Endava Announces First Quarter Fiscal Year 2021 Results

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, 2020, the first quarter of its 2021 fiscal year ("Q1 FY2021").

"Endava delivered another strong quarter with revenue for Q1 FY2021 of £95.1 million, an increase of 15.5% Year on Year on a reported basis, and our pro-forma constant currency growth rate reflecting the sale of the Worldpay Captive was 20.1% Year on Year. The demand environment remains solid in all of our geographies and verticals," said John Cotterell, Endava's CEO.

FIRST QUARTER FISCAL YEAR 2021 FINANCIAL HIGHLIGHTS:

  • Revenue for Q1 FY2021 was £95.1 million, an increase of 15.5% compared to £82.4 million in the same period in the prior year.
  • Revenue growth rate at constant currency (a non-IFRS measure) was 16.9% for Q1 FY2021 compared to 21.5% in the same period in the prior year.
  • Profit before tax for Q1 FY2021 was £8.7 million compared to profit before tax of £17.5 million in the same period in the prior year.
  • Adjusted profit before tax (a non-IFRS measure) for Q1 FY2021 was £18.2 million, compared to £16.9 million in the same period in the prior year, or 19.2% of revenue, compared to 20.5% of revenue in the same period in the prior year.
  • Profit for the period was £6.7 million in Q1 FY2021, resulting in a diluted EPS of £0.12, compared to profit for the period of £14.5 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 £14.7 million in Q1 FY2021, resulting in adjusted diluted EPS (a non-IFRS measure) of £0.26 compared to adjusted profit for the period of £13.6 million and adjusted diluted EPS of £0.24 in the same period in the prior year.

CASH FLOW:

  • Net cash from operating activities was £21.5 million in Q1 FY2021 compared to £15.4 million in the same period in the prior year.
  • Adjusted free cash flow (a non-IFRS measure) was £21.2 million in Q1 FY2021 compared to £13.5 million in the same period in the prior year.
  • At September 30, 2020, Endava had cash and cash equivalents of £70.0 million, compared to £101.3 million at June 30, 2020.

OTHER METRICS FOR THE QUARTER ENDED SEPTEMBER 30, 2020:

  • Headcount (including directors) reached 7,199 at September 30, 2020, with 6,204 average operational employees in Q1 FY2021, compared to a headcount of 5,904 at September 30, 2019 and 5,339 average operational employees in the same quarter of the prior year.
  • Number of clients with over £1 million in revenue on a rolling twelve months basis was 66 at September 30, 2020, compared to 62 at September 30, 2019.
  • Top 10 clients accounted for 39% of revenue in Q1 FY2021, compared to 41% at September 30, 2019.
  • By geographic region, 29% of revenue was generated in North America, 25% was generated in Europe, 43% was generated in the United Kingdom and 3% was generated in the rest of the world in Q1 FY2021. This compares to 27% in North America, 26% in Europe, 45% in the United Kingdom and 2% in the rest of the world in the same period in the prior year.
  • By industry vertical, 50% of revenue was generated from Payments and Financial Services, 28% from TMT and 22% from Other. This compares to 53% from Payments and Financial Services, 25% from TMT and 22% from Other in the same period in the prior year.

OUTLOOK:

At this time, the general economic environment remains fluid and it continues to be challenging to anticipate the ultimate full scope and duration of the impact of the COVID-19 pandemic. Endava is providing guidance for the second quarter of its 2021 fiscal year and its full 2021 fiscal year based upon what it currently sees in its markets.

Second Quarter Fiscal Year 2021:

Endava expects revenues will be in the range £102.0 m to £104.0 m, representing constant currency revenue growth of between 17.5% and 18.0%. Endava expects adjusted diluted EPS to be in the range of £0.25 to £0.26 per share.

The constant currency growth figure above excludes the Worldpay Captive, which Endava sold in August 2019, and, starting in the second quarter of fiscal 2021, will not be included in quarterly comparative financial metrics. Endava does not intend to refer to Worldpay Captive in future quarterly guidance.

Full Fiscal Year 2021:

Endava expects revenues will be in the range £419.0m to £421.0m, representing constant currency growth of between 20.0% and 20.5%. Endava expects adjusted diluted EPS to be in the range of £1.04 to £1.08 per share.

The constant currency growth figure now quoted for the full fiscal year 2021 guidance will still include the proforma adjustment for the Worldpay Captive, as it remains in the full year comparative.

This above guidance for Q2 Fiscal Year 2021 and the Full Fiscal Year 2021 assumes the exchange rates at the end of October (when the exchange rate was 1 British Pound to 1.29 US Dollar and 1.11 Euro).

Endava is not able, at this time, to provide an outlook for IFRS diluted EPS for Q2 FY2021 or FY2021 because of the unreasonable effort of estimating on a forward-looking basis certain items that are excluded from adjusted diluted EPS, including, for example, share-based compensation expense, amortisation of acquired intangible assets and foreign currency exchange (gains)/losses, the effect of which may be significant. Endava is also not able, at this time, to reconcile to an outlook for revenue growth not at constant currency because of the unreasonable effort of estimating foreign currency exchange gains/losses, the effect of which may be significant, on a forward-looking basis.

The guidance provided above is forward-looking in nature. Actual results may differ materially. See the cautionary note regarding “Forward-Looking Statements” below.

CONFERENCE CALL DETAILS:

The Company will host a conference call at 8:00 am EST today, November 12, 2020, to review its Q1 FY2021 results. To participate in Endava’s Q1 FY2021 earnings conference call, please dial in at least five minutes prior to the scheduled start time (866) 324-3683 or (509) 844-0959 for international participants, Conference ID 3084871.

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 Friday, November 27, 2020.

ABOUT ENDAVA PLC:

Endava is a leading next-generation technology services provider and helps accelerate disruption by delivering rapid evolution to enterprises. Using distributed enterprise agile at scale, Endava collaborates with its clients, seamlessly integrating with their teams, catalysing ideation and delivering robust solutions. Endava helps its clients become digital, experience-driven businesses by assisting them in their journey from idea generation to development and deployment of products, platforms and solutions. It services clients in the following industries: Payments and Financial Services, TMT and "Other," which includes Consumer Products, Retail, Mobility and Healthcare. Endava had 7,199 employees (including directors) as of September 30, 2020 located in offices in North America and Western Europe and delivery centres in Romania, Moldova, Bulgaria, Serbia, North Macedonia, Slovenia, Bosnia & Herzegovina, Argentina, Uruguay, Venezuela, and Colombia.

NON-IFRS FINANCIAL INFORMATION:

To supplement Endava’s Consolidated Statements of Comprehensive Income, Consolidated Balance Sheets and Consolidated Statements of Cash Flow presented in accordance with IFRS, the Company uses non-IFRS measures of certain components of financial performance. These measures include: revenue growth rate at constant currency, revenue growth at constant currency adjusted for the sale of Endava Technology SRL, also referred to as “the Worldpay Captive” to Worldpay on August 31, 2019, adjusted profit before tax, adjusted profit for the period, adjusted diluted EPS and adjusted free cash flow.

Revenue 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 rates in effect for the fiscal quarter ended September 30, 2019 were used to convert revenue for the fiscal quarter ended September 30, 2020 and the revenue for the comparable prior period.

Revenue growth at constant currency adjusted for the sale of the Worldpay Captive is revenue growth at constant currency adjusted to exclude the impact of the sale of the Worldpay Captive.

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 and losses, and net gain on disposal of subsidiary. Share-based compensation expense, amortisation of acquired intangible assets and unrealized foreign currency gains are non-cash expenses. Adjusted PBT margin is Adjusted PBT as a percentage of total revenue.

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 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.

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 2021 and the full fiscal year 2021 and the challenges presented by the ongoing COVID-19 pandemic and the associated global economic uncertainty. 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 COVID-19 pandemic and the precautions taken in response to the pandemic or if general economic conditions in Europe, the United States or the global economy worsen; Endava’s ability to manage its rapid growth or achieve anticipated growth; 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 favourable pricing and utilisation 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 remediate the identified material weaknesses and 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 our Annual Report on Form 20-F filed with the Securities and Exchange Commission (“SEC”) on September 15, 2020. 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

2020

2019

£’000

£’000

REVENUE

95,125

82,352

Cost of sales

Direct cost of sales

(57,476

)

(48,764

)

Allocated cost of sales

(4,732

)

(3,921

)

Total cost of sales

(62,208

)

(52,685

)

GROSS PROFIT

32,917

29,667

Selling, general and administrative expenses

(21,267

)

(17,340

)

OPERATING PROFIT

11,650

12,327

Net finance (expense) / income

(2,925

)

2,928

Gain on sale of subsidiary

2,215

PROFIT BEFORE TAX

8,725

17,470

Tax on profit on ordinary activities

(2,017

)

(2,958

)

PROFIT FOR THE PERIOD

6,708

14,512

OTHER COMPREHENSIVE INCOME

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translating foreign operations

(847

)

(1,925

)

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT

5,861

12,587

EARNINGS PER SHARE (EPS):

Weighted average number of shares outstanding - Basic

54,494,227

52,556,332

Weighted average number of shares outstanding - Diluted

56,639,638

55,422,182

Basic EPS (£)

0.12

0.28

Diluted EPS (£)

0.12

0.26

CONDENSED CONSOLIDATED BALANCE SHEETS

 

September 30, 2020

June 30, 2020

September 30, 2019

£’000

£’000

£’000
(Restated) (1)

ASSETS - NON-CURRENT

Goodwill

104,780

56,885

36,251

Intangible assets

36,953

38,751

29,063

Property, plant and equipment

12,157

12,747

10,828

Lease right-of-use assets

49,020

51,134

37,382

Financial assets

772

639

1,066

Deferred tax assets

15,797

13,340

9,841

TOTAL

219,479

173,496

124,431

ASSETS - CURRENT

Trade and other receivables

92,743

82,614

67,901

Corporation tax receivable

2,613

2,922

793

Financial assets

584

584

617

Cash and cash equivalents

70,039

101,327

83,628

TOTAL

165,979

187,447

152,939

TOTAL ASSETS

385,458

360,943

277,370

LIABILITIES - CURRENT

Lease liabilities

11,102

11,132

8,564

Trade and other payables

66,078

58,599

48,095

Corporation tax payable

2,885

1,449

4,970

Contingent consideration

1,392

1,442

1,285

Deferred consideration

3,783

3,764

TOTAL

85,240

76,386

62,914

LIABILITIES - NON CURRENT

Lease liabilities

40,563

42,233

29,603

Deferred tax liabilities

5,691

5,861

1,950

Deferred consideration

5,079

Other liabilities

133

136

118

TOTAL

51,466

48,230

31,671

EQUITY

Share capital

1,099

1,099

1,089

Share premium

229

221

137

Merger relief reserve

25,527

25,527

21,573

Retained earnings

227,398

214,638

165,314

Other reserves

(4,664

)

(3,817

)

(3,502

)

Investment in own shares

(837

)

(1,341

)

(1,826

)

TOTAL

248,752

236,327

182,785

TOTAL LIABILITIES AND EQUITY

385,458

360,943

277,370

1) The restatement refers to a reclassification of £17,143,000 from share premium to merger relief reserve.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended
September 30

2020

2019

£’000

£’000

OPERATING ACTIVITIES

Profit for the period

6,708

14,512

Income tax charge

2,017

2,958

Non-cash adjustments

12,417

1,956

Tax paid

152

(832

)

Net changes in working capital

176

(3,185

)

Net cash from operating activities

21,470

15,409

INVESTING ACTIVITIES

Purchase of non-current assets (tangible and intangible)

(641

)

(2,506

)

Proceeds from disposal of non-current assets

65

13

Acquisition of business / subsidiaries (net of cash acquired)

(50,790

)

(1,523

)

Proceeds from sale of subsidiary net of cash disposed of

2,578

Cash and cash equivalents acquired with subsidiaries

1,603

Interest received

27

199

Net cash used in investing activities

(49,736

)

(1,239

)

FINANCING ACTIVITIES

Proceeds from sublease

157

154

Repayment of borrowings

(9

)

Repayment of lease liabilities

(2,954

)

(2,156

)

Interest paid

(211

)

(166

)

Grant received

309

564

Issue of shares

8

9

Net cash from financing activities

(2,691

)

(1,604

)

Net change in cash and cash equivalents

(30,957

)

12,566

Cash and cash equivalents at the beginning of the period

101,327

70,172

Exchange differences on cash and cash equivalents

(331

)

890

Cash and cash equivalents at the end of the period

70,039

83,628

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

2020

2019

REVENUE GROWTH RATE AS REPORTED UNDER IFRS

15.5

%

24.0

%

Foreign exchange rates impact

1.4

%

(2.5

%)

REVENUE GROWTH RATE AT CONSTANT CURRENCY INCLUDING WORLDPAY CAPTIVE

16.9

%

21.5

%

Impact of Worldpay Captive

3.2

%

0.4

%

PRO-FORMA REVENUE GROWTH RATE AT CONSTANT CURRENCY ADJUSTED FOR THE SALE OF THE WORLDPAY CAPTIVE

20.1

%

21.9

%

RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX AND ADJUSTED PROFIT FOR THE PERIOD:

Three Months Ended
September 30

2020

2019

£’000

£’000

PROFIT BEFORE TAX

8,725

17,470

Adjustments:

Share-based compensation expense

5,931

3,323

Amortisation of acquired intangible assets

1,166

896

Foreign currency exchange (gains)/losses, net

2,412

(2,553

)

Net gain on disposal of subsidiary

(2,215

)

Total adjustments

9,509

(549

)

ADJUSTED PROFIT BEFORE TAX

18,234

16,921

PROFIT FOR THE PERIOD

6,708

14,512

Adjustments:

Adjustments to profit before tax

9,509

(549

)

Tax impact of adjustments

(1,550

)

(393

)

ADJUSTED PROFIT FOR THE PERIOD

14,667

13,570

Diluted EPS (£)

0.12

0.26

Adjusted diluted EPS (£)

0.26

0.24

RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW

Three Months Ended
September 30

2020

2019

£’000

£’000

Net cash from operating activities

21,470

15,409

Adjustments:

Grant received

309

564

Net purchases of non-current assets (tangible and intangible)

(576

)

(2,493

)

Adjusted Free cash flow

21,203

13,480

SUPPLEMENTARY INFORMATION

SHARE-BASED COMPENSATION EXPENSE

Three Months Ended
September 30

2020

2019

£’000

£’000

Direct cost of sales

3,498

1,697

Selling, general and administrative expenses

2,433

1,626

Total

5,931

3,323

DEPRECIATION AND AMORTISATION

 

Three Months Ended
September 30

2020

2019

£’000

£’000

Direct cost of sales

3,570

2,751

Selling, general and administrative expenses

1,773

1,376

Total

5,343

4,127

EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT

 

Three Months Ended
September 30

2020

2019

Closing number of total employees (including directors)

7,199

5,904

Average operational employees

6,204

5,339

Top 10 customers %

39

%

41

%

Number of clients with > £1m of revenue (rolling 12 months)

66

62

Geographic split of revenue %

North America

29

%

27

%

Europe

25

%

26

%

UK

43

%

45

%

Rest of World (RoW)

3

%

2

%

Industry vertical split of revenue %

Payments and Financial Services

50

%

53

%

TMT

28

%

25

%

Other

22

%

22

%

Contacts:

INVESTOR CONTACT:
Endava Plc
Laurence Madsen, Investor Relations Manager
Investors@endava.com

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