Endava Announces First Quarter FY19 Financial Results

Q1 FY2019

39.7% Year over Year Growth in Revenue to £66.4 million

39.8% Constant Currency Revenue Growth¹

IFRS Diluted EPS £0.04 compared to £0.10 in the comparative prior year

Adjusted diluted EPS² £0.17 compared to £0.13 in the comparative prior year

LONDON--(BUSINESS WIRE)-- Endava (NYSE:DAVA), a global provider of digital transformation, agile development and intelligent automation services, today announced results for its first quarter ended September 30, 2018.

“We are pleased with our results for the first quarter of FY19 demonstrating our strength in growing new and existing customers, across all geographies and industry verticals.” said John Cotterell, Endava’s CEO.

“Our strong client relationships contributed significantly to our constant currency revenue growth of 39.8% for the quarter and give us good visibility into the next quarter. We delivered that growth profitably, with PBT at £2.6 million and Adjusted PBT³ at £11.7 million,” said Mark Thurston Endava’s CFO.”

FIRST QUARTER OF FISCAL 2019 FINANCIAL HIGHLIGHTS:

• Revenue for the first quarter ended September 30, 2018 was £66.4 million an increase of 39.7% compared to £47.5 million in the same period in the prior year.
• Revenue growth rate at constant currency was 39.8% .
• Profit before tax in the first quarter was £2.6 million compared to £6.4 million in the same period in the prior year or 4.0% of revenue compared to 13.6% in the same period in the prior year.
• Adjusted Profit before tax in the first quarter was £11.7 million compared to £7.8 million in the same period in the prior year or 17.6% of revenue compared to 16.4% in the same period in the prior year.
• IFRS Profit attributable to shareholders was £2.0 million, resulting in a Diluted EPS of £0.04 compared to IFRS Profit attributable to shareholders of £5.1 million and Diluted EPS of £0.10 in the same period in the prior year. During the quarter, a fair value adjustment to contingent consideration of £5.8m in relation to the Velocity Partners' acquisition had a one-off impact on earnings and reduced the IFRS Diluted EPS by £0.11. See "Additional Information" for further details.
• Adjusted Profit attributable to shareholders was £9.4 million, resulting in an Adjusted Diluted EPS of £0.17 compared to Adjusted Profit attributable to shareholders of £6.2 million and Adjusted Diluted EPS of £0.13 in the same period in the prior year.

CASH FLOW:

• Cash flow from operations was £2.1 million for the three months ended September 30, 2018 compared to £3.9 million in the same period in the prior year.
• Free Cash Flow (a non-IFRS measure) was £0.3 million for the three months ended September 30, 2018 compared to free cash flow of £2.2 million in the same period in the prior year.
• As of September 30, 2018, Endava had cash and cash equivalents of £41.8 million, compared to £15.0 million at the end of June 30, 2018. Net cash at September 30, 2018 was £41.7 million compared to net borrowing of £4.7 million at June 30, 2018.

OTHER METRICS FOR THE QUARTER ENDED SEPTEMBER 30, 2018:

• Headcount reached 5,182 with 4,608 average operational employees as of the quarter ended September 30, 2018 compared to a headcount of 3,934 and 3,558 average operational employees at September 30, 2017.
• Number of clients with over £1 million in spend grew to 52 on a rolling twelve months basis compared to 37 at September 30, 2017.
• Top 10 clients accounted for 39% of revenue down from 46% as of the quarter ended September 30, 2017.
• By geographic region, 27% of revenue was generated in North America, 29% was generated in Europe and 44% was generated in the United Kingdom for the quarter ended September 30, 2018. This compares to 15% in North America, 37% in Europe and 48% in the United Kingdom for the quarter ended September 30, 2017.
• Revenue by sector was as follows for the three months ended September 30, 2018, Payments and Financial Services 53%, TMT 27% and Other 20%. This compares to Payments and Financial Services 60%, TMT 29% and Other 11% for the three months ended September 30, 2017.

ADDITIONAL INFORMATION:

During the quarter, the Company took a fair value adjustment of £5.8m related to contingent consideration in connection with the Velocity Partners’ acquisition. This adjustment had a one-off impact on earnings and reduced IFRS Diluted EPS by £0.11. This charge is shown as a Net finance expense. Contingent consideration was recognised on acquisition of Velocity Partners as a financial liability, which was settled in ordinary shares on the effective date of the Company’s initial public offering (IPO). The value of these ordinary shares was measured using the share price of the Company’s ordinary shares at IPO, which was higher than the original estimated share price used to record the financial liability at the date of acquisition. The fair value adjustment was excluded as part of Adjusted profit before tax financial measure, the financial liability was fully settled and the Other Reserves in the balance sheet was increased by the ordinary shares to be issued.

OUTLOOK:

For Q2 FY19:

We expect revenue will be in the range £67.0 million to £67.5 million, representing constant currency growth of between 33% and 34%. We expect diluted adjusted EPS to be in the range of 15.0p to 16.0p per share.

Full Fiscal Year 2019:

We expect revenue will be in the range £275 million to £278 million, representing constant currency growth of between 25% and 26%. We expect diluted adjusted EPS to be in the range of 64p to 66p per share.

CONFERENCE CALL DETAILS:

The company will host a conference call at 8:00 am EST today to review the first quarter 2019 results. To participate in Endava’s first quarter 2019 earnings conference call, please dial in at least five minutes prior to the scheduled start time (877) 683-6368 or (647) 689-5450 for international participants, Conference ID 5498218.

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 December 14, 2018.

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, Financial Services, TMT, Consumer Products, Logistics and Healthcare. Endava had 5,182 employees as of September 30, 2018 located in offices in North America and Western Europe and delivery centres in Romania, Moldova, Bulgaria, Serbia, Macedonia, Argentina, Uruguay, Venezuela, and Colombia.

NON-IFRS FINANCIAL INFORMATION:

To supplement Endava’s Consolidated Statement of Comprehensive Income and Consolidated Balance Sheet presented in accordance with IFRS, the company uses non-IFRS measures of certain components of financial performance. These measures include: revenue in constant currency, adjusted profit before tax, adjusted profit attributable to shareholders and 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 year ended September 30, 2017 were used to convert revenue for the fiscal year ended September 30, 2018 and the revenue for the comparable prior period.

Free cash flow is the Company’s net cash from/(used in) operating activities, plus grants received, less purchases of non-current tangible and intangible assets. Adjusted profit before tax is the company’s profit before taxes adjusted to exclude the impact of share-based compensation, amortization of acquired intangible assets, realized and unrealized foreign currency exchange gains and losses, fair value adjustment of contingent consideration and initial public offering expenses incurred.

In order for Endava’s investors to be better able to compare its current results with those of previous periods, the company has shown a reconciliation of IFRS to non-IFRS financial measures. 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. Endava 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.

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 use of terms and phrases such as “believe,” “expect,” “will,” and other similar terms and phrases. Such forward-looking statements include, but are not limited to, the statements regarding our projected financial performance for our second fiscal quarter and full-fiscal year 2019. 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: our ability to sustain our revenue growth rate in the future; our ability to retain existing clients and attract new clients, including our ability to increase revenue from existing clients and diversify our revenue concentration; our ability to attract and retain highly-skilled IT professionals at cost-effective rates; our ability to penetrate new industry verticals and geographies and grow our revenue in current industry verticals and geographies; our ability to maintain favorable pricing and utilization rates; our 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 our market; the size of our addressable market and market trends; our ability to adapt to technological change and innovate solutions for our clients; our plans for growth and future operations, including our ability to manage our growth; our expectations of future operating results or financial performance; our ability to effectively manage our international operations, including our exposure to foreign currency exchange rate fluctuations; and our 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 on October 11, 2018. In addition, the forward-looking statements included in this press release represent our views and expectations as of the date hereof and are based on information currently available to us. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so except as required by law. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date hereof.

¹ 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.

² Adjusted diluted EPS is defined as our profit after taxes adjusted to exclude the impact of share-based compensation expense, amortization of acquired intangible assets, realized and unrealized foreign currency exchange gains and losses, fair value adjustment of contingent consideration and initial public offering expenses incurred (all of which are non-cash other than realized foreign currency exchange gains and losses and initial public offering expenses) and the tax impact of these adjustments, divided by weighted average number of shares outstanding - diluted.

³ Adjusted PBT is defined as our profit before taxes adjusted to exclude the impact of share-based compensation expense, amortization of acquired intangible assets, realized and unrealized foreign currency exchange gains and losses, fair value adjustment of contingent consideration and initial public offering expenses incurred (all of which are non-cash other than realized foreign currency exchange gains and losses and initial public offering expenses).

⁴ Adjusted PAT is defined as our profit after taxes adjusted to exclude the impact of share-based compensation expense, amortization of acquired intangible assets, realized and unrealized foreign currency exchange gains and losses, fair value adjustment of contingent consideration and initial public offering expenses incurred (all of which are non-cash other than realized foreign currency exchange gains and losses and initial public offering expenses) and the tax impact of these adjustments.

⁵ Free cash flow is the Company’s net cash from/(used in) operating activities, plus grants received, less purchases of non-current (tangible and intangible) assets.

⁶ Translated solely for convenience into dollars at the rate of £1.00=$1.3029.

⁷ Translated solely for convenience into dollars at the rate of £1.00=$1.3093.

View source version on businesswire.com: https://www.businesswire.com/news/home/20181129005315/en/

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

Source: Endava

Released November 29, 2018