Q2 FY2023 30.2% Year on Year
Revenue Growth to £205.2 million 23.4% Revenue Growth
at Constant Currency IFRS diluted EPS £0.26 compared
to £0.27 in the prior year comparative period Adjusted
diluted EPS £0.57 compared to £0.46 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 December 31, 2022, the second quarter of its
2023 fiscal year ("Q2 FY2023").
“Endava reported another solid quarter for Q2 FY2023 as demand
for our services across all regions and verticals in which we
operate remained healthy,” said John Cotterell, Endava's CEO. "Even
with the global economic uncertainty, digital transformation
remains a priority for our clients and they value the
transformation services we are delivering. Demand from new and
existing clients continued to drive revenue growth in the quarter,
leading to a revenue increase of 23.4% in constant currency for Q2
FY2023.”
SECOND QUARTER FISCAL YEAR 2023 FINANCIAL HIGHLIGHTS:
- Revenue for Q2 FY2023 was £205.2 million, an increase of 30.2%
compared to £157.7 million in the same period in the prior
year.
- Revenue growth rate at constant currency (a non-IFRS measure)*
was 23.4% for Q2 FY2023, compared to 53.4% in the same period in
the prior year.
- Profit before tax for Q2 FY2023 was £20.3 million, compared to
£19.1 million in the same period in the prior year.
- Adjusted profit before tax (a non-IFRS measure)* for Q2 FY2023
was £41.9 million, compared to £33.0 million in the same period in
the prior year, or 20.4% of revenue, compared to 20.9% of revenue
in the same period in the prior year.
- Profit for the period was £15.0 million in Q2 FY2023, resulting
in a diluted EPS of £0.26, compared to profit of £15.4 million and
diluted EPS of £0.27 in the same period in the prior year.
- Adjusted profit for the period (a non-IFRS measure)* was £33.2
million in Q2 FY2023, resulting in adjusted diluted EPS (a non-IFRS
measure)* of £0.57, compared to adjusted profit for the period of
£26.5 million and adjusted diluted EPS of £0.46 in the same period
in the prior year.
CASH FLOW:
- Net cash from operating activities was £40.9 million in Q2
FY2023, compared to £35.0 million in the same period in the prior
year.
- Adjusted free cash flow (a non-IFRS measure)* was £37.0 million
in Q2 FY2023, compared to £31.2 million in the same period in the
prior year.
- At December 31, 2022, Endava had cash and cash equivalents of
£185.3 million, compared to £162.8 million at June 30, 2022.
* 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 DECEMBER 31,
2022:
- Headcount reached 12,183 at December 31, 2022, with 11,107
average operational employees in Q2 FY2023, compared to a headcount
of 10,391 at December 31, 2021 and 9,167 average operational
employees in the same quarter of the prior year.
- Number of clients with over £1 million in revenue on a rolling
twelve month basis was 156 at December 31, 2022, compared to 107 at
December 31, 2021.
- Top 10 clients accounted for 31% of revenue in Q2 FY2023,
compared to 34% in the same period in the prior year.
- By geographic region, 33% of revenue was generated in North
America, 23% was generated in Europe, 39% was generated in the
United Kingdom and 5% was generated in the rest of the world in Q2
FY2023. This compares to 35% in North America, 21% in Europe, 41%
in the United Kingdom and 3% in the rest of the world in the same
period in the prior year.
- By industry vertical, 53% of revenue was generated from
Payments and Financial Services, 22% from TMT and 25% from Other in
Q2 FY2023. This compares to 51% from Payments and Financial
Services, 25% from TMT and 24% from Other in the same period in the
prior year.
OUTLOOK:
Third Quarter Fiscal Year 2023:
Endava expects revenues will be in the range £201.0 million to
£203.0 million, representing constant currency revenue growth of
between 14.0% and 15.0%. Endava expects adjusted diluted EPS to be
in the range of £0.52 to £0.54 per share.
Full Fiscal Year 2023:
Endava expects revenues will be in the range of £812.0 million
to £817.0 million, representing constant currency growth of between
19.0% and 20.0%. Endava expects adjusted diluted EPS to be in the
range of £2.20 to £2.25 per share.
This above guidance for Q3 Fiscal Year 2023 and the Full Fiscal
Year 2023 assumes the exchange rates at the end of January 2023
(when the exchange rate was 1 British Pound to 1.23 US Dollar and
1.14 Euro).
Endava is not able, at this time, to provide an outlook for IFRS
diluted EPS for Q3 FY2023 or FY2023 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.
RECENT BUSINESS HIGHLIGHTS:
- On February 9, 2023, Endava announced the successful closing of
a £350 million unsecured, multicurrency revolving credit facility.
This facility is for general business purposes, including future
capital investments and development activities. The facility
replaced Endava’s previous unsecured revolving credit facility of
£200 million, which was due to expire on October 12, 2024. It also
provides for uncommitted accordion options for up to an aggregate
of £150 million in additional borrowing and has two renewal options
for one year each.
- On October 6, 2022, Endava announced the acquisition of Lexicon
Digital Pty Ltd and Lexicon Consolidated Holdings Pty Ltd,
headquartered in Melbourne, Australia (“Lexicon”). Lexicon is an
Australian-based technology consulting, design and engineering firm
who partners with clients to build new digital solutions or
accelerate digital transformation programs across enterprise
systems, products and IoT using an agile delivery methodology.
Lexicon’s clients include Australia’s market leaders in the
insurance and wealth management sectors and an array of companies
in other sectors, including entertainment, retail, agribusiness and
automotive. Lexicon has 127 billable staff member in Australia
(with offices in Melbourne and Sydney) and Vietnam (Ho Chi
Minh).
CONFERENCE CALL DETAILS:
The Company will host a conference call at 8:00 am ET today,
February 14, 2023, to review its Q2 FY2023 results. To participate
in Endava’s Q2 FY2023 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 Tuesday, March 14,
2023.
ABOUT ENDAVA PLC:
Endava is reimagining the relationship between people and
technology. By leveraging next-generation technologies, our agile,
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 and Financial Services, TMT,
Consumer Products, Retail, Mobility and Healthcare. As of December
31, 2022, 12,183 Endavans served clients from locations in
Asia-Pacific, Middle East, North America and Western Europe and
delivery locations in Argentina, Bosnia & Herzegovina,
Bulgaria, Colombia, Croatia, Malaysia, Mexico, Moldova, North
Macedonia, Poland, Romania, Serbia, Slovenia, Uruguay and
Vietnam.
NON-IFRS FINANCIAL INFORMATION:
To supplement Endava’s Condensed Consolidated Statements of
Comprehensive Income, Condensed Consolidated Balance Sheets and
Condensed 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, 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 December 31, 2021 were used to
convert revenue for the fiscal quarter ended December 31, 2022 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 and fair value movement of contingent
consideration, all of which are non-cash items. 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.
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 third
fiscal quarter of fiscal year 2023 and the full fiscal year 2023.
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 armed conflict or if
general economic conditions in Europe, the United States or the
global economy continue to worsen, including increased inflation;
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 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 our Annual Report filed with the SEC on
October 31, 2022. 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
Six Months Ended December
31
Three Months Ended December
31
2022
2021
2022
2021
£’000
£’000
£’000
£’000
REVENUE
401,410
305,133
205,241
157,668
Cost of sales
Direct cost of sales
(249,253
)
(189,292
)
(126,282
)
(99,806
)
Allocated cost of sales
(12,243
)
(11,090
)
(6,460
)
(5,800
)
Total cost of sales
(261,496
)
(200,382
)
(132,742
)
(105,606
)
GROSS PROFIT
139,914
104,751
72,499
52,062
Selling, general and administrative
expenses
(76,242
)
(59,624
)
(37,364
)
(31,981
)
Net impairment losses on financial
assets
(3,644
)
(1,812
)
(2,340
)
(651
)
OPERATING PROFIT
60,028
43,315
32,795
19,430
Net Finance income / (expense)
(1,189
)
683
(12,524
)
(354
)
PROFIT BEFORE TAX
58,839
43,998
20,271
19,076
Tax on profit on ordinary activities
(12,092
)
(8,047
)
(5,252
)
(3,670
)
PROFIT FOR THE PERIOD
46,747
35,951
15,019
15,406
OTHER COMPREHENSIVE INCOME
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translating
foreign operations
823
(1,528
)
(7,157
)
(3,577
)
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT
47,570
34,423
7,862
11,829
EARNINGS PER SHARE (EPS):
Weighted average number of shares
outstanding - Basic
56,962,777
55,911,086
57,219,704
56,173,171
Weighted average number of shares
outstanding - Diluted
57,923,559
57,880,029
57,959,580
58,019,316
Basic EPS (£)
0.82
0.64
0.26
0.27
Diluted EPS (£)
0.81
0.62
0.26
0.27
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2022
June
30, 2022
December 31, 2021(1)
£’000
£’000
£’000
ASSETS - NON-CURRENT
Goodwill
189,684
145,916
126,316
Intangible assets
55,114
56,189
57,068
Property, plant and equipment
24,768
21,260
17,273
Lease right-of-use assets
62,034
50,818
51,688
Deferred tax assets
13,491
17,218
22,812
Financial assets
1,393
2,276
189
TOTAL
346,484
293,677
275,346
ASSETS - CURRENT
Trade and other receivables
173,750
162,671
143,840
Corporation tax receivable
2,343
2,309
1,193
Financial assets
226
392
444
Cash and cash equivalents
185,323
162,806
114,176
TOTAL
361,642
328,178
259,653
TOTAL ASSETS
708,126
621,855
534,999
LIABILITIES - CURRENT
Lease liabilities
13,768
11,898
11,960
Trade and other payables
96,481
98,252
93,954
Corporation tax payable
4,245
3,477
384
Contingent consideration
6,385
4,183
5,904
Deferred consideration
9,858
10,604
6,838
TOTAL
130,737
128,414
119,040
LIABILITIES - NON CURRENT
Lease liabilities
53,953
43,999
44,648
Contingent consideration
—
4,331
—
Deferred tax liabilities
11,021
10,826
8,901
Deferred consideration
1,407
1,062
2,831
Other liabilities
545
500
191
TOTAL
66,926
60,718
56,571
EQUITY
Share capital
1,150
1,135
1,130
Share premium
21,389
9,152
4,541
Merger relief reserve
30,003
30,003
30,003
Retained earnings
462,767
398,102
338,996
Other reserves
(4,691
)
(5,514
)
(15,127
)
Investment in own shares
(155
)
(155
)
(155
)
TOTAL
510,463
432,723
359,388
TOTAL LIABILITIES AND EQUITY
708,126
621,855
534,999
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six
Months Ended December 31
Three Months Ended December 31
2022
2021
2022
2021
£’000
£’000
£’000
£’000
OPERATING ACTIVITIES
Profit for the period
46,747
35,951
15,019
15,406
Income tax charge
12,092
8,047
5,252
3,670
Non-cash adjustments
24,974
32,970
18,875
18,228
Tax paid
(10,047
)
(5,701
)
(8,437
)
(3,468
)
Net changes in working capital
(7,635
)
(16,396
)
10,186
1,126
Net cash from operating
activities
66,131
54,871
40,895
34,962
INVESTING ACTIVITIES
Purchase of non-current assets (tangibles
and intangibles)
(7,591
)
(7,398
)
(4,148
)
(3,836
)
Proceeds from disposal of non-current
assets
16
171
(3
)
59
Payment for acquisition of subsidiary, net
of cash acquired
(32,397
)
(611
)
(32,397
)
—
Interest received
797
20
432
11
Net cash used in investing
activities
(39,175
)
(7,818
)
(36,116
)
(3,766
)
FINANCING ACTIVITIES
Proceeds from sublease
237
277
92
142
Repayment of lease liabilities
(6,491
)
(7,123
)
(3,392
)
(3,322
)
Interest paid
(423
)
(475
)
(206
)
(226
)
Grant received
220
43
220
42
Issue of shares
2,266
4,299
2,245
4,299
Net cash (used in)/from financing
activities
(4,191
)
(2,979
)
(1,041
)
935
Net change in cash and cash
equivalents
22,765
44,074
3,738
32,131
Cash and cash equivalents at the
beginning of the period
162,806
69,884
182,395
82,034
Exchange differences on cash and cash
equivalents
(248
)
218
(810
)
11
Cash and cash equivalents at the end of
the period
185,323
114,176
185,323
114,176
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:
Six
Months Ended December 31
Three Months Ended December 31
2022
2021
2022
2021
REVENUE GROWTH RATE AS REPORTED UNDER
IFRS
31.6
%
52.3
%
30.2
%
49.8
%
Foreign exchange rates impact
(6.9
%)
4.6
%
(6.8
%)
3.6
%
REVENUE GROWTH RATE AT CONSTANT
CURRENCY
24.6
%
56.9
%
23.4
%
53.4
%
RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX AND ADJUSTED
PROFIT FOR THE PERIOD:
Six
Months Ended December 31
Three Months Ended December 31
2022
2021
2022
2021
£’000
£’000
£’000
£’000
PROFIT BEFORE TAX
58,839
43,998
20,271
19,076
Adjustments:
Share-based compensation expense
15,909
20,916
6,365
11,758
Amortisation of acquired intangible
assets
6,207
4,941
3,188
2,480
Foreign currency exchange (gains) /
losses, net
7,533
(2,060
)
14,947
(303
)
Fair value movement of contingent
consideration
(7,143
)
—
(2,894
)
—
Total adjustments
22,506
23,797
21,606
13,935
ADJUSTED PROFIT BEFORE TAX
81,345
67,795
41,877
33,011
PROFIT FOR THE PERIOD
46,747
35,951
15,019
15,406
Adjustments:
Adjustments to profit before tax
22,506
23,797
21,606
13,935
Tax impact of adjustments
(4,734
)
(4,977
)
(3,404
)
(2,870
)
ADJUSTED PROFIT FOR THE PERIOD
64,519
54,771
33,221
26,471
Diluted EPS (£)
0.81
0.62
0.26
0.27
Adjusted diluted EPS (£)
1.11
0.95
0.57
0.46
RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO
ADJUSTED FREE CASH FLOW
Six
Months Ended December 31
Three Months Ended December 31
2022
2021
2022
2021
£’000
£’000
£’000
£’000
Net cash from operating
activities
66,131
54,871
40,895
34,962
Adjustments:
Grant received
220
43
220
42
Purchases of non-current assets (tangibles
and intangibles)
(7,575
)
(7,227
)
(4,151
)
(3,777
)
Adjusted Free cash flow
58,776
47,687
36,964
31,227
SUPPLEMENTARY INFORMATION
SHARE-BASED COMPENSATION EXPENSE
Six
Months Ended December 31
Three Months Ended December 31
2022
2021
2022
2021
£’000
£’000
£’000
£’000
Direct cost of sales
10,297
12,675
4,340
7,329
Selling, general and administrative
expenses
5,612
8,241
2,025
4,429
Total
15,909
20,916
6,365
11,758
DEPRECIATION AND AMORTISATION
Six
Months Ended December 31
Three Months Ended December 31
2022
2021
2022
2021
£’000
£’000
£’000
£’000
Direct cost of sales
8,626
8,024
4,539
4,108
Selling, general and administrative
expenses
7,461
6,162
3,843
3,105
Total
16,087
14,186
8,382
7,213
EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT
Six
Months Ended December 31
Three Months Ended December 31
2022
2021
2022
2021
Closing number of total employees
(including directors)
12,183
10,391
12,183
10,391
Average operational employees
11,031
8,825
11,107
9,167
Top 10 customers %
32
%
35
%
31
%
34
%
Number of clients with > £1m of
revenue
(rolling 12 months)
156
107
156
107
Geographic split of revenue %
North America
34
%
36
%
33
%
35
%
Europe
22
%
20
%
23
%
21
%
UK
40
%
41
%
39
%
41
%
Rest of World (RoW)
4
%
3
%
5
%
3
%
Industry vertical split of revenue
%
Payments and Financial Services
53
%
50
%
53
%
51
%
TMT
22
%
25
%
22
%
25
%
Other
25
%
25
%
25
%
24
%
FOOTNOTES
(1) The Condensed Consolidated Balance Sheet as of December 31,
2021 has been restated to include the effects of IFRIC agenda
decision on cloud configuration and customisation costs and to
include the effect of revisions arising from provisional to final
acquisition accounting for Five and Levvel (refer to note 3C from
our Annual Report on Form 20-F for the fiscal year ended June 30,
2022 for details).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230213005495/en/
INVESTOR CONTACT: Endava Plc Laurence Madsen, Investor
Relations Manager Investors@endava.com
Grafico Azioni Endava (NYSE:DAVA)
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