Endava Announces Second Quarter Fiscal Year 2022 Results

Q2 FY2022

49.8% Year on Year Revenue Growth to £157.7 million

53.4% Revenue Growth at Constant Currency

IFRS diluted EPS £0.27 compared to £0.14 in the prior year comparative period

Adjusted diluted EPS £0.46 compared to £0.29 in the prior year comparative period

LONDON--()--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, 2021, the second quarter of its 2022 fiscal year ("Q2 FY2022").

“Endava continued our strong growth in all regions and verticals – helping clients digitally accelerate and innovate,” said Endava CEO John Cotterell. “Demand for our services has been driven by prolonged waves of technology enabled change like the move to the cloud, autonomous vehicles, frictionless payments, data insights and supply chain pressures. Our ability to ideate, technical insight, industry expertise and quality engineered product led more clients to turn to us as their strategic partner, enabling an excellent set of results for Q2 FY2022, with a revenue increase of 53.4% in constant currency terms.”

SECOND QUARTER FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS:

  • Revenue for Q2 FY2022 was £157.7 million, an increase of 49.8% compared to £105.2 million in the same period in the prior year.
  • Revenue growth rate at constant currency (a non-IFRS measure) was 53.4% for Q2 FY2022, compared to 21.4% in the same period in the prior year.
  • Profit before tax for Q2 FY2022 was £19.1 million, compared to £10.6 million in the same period in the prior year.
  • Adjusted profit before tax (a non-IFRS measure) for Q2 FY2022 was £33.0 million, compared to £20.6 million in the same period in the prior year, or 20.9% of revenue, compared to 19.6% of revenue in the same period in the prior year.
  • Profit for the period was £15.4 million in Q2 FY2022, resulting in a diluted EPS of £0.27, compared to profit of £7.8 million and diluted EPS of £0.14 in the same period in the prior year.
  • Adjusted profit for the period (a non-IFRS measure) was £26.5 million in Q2 FY2022, resulting in adjusted diluted EPS (a non-IFRS measure) of £0.46, compared to adjusted profit for the period of £16.4 million and adjusted diluted EPS of £0.29 in the same period in the prior year.

CASH FLOW:

  • Net cash from operating activities was £35.0 million in Q2 FY2022, compared to £20.4 million in the same period in the prior year.
  • Adjusted free cash flow (a non-IFRS measure) was £31.2 million in Q2 FY2022, compared to £18.7 million in the same period in the prior year.
  • At December 31, 2021, Endava had cash and cash equivalents of £114.2 million, compared to £69.9 million at June 30, 2021.

OTHER METRICS FOR THE QUARTER ENDED DECEMBER 31, 2021:

  • Headcount reached 10,391 at December 31, 2021, with 9,167 average operational employees in Q2 FY2022, compared to a headcount of 7,464 at December 31, 2020 and 6,629 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 107 at December 31, 2021, compared to 75 at December 31, 2020.
  • Top 10 clients accounted for 34% of revenue in Q2 FY2022, compared to 37% in the same period in the prior year.
  • By geographic region, 35% of revenue was generated in North America, 21% was generated in Europe, 41% was generated in the United Kingdom and 3% was generated in the rest of the world in Q2 FY2022. This compares to 29% in North America, 27% in Europe, 42% in the United Kingdom and 2% in the rest of the world in the same period in the prior year.
  • By industry vertical, 51% of revenue was generated from Payments and Financial Services, 25% from TMT and 24% from Other in Q2 FY2022. This compares to 49% from Payments and Financial Services, 28% from TMT and 23% from Other in the same period in the prior year.

OUTLOOK:

Third Quarter Fiscal Year 2022:

Endava expects revenues will be in the range £161.0 million to £163.0 million, representing constant currency revenue growth of between 44.0% and 45.0%. Endava expects adjusted diluted EPS to be in the range of £0.42 to £0.44 per share.

Full Fiscal Year 2022:

Endava expects revenues will be in the range of £636.0 million to £640.0 million, representing constant currency growth of between 44.0% and 45.0%. Endava expects adjusted diluted EPS to be in the range of £1.80 to £1.84 per share.

This above guidance for Q3 Fiscal Year 2022 and the Full Fiscal Year 2022 assumes the exchange rates at the end of January (when the exchange rate was 1 British Pound to 1.34 US Dollar and 1.2 Euro).

Endava is not able, at this time, to provide an outlook for IFRS diluted EPS for Q3 FY2022 or FY2022 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, February 16, 2022, to review its Q2 FY2022 results. To participate in Endava’s Q2 FY2022 earnings conference call, please dial in at least five minutes prior to the scheduled start time (888) 330-2391 or (240) 789-2702 for international participants, Conference ID 8763704.

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, March 4, 2022.

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, 2021, 10,391 Endavans served clients from locations in Australia, North America, Singapore and Western Europe and delivery centres in Bosnia & Herzegovina, Bulgaria, Croatia, Moldova, North Macedonia, Romania, Serbia, Slovenia, Argentina, Colombia, Mexico, Uruguay and Venezuela.

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 December 31, 2020 were used to convert revenue for the fiscal quarter ended December 31, 2021 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 and, realised and unrealised foreign currency exchange (gains)/losses, 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.

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 2022 and the full fiscal year 2022. 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 28, 2021. 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

 

2021

2020(1)

2021

2020(1)

 

£’000

£’000

£’000

£’000

REVENUE

305,133

 

200,365

 

157,668

 

105,240

 

Cost of sales

 

 

 

 

Direct cost of sales

(189,292

)

(120,479

)

(99,806

)

(63,003

)

Allocated cost of sales

(11,090

)

(9,912

)

(5,800

)

(5,180

)

Total cost of sales

(200,382

)

(130,391

)

(105,606

)

(68,183

)

GROSS PROFIT

104,751

 

69,974

 

52,062

 

37,057

 

Selling, general and administrative expenses

(59,624

)

(41,615

)

(31,981

)

(21,188

)

Net impairment losses on financial assets

(1,812

)

(2,646

)

(651

)

(1,806

)

OPERATING PROFIT

43,315

 

25,713

 

19,430

 

14,063

 

Net Finance income / (expense)

683

 

(6,380

)

(354

)

(3,455

)

PROFIT BEFORE TAX

43,998

 

19,333

 

19,076

 

10,608

 

Tax on profit on ordinary activities

(8,047

)

(4,826

)

(3,670

)

(2,809

)

PROFIT FOR THE PERIOD

35,951

 

14,507

 

15,406

 

7,799

 

OTHER COMPREHENSIVE INCOME

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

Exchange differences on translating foreign operations

(1,528

)

(3,491

)

(3,577

)

(2,644

)

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

34,423

 

11,016

 

11,829

 

5,155

 

 

 

 

 

 

EARNINGS PER SHARE (EPS):

 

 

 

 

Weighted average number of shares outstanding - Basic

55,911,086

 

54,831,134

 

56,173,171

 

55,168,042

 

Weighted average number of shares outstanding - Diluted

57,880,029

 

56,850,290

 

58,019,316

 

57,107,940

 

Basic EPS (£)

0.64

 

0.26

 

0.27

 

0.14

 

Diluted EPS (£)

0.62

 

0.26

 

0.27

 

0.14

 

(1) The presentation of the income statement has been changed to separately disclose the net impairment losses on financial assets on the face of the Consolidated Statement of Comprehensive Income (refer to Note 3C of our Annual Report on Form 20-F for the fiscal year ended June 30, 2021 for details).

CONDENSED CONSOLIDATED BALANCE SHEETS

 

December 31, 2021

June 30, 2021

December 31, 2020

 

£’000

£’000

£’000

ASSETS - NON-CURRENT

 

 

 

Goodwill

124,591

 

124,417

 

102,739

 

Intangible assets

64,362

 

69,550

 

34,961

 

Property, plant and equipment

17,273

 

13,324

 

11,985

 

Lease right-of-use assets

51,688

 

57,193

 

46,836

 

Deferred tax assets

21,406

 

18,674

 

13,552

 

Financial assets

189

 

363

 

639

 

TOTAL

279,509

 

283,521

 

210,712

 

ASSETS - CURRENT

 

 

 

Trade and other receivables

143,840

 

118,303

 

91,527

 

Corporation tax receivable

1,193

 

938

 

2,611

 

Financial assets

444

 

563

 

577

 

Cash and cash equivalents

114,176

 

69,884

 

84,221

 

TOTAL

259,653

 

189,688

 

178,936

 

TOTAL ASSETS

539,162

 

473,209

 

389,648

 

LIABILITIES - CURRENT

 

 

 

Lease liabilities

11,960

 

13,543

 

12,150

 

Trade and other payables

94,060

 

78,634

 

63,121

 

Corporation tax payable

384

 

4,294

 

1,865

 

Contingent consideration

5,904

 

5,718

 

1,091

 

Deferred consideration

6,789

 

624

 

2,786

 

TOTAL

119,097

 

102,813

 

81,013

 

LIABILITIES - NON CURRENT

 

 

 

Lease liabilities

44,648

 

50,142

 

39,141

 

Deferred tax liabilities

8,787

 

10,010

 

5,497

 

Deferred consideration

2,831

 

9,370

 

5,017

 

Other liabilities

191

 

205

 

138

 

TOTAL

56,457

 

69,727

 

49,793

 

EQUITY

 

 

 

Share capital

1,130

 

1,114

 

1,110

 

Share premium

4,541

 

247

 

230

 

Merger relief reserve

30,003

 

30,003

 

25,527

 

Retained earnings

343,216

 

283,059

 

239,469

 

Other reserves

(15,127

)

(13,599

)

(7,308

)

Investment in own shares

(155

)

(155

)

(186

)

TOTAL

363,608

 

300,669

 

258,842

 

TOTAL LIABILITIES AND EQUITY

539,162

 

473,209

 

389,648

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Six Months Ended December 31

Three Months Ended December 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

OPERATING ACTIVITIES

 

 

 

 

Profit for the period

35,951

 

14,507

 

15,406

 

7,799

 

Income tax charge

8,047

 

4,826

 

3,670

 

2,809

 

Non-cash adjustments

32,970

 

27,486

 

18,228

 

15,069

 

Tax paid

(5,701

)

(648

)

(3,468

)

(800

)

UK research and development credit received

 

1,311

 

 

1,311

 

Net changes in working capital

(16,396

)

(5,599

)

1,126

 

(5,775

)

Net cash from operating activities

54,871

 

41,883

 

34,962

 

20,413

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

Purchase of non-current assets (tangibles and intangibles)

(7,398

)

(2,344

)

(3,836

)

(1,703

)

Proceeds from disposal of non-current assets

171

 

108

 

59

 

43

 

Acquisition of subsidiaries, consideration in cash

(611

)

(52,132

)

 

(1,342

)

Cash and cash equivalents acquired with subsidiaries

 

1,603

 

 

 

Interest received

20

 

53

 

11

 

26

 

Net cash used in investing activities

(7,818

)

(52,712

)

(3,766

)

(2,976

)

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

Proceeds from sublease

277

 

289

 

142

 

132

 

Repayment of lease liabilities

(7,123

)

(5,746

)

(3,322

)

(2,792

)

Interest paid

(475

)

(444

)

(226

)

(233

)

Grant received / (paid)

43

 

220

 

42

 

(89

)

Issue of shares

4,299

 

9

 

4,299

 

1

 

Net cash from financing activities

(2,979

)

(5,672

)

935

 

(2,981

)

Net change in cash and cash equivalents

44,074

 

(16,501

)

32,131

 

14,456

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

69,884

 

101,327

 

82,034

 

70,039

 

Exchange differences on cash and cash equivalents

218

 

(605

)

11

 

(274

)

Cash and cash equivalents at the end of the period

114,176

 

84,221

 

114,176

 

84,221

 

 

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

 

2021

2020

2021

2020

REVENUE GROWTH RATE AS REPORTED UNDER IFRS

52.3

%

19.1

%

49.8

%

22.5

%

Foreign exchange rates impact

4.6

%

0.1

%

3.6

%

(1.1

%)

REVENUE GROWTH RATE AT CONSTANT CURRENCY INCLUDING WORLDPAY CAPTIVE

56.9

%

19.2

%

53.4

%

21.4

%

Impact of Worldpay Captive

 

1.6

%

 

 

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

56.9

%

20.8

%

53.4

%

21.4

%

 

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

 

Six Months Ended December 31

Three Months Ended December 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

 

 

 

 

 

PROFIT BEFORE TAX

43,998

 

19,333

 

19,076

 

10,608

 

Adjustments:

 

 

 

 

Share-based compensation expense

20,916

 

11,896

 

11,758

 

5,965

 

Amortisation of acquired intangible assets

4,941

 

2,280

 

2,480

 

1,114

 

Foreign currency exchange (gains) / losses, net

(2,060

)

5,304

 

(303

)

2,892

 

Total adjustments

23,797

 

19,480

 

13,935

 

9,971

 

ADJUSTED PROFIT BEFORE TAX

67,795

 

38,813

 

33,011

 

20,579

 

 

 

 

 

 

PROFIT FOR THE PERIOD

35,951

 

14,507

 

15,406

 

7,799

 

Adjustments:

 

 

 

 

Adjustments to profit before tax

23,797

 

19,480

 

13,935

 

9,971

 

Tax impact of adjustments

(4,977

)

(2,966

)

(2,870

)

(1,416

)

ADJUSTED PROFIT FOR THE PERIOD

54,771

 

31,021

 

26,471

 

16,354

 

 

 

 

 

 

Diluted EPS (£)

0.62

 

0.26

 

0.27

 

0.14

 

Adjusted diluted EPS (£)

0.95

 

0.55

 

0.46

 

0.29

 

 

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

 

Six Months Ended December 31

Three Months Ended December 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

 

 

 

 

 

Net cash from operating activities

54,871

 

41,883

 

34,962

 

20,413

 

Adjustments:

 

 

 

 

Grant received

43

 

220

 

42

 

(89

)

Purchases of non-current assets (tangibles and intangibles)

(7,227

)

(2,236

)

(3,777

)

(1,660

)

Adjusted Free cash flow

47,687

 

39,867

 

31,227

 

18,664

 

 

SUPPLEMENTARY INFORMATION

SHARE-BASED COMPENSATION EXPENSE

 

Six Months Ended December 31

Three Months Ended December 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

 

 

 

 

 

Direct cost of sales

12,675

7,064

7,329

3,566

Selling, general and administrative expenses

8,241

4,832

4,429

2,399

Total

20,916

11,896

11,758

5,965

 

DEPRECIATION AND AMORTISATION

 

Six Months Ended December 31

Three Months Ended December 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

 

 

 

 

 

Direct cost of sales

8,024

7,863

4,108

4,293

Selling, general and administrative expenses

6,162

3,568

3,105

1,795

Total

14,186

11,431

7,213

6,088

 

EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT

 

Six Months Ended December 31

Three Months Ended December 31

 

2021

2020

2021

2020

 

 

 

 

 

Closing number of total employees (including directors)

10,391

 

7,464

 

10,391

 

7,464

 

Average operational employees

8,825

 

6,417

 

9,167

 

6,629

 

 

 

 

 

 

Top 10 customers %

35

%

38

%

34

%

37

%

Number of clients with > £1m of revenue

(rolling 12 months)

107

 

75

 

107

 

75

 

 

 

 

 

 

Geographic split of revenue %

 

 

 

 

North America

36

%

29

%

35

%

29

%

Europe

20

%

26

%

21

%

27

%

UK

41

%

43

%

41

%

42

%

Rest of World (RoW)

3

%

2

%

3

%

2

%

Industry vertical split of revenue %

 

 

 

 

Payments and Financial Services

50

%

50

%

51

%

49

%

TMT

25

%

28

%

25

%

28

%

Other

25

%

22

%

24

%

23

%

 

Contacts

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

Contacts

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