted free cash flow is the Company’s net cash from operating
activities, plus grants received, less purchases of non-current
assets (tangible and intangible).
Management believes these measures help illustrate underlying
trends in the Company's business and uses the measures to establish
budgets and operational goals, communicated internally and
externally, for managing the Company's business and evaluating its
performance. Management also believes the presentation of its
non-IFRS financial measures enhances an investor’s overall
understanding of the Company’s historical financial performance.
The presentation of the Company’s non-IFRS financial measures is
not meant to be considered in isolation or as a substitute for the
Company’s financial results prepared in accordance with IFRS, and
its non-IFRS measures may be different from non-IFRS measures used
by other companies. Investors should review the reconciliation of
the Company’s non-IFRS financial measures to the comparable IFRS
financial measures included below, and not rely on any single
financial measure to evaluate the Company’s business.
FORWARD-LOOKING STATEMENTS:
This press release includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements may be identified by the use
of terms and phrases such as “believe,” “expect,” "outlook," “may,”
“will,” and other similar terms and phrases. Such forward-looking
statements include, but are not limited to, the statements
regarding Endava’s projected financial performance for the second
fiscal quarter of fiscal year 2024 and the full fiscal year 2024;
expectations of increased current and prospective client demand for
Endava offerings in upcoming periods and resulting impact on
revenue; and Endava’s ability to achieve its anticipated growth and
future financial performance, including management's financial
outlook for the second quarter and full fiscal year 2024.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause actual results to
differ materially from the results anticipated by these
forward-looking statements, including, but not limited to: Endava’s
business, results of operations and financial condition may be
negatively impacted by the Russia-Ukraine military conflict and
related sanctions, conflict in the Middle East or if general
economic conditions in Europe, the United States or the global
economy continue to worsen, including increased inflation and
recent and potential future bank failures; Endava’s ability to
retain existing clients and attract new clients, including its
ability to increase revenue from existing clients and diversify its
revenue concentration; Endava’s ability to attract and retain
highly-skilled IT professionals at cost-effective rates; Endava's
ability to penetrate new industry verticals and geographies and
grow its revenue in current industry verticals and geographies;
Endava’s ability to maintain favorable pricing and utilization
rates; Endava’s ability to successfully identify acquisition
targets, consummate acquisitions and successfully integrate
acquired businesses and personnel; the effects of increased
competition as well as innovations by new and existing competitors
in its market; Endava’s ability to adapt to technological change
and innovate solutions for its clients; Endava’s ability to collect
on billed and unbilled receivables from clients; Endava’s ability
to effectively manage its international operations, including
Endava's exposure to foreign currency exchange rate fluctuations;
Endava’s ability to maintain an effective system of disclosure
controls and internal control over financial reporting; and
Endava’s future financial performance, including trends in revenue,
cost of sales, gross profit, selling, general and administrative
expenses, finance income and expense and taxes, as well as other
risks and uncertainties discussed in the “Risk Factors” section of
Endava's Annual Report for the year ended June 30, 2023 filed with
the SEC on September 19, 2023 and in other filings that Endava
makes from time to time with the SEC. In addition, the
forward-looking statements included in this press release represent
Endava’s views and expectations as of the date hereof and are based
on information currently available to Endava. Endava anticipates
that subsequent events and developments may cause its views to
change. Endava specifically disclaims any obligation to update the
forward-looking statements in this press release except as required
by law. These forward-looking statements should not be relied upon
as representing Endava’s views as of any date subsequent to the
date hereof.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
Three Months Ended September
30
2023
2022(1)
£’000
£’000
REVENUE
188,421
196,169
Cost of sales
Direct cost of sales
(127,319)
(122,971)
Allocated cost of sales
(6,632)
(5,783)
Total cost of sales
(133,951)
(128,754)
GROSS PROFIT
54,470
67,415
Selling, general and administrative
expenses
(38,363)
(40,182)
OPERATING PROFIT
16,107
27,233
Net finance income
1,206
11,335
PROFIT BEFORE TAX
17,313
38,568
Tax on profit on ordinary activities
(4,947)
(6,840)
PROFIT FOR THE PERIOD
12,366
31,728
OTHER COMPREHENSIVE INCOME
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translating
foreign operations
4,742
7,980
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT
17,108
39,708
EARNINGS PER SHARE (EPS):
Weighted average number of shares
outstanding - Basic
57,901,454
56,705,849
Weighted average number of shares
outstanding - Diluted
58,438,198
58,128,971
Basic EPS (£)
0.21
0.56
Diluted EPS (£)
0.21
0.55
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2023
June
30, 2023
September 30, 2022
£’000
£’000
£’000
ASSETS - NON-CURRENT
Goodwill
259,092
240,818
152,604
Intangible assets
66,193
66,216
56,354
Property, plant and equipment
24,506
25,940
23,460
Lease right-of-use assets
65,100
65,084
59,490
Deferred tax assets
20,601
20,156
19,611
Financial assets and other receivables
3,177
5,242
2,793
TOTAL
438,669
423,456
314,312
ASSETS - CURRENT
Trade and other receivables
185,750
177,866
190,760
Corporation tax receivable
5,547
4,042
2,940
Financial assets
67
56
346
Cash and cash equivalents
168,191
164,703
182,395
TOTAL
359,555
346,667
376,441
TOTAL ASSETS
798,224
770,123
690,753
LIABILITIES - CURRENT
Lease liabilities
14,698
14,573
12,945
Trade and other payables
83,948
91,159
102,244
Corporation tax payable
8,087
5,940
11,878
Contingent consideration
8,067
7,650
1,340
Deferred consideration
155
1,267
12,401
TOTAL
114,955
120,589
140,808
LIABILITIES - NON CURRENT
Lease liabilities
54,253
54,441
51,321
Deferred tax liabilities
14,236
14,623
10,507
Contingent consideration
9,336
3,809
3,040
Deferred consideration
5,676
4,837
—
Other liabilities
522
516
512
TOTAL
84,023
78,226
65,380
EQUITY
Share capital
1,155
1,155
1,135
Share premium
14,635
14,625
9,173
Merger relief reserve
42,805
42,805
30,003
Retained earnings
546,111
522,926
441,943
Other reserves
(5,434)
(10,176)
2,466
Investment in own shares
(26)
(27)
(155)
TOTAL
599,246
571,308
484,565
TOTAL LIABILITIES AND EQUITY
798,224
770,123
690,753
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended September 30
2023
2022
£’000
£’000
OPERATING ACTIVITIES
Profit for the period
12,366
31,728
Income tax charge
4,947
6,840
Non-cash adjustments
15,800
6,099
Tax paid
(2,348)
(1,610)
Net changes in working capital
(14,178)
(17,821)
Net cash from operating
activities
16,587
25,236
INVESTING ACTIVITIES
Purchase of non-current assets (tangibles
and intangibles)
(807)
(3,443)
Proceeds from disposal of non-current
assets
3
19
Payment for acquisition of subsidiary, net
of cash acquired
(4,182)
—
Other acquisition related settlements
(6,680)
—
Interest received
1,565
365
Net cash used in investing
activities
(10,101)
(3,059)
FINANCING ACTIVITIES
Proceeds from sublease
56
145
Repayment of lease liabilities
(3,920)
(3,099)
Interest and debt financing costs paid
(287)
(217)
Grant received
207
—
Proceeds from exercise of options
11
21
Net cash used in financing
activities
(3,933)
(3,150)
Net change in cash and cash
equivalents
2,553
19,027
Cash and cash equivalents at the
beginning of the period
164,703
162,806
Exchange differences on cash and cash
equivalents
935
562
Cash and cash equivalents at the end of
the period
168,191
182,395
RECONCILIATION OF IFRS FINANCIAL MEASURES TO NON-IFRS
FINANCIAL MEASURES
RECONCILIATION OF REVENUE GROWTH RATE
AS REPORTED UNDER IFRS TO REVENUE GROWTH RATE AT CONSTANT
CURRENCY:
Three Months Ended September 30
2023
2022
REVENUE GROWTH RATE AS REPORTED UNDER
IFRS
(3.9) %
33.0 %
Foreign exchange rates impact
3.3 %
(7.1%)
REVENUE GROWTH RATE AT CONSTANT
CURRENCY
(0.6) %
25.9 %
RECONCILIATION OF ADJUSTED PROFIT
BEFORE TAX AND ADJUSTED PROFIT FOR THE PERIOD:
Three Months Ended September 30
2023
2022
£’000
£’000
PROFIT BEFORE TAX
17,313
38,568
Adjustments:
Share-based compensation expense
9,939
9,544
Amortisation of acquired intangible
assets
3,401
3,019
Foreign currency exchange gains
(2,079)
(7,414)
Fair value movement of contingent
consideration
1,236
(4,249)
Total adjustments
12,497
900
ADJUSTED PROFIT BEFORE TAX
29,810
39,468
PROFIT FOR THE PERIOD
12,366
31,728
Adjustments:
Adjustments to profit before tax
12,497
900
Tax impact of adjustments
(1,939)
(1,330)
ADJUSTED PROFIT FOR THE PERIOD
22,924
31,298
RECONCILIATION OF ADJUSTED DILUTED
EARNINGS PER SHARE:
Three Months Ended September 30
2023
2022
£’000
£’000
DILUTED EARNINGS PER SHARE (£)
0.21
0.55
Adjustments:
Share-based compensation expense
0.17
0.16
Amortisation of acquired intangible
assets
0.06
0.05
Foreign currency exchange gains
(0.04)
(0.13)
Fair value movement of contingent
consideration
0.02
(0.07)
Tax impact of adjustments
(0.03)
(0.02)
Total adjustments
0.18
(0.01)
ADJUSTED DILUTED EARNINGS PER SHARE
(£)
0.39
0.54
RECONCILIATION OF NET CASH FROM
OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW
Three Months Ended September 30
2023
2022
£’000
£’000
Net cash from operating
activities
16,587
25,236
Adjustments:
Grant received
207
—
Purchase of non-current assets (tangible
and intangible)
(804)
(3,424)
Adjusted Free cash flow
15,990
21,812
SUPPLEMENTARY INFORMATION
SHARE-BASED COMPENSATION
EXPENSE
Three Months Ended September 30
2023
2022
£’000
£’000
Direct cost of sales
6,802
5,957
Selling, general and administrative
expenses
3,137
3,587
Total
9,939
9,544
DEPRECIATION AND AMORTISATION
Three Months Ended September 30
2023
2022
£’000
£’000
Direct cost of sales
5,196
4,087
Selling, general and administrative
expenses
4,223
3,618
Total
9,419
7,705
EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE
SPLIT
Three Months Ended September 30
2023
2022
Closing number of total employees
(including directors)
11,761
12,065
Average operational employees
10,751
10,956
Top 10 customers %
35 %
33 %
Number of clients with > £1m of
revenue
(rolling 12 months)
145
140
Geographic split of revenue %
North America
30 %
35 %
Europe
25 %
22 %
UK
35 %
40 %
Rest of World (RoW)
10 %
3 %
Industry vertical split of revenue
%
Payments
27 %
30 %
Banking and Capital Markets
14 %
16 %
Insurance
8 %
6 %
TMT
23 %
23 %
Mobility
11 %
10 %
Other
17 %
15 %
FOOTNOTES
(1) The presentation of the income statement has been changed to
no longer separately disclose the net impairment gains/losses on
financial assets on the face of the Condensed Consolidated
Statements of Comprehensive Income, but include them within
Selling, general and administrative expenses.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231114574284/en/
INVESTOR CONTACT: Endava plc Laurence Madsen, Investor
Relations Manager Investors@endava.com
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