Endava Announces Second Quarter Fiscal Year 2024 Results
Q2 FY2024
10.6% Year on Year Revenue Decrease to £183.6 million
8.1% Revenue Decrease at Constant Currency
Diluted EPS £0.14 compared to £0.26 in the prior year comparative period
Adjusted diluted EPS £0.30 compared to £0.59 in the prior year comparative period
"Our results for Q2 FY2024 were in line with our prior guidance, with a revenue decrease of 8.1% in constant currency year over year. The uncertain economic environment continues to impact near-term client decision making. We now have numerous projects where discovery work has been done, but clients are hesitating on when to commit to sizeable spend needed to build production-ready systems. This said, we believe we have a very well positioned and strong business and are confident that despite current softness in demand, in the longer term, the opportunity for us is very attractive. Additionally, I am thrilled to announce today our acquisition of GalaxE Solutions, a leading provider of digital transformation and product development services to blue chip US companies mainly in Healthcare with delivery from India,” said
SECOND QUARTER FISCAL YEAR 2024 FINANCIAL HIGHLIGHTS:
- Revenue for Q2 FY2024 was £183.6 million, a decrease of 10.6% compared to £205.2 million in the same period in the prior year.
- Revenue decrease at constant currency(a non-IFRS measure)* was 8.1% for Q2 FY2024, compared to growth of 23.4% in the same period in the prior year.
- Profit before tax for Q2 FY2024 was £10.6 million, compared to £20.3 million in the same period in the prior year.
- Adjusted profit before tax (a non-IFRS measure)* for Q2 FY2024 was £22.7 million, or 12.4% of revenue, compared to £43.0 million, or 20.9% of revenue, in the same period in the prior year.
- Profit for the period was £8.3 million, resulting in a diluted earnings per share ("EPS") of £0.14, compared to profit of £15.0 million and diluted EPS of £0.26 in the same period in the prior year.
- Adjusted profit for the period (a non-IFRS measure)* was £17.5 million, resulting in adjusted diluted EPS (a non-IFRS measure)* of £0.30, compared to adjusted profit for the period of £34.3 million and adjusted diluted EPS of £0.59 in the same period in the prior year.
CASH FLOW:
- Net cash from operating activities was £35.0 million in Q2 FY2024, compared to £40.9 million in the same period in the prior year.
- Adjusted free cash flow (a non-IFRS measure)* was £33.6 million in Q2 FY2024, compared to £37.0 million in the same period in the prior year.
-
At
December 31, 2023 ,Endava had cash and cash equivalents of £198.6 million, compared to £164.7 million atJune 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
-
Headcount totaled 11,539 at
December 31, 2023 , with an average of 10,461 operational employees in Q2 FY2024, compared to a headcount of 12,183 atDecember 31, 2022 and an average of 11,107 operational employees in Q2 FY2023. -
Number of clients with over £1 million in revenue on a rolling twelve-month basis was 150 at
December 31, 2023 , compared to 156 clients atDecember 31, 2022 . - Top 10 clients accounted for 34% of revenue in Q2 FY2024, compared to 31% in the same period in the prior year.
-
By geographic region, 31% of revenue was generated in
North America , 26% was generated inEurope , 34% was generated in theUnited Kingdom and 9% was generated in the rest of the world in Q2 FY2024. This compares to 33% inNorth America , 23% inEurope , 39% in theUnited Kingdom and 5% in the Rest of the World in the same period in the prior year. - By industry vertical, 26% 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 18% from Other in Q2 FY2024. This compares to 29% from Payments, 17% from BCM, 7% from Insurance, 22% from TMT, 10% from Mobility, and 15% from Other in the same period in the prior year.
OUTLOOK:
Third Quarter Fiscal Year 2024:
Full Fiscal Year 2024:
This above guidance for the third quarter and full fiscal year 2024 assumes the exchange rates on
The guidance provided above is forward-looking in nature. Actual results may differ materially. See “Forward-Looking Statements” below.
RECENT BUSINESS HIGHLIGHTS:
On
On
CONFERENCE CALL DETAILS:
The Company will host a conference call at
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
ABOUT
Technology is our how. And people are our why. By combining world-class engineering, industry expertise and a people-centric mindset, we consult and partner with our customers to create technological solutions that drive innovation and transform businesses. From ideation to production, we support our customers with tailor-made solutions across various industries and all around the world.
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 this press release. These measures include revenue (decrease)/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
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 less the tax charge for the period adjusted for the tax impact of the adjustments to PBT.
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 net 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 the uncertain economic environment and Endava’s expectations of current and prospective client demand for
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
||||||||
|
Six Months Ended
|
Three Months Ended
|
||||||
|
2023 |
2022(1) |
2023 |
2022(1) |
||||
|
£’000 |
£’000 |
£’000 |
£’000 |
||||
REVENUE |
371,973 |
|
401,410 |
|
183,552 |
|
205,241 |
|
Cost of sales |
|
|
|
|
||||
Direct cost of sales |
(259,412 |
) |
(249,253 |
) |
(132,093 |
) |
(126,282 |
) |
Allocated cost of sales |
(13,218 |
) |
(12,243 |
) |
(6,586 |
) |
(6,460 |
) |
Total cost of sales |
(272,630 |
) |
(261,496 |
) |
(138,679 |
) |
(132,742 |
) |
GROSS PROFIT |
99,343 |
|
139,914 |
|
44,873 |
|
72,499 |
|
Selling, general and administrative expenses |
(78,618 |
) |
(79,886 |
) |
(40,255 |
) |
(39,704 |
) |
OPERATING PROFIT |
20,725 |
|
60,028 |
|
4,618 |
|
32,795 |
|
Net finance income / (expense) |
7,193 |
|
(1,189 |
) |
5,987 |
|
(12,524 |
) |
PROFIT BEFORE TAX |
27,918 |
|
58,839 |
|
10,605 |
|
20,271 |
|
Tax on profit on ordinary activities |
(7,205 |
) |
(12,092 |
) |
(2,258 |
) |
(5,252 |
) |
PROFIT FOR THE PERIOD |
20,713 |
|
46,747 |
|
8,347 |
|
15,019 |
|
OTHER COMPREHENSIVE INCOME |
|
|
|
|
||||
Items that may be reclassified subsequently to profit or loss: |
|
|
|
|
||||
Exchange differences on translating foreign operations |
1,869 |
|
823 |
|
(2,873 |
) |
(7,157 |
) |
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT |
22,582 |
|
47,570 |
|
5,474 |
|
7,862 |
|
|
|
|
|
|
||||
EARNINGS PER SHARE (EPS): |
|
|
|
|
||||
Weighted average number of shares outstanding - Basic |
58,101,072 |
|
56,962,777 |
|
58,300,691 |
|
57,219,704 |
|
Weighted average number of shares outstanding - Diluted |
58,367,296 |
|
57,923,559 |
|
58,602,535 |
|
57,959,580 |
|
Basic EPS (£) |
0.36 |
|
0.82 |
|
0.14 |
|
0.26 |
|
Diluted EPS (£) |
0.35 |
|
0.81 |
|
0.14 |
|
0.26 |
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||
|
|
|
|
|||
|
£’000 |
£’000 |
£’000 |
|||
ASSETS - NON-CURRENT |
|
|
|
|||
|
255,749 |
|
240,818 |
|
189,684 |
|
Intangible assets |
61,561 |
|
66,216 |
|
55,114 |
|
Property, plant and equipment |
23,181 |
|
25,940 |
|
24,768 |
|
Lease right-of-use assets |
54,949 |
|
65,084 |
|
62,034 |
|
Deferred tax assets |
21,314 |
|
20,156 |
|
13,491 |
|
Financial assets and other receivables |
6,386 |
|
5,242 |
|
1,393 |
|
TOTAL |
423,140 |
|
423,456 |
|
346,484 |
|
ASSETS - CURRENT |
|
|
|
|||
Trade and other receivables |
170,318 |
|
177,866 |
|
173,750 |
|
Corporation tax receivable |
2,327 |
|
4,042 |
|
2,343 |
|
Financial assets |
186 |
|
56 |
|
226 |
|
Cash and cash equivalents |
198,602 |
|
164,703 |
|
185,323 |
|
TOTAL |
371,433 |
|
346,667 |
|
361,642 |
|
TOTAL ASSETS |
794,573 |
|
770,123 |
|
708,126 |
|
LIABILITIES - CURRENT |
|
|
|
|||
Lease liabilities |
13,782 |
|
14,573 |
|
13,768 |
|
Trade and other payables |
84,678 |
|
91,159 |
|
96,481 |
|
Corporation tax payable |
5,103 |
|
5,940 |
|
4,245 |
|
Contingent consideration |
5,335 |
|
7,650 |
|
6,385 |
|
Deferred consideration |
2,499 |
|
1,267 |
|
9,858 |
|
TOTAL |
111,397 |
|
120,589 |
|
130,737 |
|
LIABILITIES - NON CURRENT |
|
|
|
|||
Lease liabilities |
45,645 |
|
54,441 |
|
53,953 |
|
Deferred tax liabilities |
13,730 |
|
14,623 |
|
11,021 |
|
Contingent consideration |
— |
|
3,809 |
|
— |
|
Deferred consideration |
3,280 |
|
4,837 |
|
1,407 |
|
Other liabilities |
543 |
|
516 |
|
545 |
|
TOTAL |
63,198 |
|
78,226 |
|
66,926 |
|
EQUITY |
|
|
|
|||
Share capital |
1,167 |
|
1,155 |
|
1,150 |
|
Share premium |
17,753 |
|
14,625 |
|
21,389 |
|
Merger relief reserve |
48,139 |
|
42,805 |
|
30,003 |
|
Retained earnings |
566,589 |
|
522,926 |
|
462,767 |
|
Other reserves |
(13,644 |
) |
(10,176 |
) |
(4,691 |
) |
Investment in own shares |
(26 |
) |
(27 |
) |
(155 |
) |
TOTAL |
619,978 |
|
571,308 |
|
510,463 |
|
TOTAL LIABILITIES AND EQUITY |
794,573 |
|
770,123 |
|
708,126 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
|
Six Months Ended |
Three Months Ended |
||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
||||
OPERATING ACTIVITIES |
|
|
|
|
||||
Profit for the period |
20,713 |
|
46,747 |
|
8,347 |
|
15,019 |
|
Income tax charge |
7,205 |
|
12,092 |
|
2,258 |
|
5,252 |
|
Non-cash adjustments |
31,833 |
|
24,974 |
|
16,033 |
|
18,875 |
|
Tax paid |
(4,814 |
) |
(10,047 |
) |
(2,466 |
) |
(8,437 |
) |
Net changes in working capital |
(3,314 |
) |
(7,635 |
) |
10,864 |
|
10,186 |
|
Net cash from operating activities |
51,623 |
|
66,131 |
|
35,036 |
|
40,895 |
|
|
|
|
|
|
||||
INVESTING ACTIVITIES |
|
|
|
|
||||
Purchase of non-current assets (tangibles and intangibles) |
(2,200 |
) |
(7,591 |
) |
(1,393 |
) |
(4,148 |
) |
(Loss) / proceeds from disposal of non-current assets |
(27 |
) |
16 |
|
(30 |
) |
(3 |
) |
Payment for acquisition of subsidiary, net of cash acquired |
(6,710 |
) |
(32,397 |
) |
(2,528 |
) |
(32,397 |
) |
Other acquisition-related settlements |
(6,680 |
) |
— |
|
— |
|
— |
|
Interest received |
3,522 |
|
797 |
|
1,957 |
|
432 |
|
Net cash used in investing activities |
(12,095 |
) |
(39,175 |
) |
(1,994 |
) |
(36,116 |
) |
|
|
|
|
|
||||
FINANCING ACTIVITIES |
|
|
|
|
||||
Proceeds from sublease |
87 |
|
237 |
|
31 |
|
92 |
|
Repayment of lease liabilities |
(7,420 |
) |
(6,491 |
) |
(3,500 |
) |
(3,392 |
) |
Interest and debt financing costs paid |
(583 |
) |
(423 |
) |
(296 |
) |
(206 |
) |
Grant received |
230 |
|
220 |
|
23 |
|
220 |
|
Proceeds from exercise of options |
3,129 |
|
2,266 |
|
3,118 |
|
2,245 |
|
Net cash used in financing activities |
(4,557 |
) |
(4,191 |
) |
(624 |
) |
(1,041 |
) |
Net change in cash and cash equivalents |
34,971 |
|
22,765 |
|
32,418 |
|
3,738 |
|
|
|
|
|
|
||||
Cash and cash equivalents at the beginning of the period |
164,703 |
|
162,806 |
|
168,191 |
|
182,395 |
|
Exchange differences on cash and cash equivalents |
(1,072 |
) |
(248 |
) |
(2,007 |
) |
(810 |
) |
Cash and cash equivalents at the end of the period |
198,602 |
|
185,323 |
|
198,602 |
|
185,323 |
|
RECONCILIATION OF IFRS FINANCIAL MEASURES TO NON-IFRS FINANCIAL MEASURES
RECONCILIATION OF REVENUE (DECREASE)/GROWTH RATE AS REPORTED UNDER IFRS TO REVENUE GROWTH RATE AT CONSTANT CURRENCY: |
||||||||
|
Six Months Ended
|
Three Months Ended
|
||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
REVENUE (DECREASE) / GROWTH RATE AS REPORTED UNDER IFRS |
(7.3 |
)% |
31.6 |
% |
(10.6 |
)% |
30.2 |
% |
Foreign exchange rates impact |
2.8 |
% |
(6.9 |
)% |
2.5 |
% |
(6.8 |
)% |
REVENUE (DECREASE) / GROWTH RATE AT CONSTANT CURRENCY |
(4.5 |
)% |
24.6 |
% |
(8.1 |
)% |
23.4 |
% |
RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX AND ADJUSTED PROFIT FOR THE PERIOD: |
||||||||
|
Six Months Ended
|
Three Months Ended
|
||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
||||
|
|
|
|
|
||||
PROFIT BEFORE TAX |
27,918 |
|
58,839 |
|
10,605 |
|
20,271 |
|
Adjustments: |
|
|
|
|
||||
Share-based compensation expense |
23,556 |
|
15,909 |
|
13,617 |
|
6,365 |
|
Amortisation of acquired intangible assets |
7,085 |
|
6,207 |
|
3,684 |
|
3,188 |
|
Foreign currency exchange (gains) / losses, net |
2,685 |
|
7,533 |
|
4,764 |
|
14,947 |
|
Restructuring costs |
— |
|
1,113 |
|
— |
|
1,113 |
|
Fair value movement of contingent consideration |
(8,706 |
) |
(7,143 |
) |
(9,942 |
) |
(2,894 |
) |
Total adjustments |
24,620 |
|
23,619 |
|
12,123 |
|
22,719 |
|
ADJUSTED PROFIT BEFORE TAX |
52,538 |
|
82,458 |
|
22,728 |
|
42,990 |
|
|
|
|
|
|
||||
PROFIT FOR THE PERIOD |
20,713 |
|
46,747 |
|
8,347 |
|
15,019 |
|
Adjustments: |
|
|
|
|
||||
Adjustments to profit before tax |
24,620 |
|
23,619 |
|
12,123 |
|
22,719 |
|
Tax impact of adjustments |
(4,916 |
) |
(4,734 |
) |
(2,977 |
) |
(3,404 |
) |
ADJUSTED PROFIT FOR THE PERIOD |
40,417 |
|
65,632 |
|
17,493 |
|
34,334 |
|
|
|
|
|
|
RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE: |
||||||||
|
Six Months Ended |
Three Months Ended |
||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
||||
|
|
|
|
|
||||
DILUTED EARNINGS PER SHARE (£) |
0.35 |
|
0.81 |
|
0.14 |
|
0.26 |
|
Adjustments: |
|
|
|
|
||||
Share-based compensation expense |
0.40 |
|
0.27 |
|
0.23 |
|
0.11 |
|
Amortisation of acquired intangible assets |
0.12 |
|
0.11 |
|
0.06 |
|
0.06 |
|
Foreign currency exchange (gains) / losses, net |
0.05 |
|
0.13 |
|
0.08 |
|
0.26 |
|
Restructuring costs |
— |
|
0.02 |
|
— |
|
0.02 |
|
Fair value movement of contingent consideration |
(0.15 |
) |
(0.14 |
) |
(0.16 |
) |
(0.06 |
) |
Tax impact of adjustments |
(0.08 |
) |
(0.08 |
) |
(0.05 |
) |
(0.06 |
) |
Total adjustments |
0.34 |
|
0.31 |
|
0.16 |
|
0.33 |
|
ADJUSTED DILUTED EARNINGS PER SHARE (£) |
0.69 |
|
1.12 |
|
0.30 |
|
0.59 |
|
RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW |
||||||||
|
Six Months Ended
|
Three Months Ended
|
||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
||||
|
|
|
|
|
||||
Net cash from operating activities |
51,623 |
|
66,131 |
|
35,036 |
|
40,895 |
|
Adjustments: |
|
|
|
|
||||
Grant received |
230 |
|
220 |
|
23 |
|
220 |
|
Net purchase of non-current assets (tangible and intangible) |
(2,227 |
) |
(7,575 |
) |
(1,423 |
) |
(4,151 |
) |
Adjusted Free cash flow |
49,626 |
|
58,776 |
|
33,636 |
|
36,964 |
|
SUPPLEMENTARY INFORMATION
SHARE-BASED COMPENSATION EXPENSE |
||||
|
Six Months Ended
|
Three Months Ended
|
||
|
2023 |
2022 |
2023 |
2022 |
|
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
Direct cost of sales |
16,318 |
10,297 |
9,516 |
4,340 |
Selling, general and administrative expenses |
7,238 |
5,612 |
4,101 |
2,025 |
Total |
23,556 |
15,909 |
13,617 |
6,365 |
DEPRECIATION AND AMORTISATION
|
Six Months Ended
|
Three Months Ended
|
||
|
2023 |
2022 |
2023 |
2022 |
|
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
Direct cost of sales |
10,049 |
8,626 |
4,853 |
4,539 |
Selling, general and administrative expenses |
8,712 |
7,461 |
4,489 |
3,843 |
Total |
18,761 |
16,087 |
9,342 |
8,382 |
EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT |
||||||||
|
Six Months Ended
|
Three Months Ended
|
||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
||||
Closing number of total employees (including directors) |
11,539 |
|
12,183 |
|
11,539 |
|
12,183 |
|
Average operational employees |
10,606 |
|
11,031 |
|
10,461 |
|
11,107 |
|
|
|
|
|
|
||||
Top 10 customers % |
34 |
% |
32 |
% |
34 |
% |
31 |
% |
Number of clients with > £1m of revenue (rolling 12 months) |
150 |
|
156 |
|
150 |
|
156 |
|
|
|
|
|
|
||||
Geographic split of revenue % |
|
|
|
|
||||
|
31 |
% |
34 |
% |
31 |
% |
33 |
% |
|
25 |
% |
22 |
% |
26 |
% |
23 |
% |
|
35 |
% |
40 |
% |
34 |
% |
39 |
% |
Rest of World (RoW) |
9 |
% |
4 |
% |
9 |
% |
5 |
% |
Industry vertical split of revenue % |
|
|
|
|
||||
Payments |
27 |
% |
30 |
% |
26 |
% |
29 |
% |
Banking and Capital Markets |
14 |
% |
16 |
% |
14 |
% |
17 |
% |
Insurance |
8 |
% |
7 |
% |
8 |
% |
7 |
% |
TMT |
23 |
% |
22 |
% |
23 |
% |
22 |
% |
Mobility |
11 |
% |
10 |
% |
11 |
% |
10 |
% |
Other |
17 |
% |
15 |
% |
18 |
% |
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/20240229039965/en/
INVESTOR CONTACT:
Investors@endava.com
Source: