Press release

Endava Announces Third Quarter Fiscal Year 2021 Results

0
Sponsored by Businesswire

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 March 31, 2021, the third quarter of its 2021 fiscal year (“Q3 FY2021”).

“Endava delivered another outstanding quarter with revenue for Q3 FY2021 of £112.3 million, an increase of 21.8% Year on Year. Demand for digital transformation services continues to grow in all regions and verticals,” said John Cotterell, Endava’s CEO.

THIRD QUARTER FISCAL YEAR 2021 FINANCIAL HIGHLIGHTS:

  • Revenue for Q3 FY2021 was £112.3 million, an increase of 21.8% compared to £92.2 million in the same period in the prior year.
  • Revenue growth rate at constant currency(a non-IFRS measure) was 23.8% for Q3 FY2021 compared to 25.7% in the same period in the prior year.
  • Profit before tax for Q3 FY2021 was £16.5 million compared to £18.3 million in the same period in the prior year.
  • Adjusted profit before tax (a non-IFRS measure) for Q3 FY2021 was £23.9 million, compared to £16.0 million in the same period in the prior year, or 21.3% of revenue, compared to 17.4% of revenue in the same period in the prior year.
  • Profit for the period was £13.0 million in Q3 FY2021, resulting in a diluted EPS of £0.23, compared to profit of £14.6 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 £19.3 million in Q3 FY2021, resulting in adjusted diluted EPS (a non-IFRS measure) of £0.34 compared to adjusted profit for the period of £12.8 million and adjusted diluted EPS of £0.23 in the same period in the prior year.

CASH FLOW:

  • Net cash from operating activities was £11.6 million in Q3 FY2021 compared to £11.8 million in the same period in the prior year.
  • Adjusted free cash flow (a non-IFRS measure) was £10.2 million in Q3 FY2021 compared to £9.6 million in the same period in the prior year.
  • At March 31, 2021, Endava had cash and cash equivalents of £78.8 million, compared to £101.3 million at June 30, 2020.

OTHER METRICS FOR THE QUARTER ENDED MARCH 31, 2021:

  • Headcount reached 8,127 at March 31, 2021, with 7,068 average operational employees in Q3 FY2021, compared to a headcount of 6,468 at March 31, 2020 and 5,787 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 81 at March 31, 2021, compared to 67 at March 31, 2020.
  • Top 10 clients accounted for 36% of revenue in Q3 FY2021, unchanged compared to March 31, 2020.
  • 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 Q3 FY2021. This compares to 27% in North America, 25% in Europe, 45% 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, 27% from TMT and 20% from Other. This compares to 54% from Payments and Financial Services, 25% from TMT and 21% from Other in the same period in the prior year. 

BUSINESS HIGHLIGHTS:

  • On March 4, 2021, Endava announced the acquisition of Pet Minuta d.o.o. of Croatia and its U.S. subsidiary, Five Minutes Studio, Inc. (together “FIVE”). FIVE, based in Brooklyn, NY and Croatia, is a digital agency delivering a full spectrum of services, including product strategy, the design, build and delivery of digital experiences, and ongoing growth marketing using agile methodology combined with a scientific/metrics-driven approach to product design. FIVE had a team of 157 operational employees as of the date of acquisition, based in Brooklyn, NY and Croatia. The majority of its people are based in delivery centers in Croatia’s four largest cities.
  • On April 1, 2021, Endava announced the acquisition of Levvel LLC, headquartered in Charlotte, NC (“Levvel”). Levvel is an award-winning U.S. technology strategy, consulting and engineering firm focused on helping companies create sophisticated technology through human-centered problem solving, rooted in deep industry expertise. Levvel has a strong focus in the Payments and Financial Services, Logistics/Mobility and TMT segments, and Endava expects the acquisition to enable it to continue to expand in the United States while serving clients in these core market sectors. Levvel delivers from the United States and Mexico and had 172 operational employees as of the date of acquisition, many of whom hold certifications, and maintains partnerships with key cloud platforms and leading and emerging technologies. 

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 fourth quarter of its 2021 fiscal year and its full 2021 fiscal year based upon what it currently sees in its markets.

Fourth Quarter Fiscal Year 2021:

Endava expects revenues will be in the range £130.0 million to £132.0 million, representing constant currency revenue growth of between 51.0% and 53.0%. Endava expects adjusted diluted EPS to be in the range of £0.34 to £0.36 per share.

Full Fiscal Year 2021:

Endava expects revenues will be in the range £443.0 million to £445.0 million, representing constant currency growth of between 29.0% and 30.0%. Endava expects adjusted diluted EPS to be in the range of £1.22 to £1.24 per share.

The constant currency growth figure now quoted for the full fiscal year 2021 guidance still includes the proforma adjustment for the Worldpay Captive, which Endava sold in August 2019, as it remains in the full year comparative.

This above guidance for Q4 Fiscal Year 2021 and the Full Fiscal Year 2021 assumes the exchange rates at the end of April (when the exchange rate was 1 British Pound to 1.39 US Dollar and 1.15 Euro).

Endava is not able, at this time, to provide an outlook for IFRS diluted EPS for Q4 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 EDT today, May 19, 2021, to review its Q3 FY2021 results. To participate in Endava’s Q3 FY2021 earnings conference call, please dial in at least five minutes prior to the scheduled start time (833) 921-1651 or (778) 560-2811 for international participants, Conference ID 1517596.

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, June 4, 2021.

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 8,127 employees (including directors) as of March 31, 2021 located in North America, Western Europe, Australia and Singapore and delivery centres in Romania, Moldova, Bulgaria, Serbia, Croatia, 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 March 31, 2020 were used to convert revenue for the fiscal quarter ended March 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, discretionary EBT bonus, 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 fourth fiscal quarter of fiscal year 2021 and the full fiscal year 2021, the challenges presented by the ongoing COVID-19 pandemic and the associated global economic uncertainty, and anticipated benefits from recent acquisitions. 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

 

Nine Months Ended

March 31

Three Months Ended

March 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

REVENUE

312,676

 

260,487

 

112,311

 

92,235

 

Cost of sales

 

 

 

 

Direct cost of sales

(189,655

)

(174,481

)

(69,176

)

(51,889

)

Allocated cost of sales

(14,533

)

(12,902

)

(4,621

)

(4,591

)

Total cost of sales

(204,188

)

(187,383

)

(73,797

)

(56,480

)

GROSS PROFIT

108,488

 

73,104

 

38,514

 

35,755

 

Selling, general and administrative expenses

(64,737

)

(58,094

)

(20,476

)

(21,614

)

OPERATING PROFIT

43,751

 

15,010

 

18,038

 

14,141

 

Net finance (expense) / income

(7,921

)

1,282

 

(1,541

)

4,153

 

Gain on sale of subsidiary

 

2,215

 

 

 

PROFIT BEFORE TAX

35,830

 

18,507

 

16,497

 

18,294

 

Tax on profit on ordinary activities

(8,337

)

(3,206

)

(3,511

)

(3,689

)

PROFIT FOR THE PERIOD

27,493

 

15,301

 

12,986

 

14,605

 

OTHER COMPREHENSIVE INCOME

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

Exchange differences on translating foreign operations

(9,512

)

(3,598

)

(6,021

)

787

 

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

17,981

 

11,703

 

6,965

 

15,392

 

 

 

 

 

 

EARNINGS PER SHARE (EPS):

 

 

 

 

Weighted average number of shares outstanding – Basic

55,081,386

 

53,170,717

 

55,581,888

 

53,815,137

 

Weighted average number of shares outstanding – Diluted

56,749,298

 

55,832,497

 

57,203,008

 

56,345,433

 

Basic EPS (£)

0.50

 

0.29

 

0.23

 

0.27

 

Diluted EPS (£)

0.48

 

0.27

 

0.23

 

0.26

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

March 31, 2021

June 30, 2020

March 31, 2020

 

£’000

£’000

£’000

(Restated) (1)

ASSETS – NON-CURRENT

 

 

 

Goodwill

119,506

56,885

56,219

Intangible assets

32,870

38,751

39,507

Property, plant and equipment

11,590

12,747

11,877

Lease right-of-use assets

41,927

51,134

48,634

Financial assets

529

639

850

Deferred tax assets

12,970

13,340

9,331

TOTAL

219,392

173,496

166,418

ASSETS – CURRENT

 

 

 

Trade and other receivables

109,104

82,614

76,496

Corporation tax receivable

1,463

2,922

5,152

Financial assets

559

584

595

Cash and cash equivalents

78,836

101,327

87,159

TOTAL

189,962

187,447

169,402

TOTAL ASSETS

409,354

360,943

335,820

LIABILITIES – CURRENT

 

 

 

Lease liabilities

12,170

11,132

10,763

Trade and other payables

65,379

58,599

63,241

Corporation tax payable

3,524

1,449

4,255

Contingent consideration

1,082

1,442

1,203

Deferred consideration

2,693

3,764

1,787

TOTAL

84,848

76,386

81,249

LIABILITIES – NON CURRENT

 

 

 

Lease liabilities

34,561

42,233

40,409

Deferred tax liabilities

5,149

5,861

5,000

Contingent consideration

1,794

Deferred consideration

7,501

1,919

Other liabilities

153

136

121

TOTAL

49,158

48,230

47,449

EQUITY

 

 

 

Share capital

1,114

1,099

1,098

Share premium

230

221

189

Merger relief reserve

30,003

25,527

25,527

Retained earnings

257,485

214,638

172,262

Other reserves

(13,329)

(3,817)

9,487

Investment in own shares

(155)

(1,341)

(1,441)

TOTAL

275,348

236,327

207,122

TOTAL LIABILITIES AND EQUITY

409,354

360,943

335,820

1) The restatement refers to a reclassification of £21,097,000 from share premium to merger relief reserve.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Nine Months Ended

March 31

Three Months Ended

March 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

OPERATING ACTIVITIES

 

 

 

 

Profit for the period

27,493

15,301

12,986

14,605

Income tax charge

8,337

3,206

3,511

3,689

Non-cash adjustments

39,088

20,062

11,602

4,176

Tax paid

(788)

(4,446)

(140)

(911)

UK research and development credit received

2,930

1,619

Net changes in working capital

(23,626)

4,223

(18,027)

(9,713)

Net cash from operating activities

53,434

38,346

11,551

11,846

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

Purchase of non-current assets (tangibles and intangibles)

(3,752)

(8,075)

(1,408)

(2,245)

Proceeds from disposal of non-current assets

150

150

42

30

Acquisition of business / subsidiaries, consideration in cash

(65,942)

(26,595)

(13,810)

466

Proceeds from sale of subsidiary net of cash disposed of

2,744

Cash and cash equivalents acquired with subsidiaries

2,722

3,289

1,119

Interest received

76

477

23

124

Net cash used in investing activities

(66,746)

(28,010)

(14,034)

(1,625)

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

Proceeds from sublease

424

406

135

104

Repayment of borrowings

(955)

(946)

Repayment of lease liabilities

(8,442)

(7,157)

(2,696)

(2,588)

Interest paid

(674)

(603)

(230)

(228)

Grant received

267

661

47

Proceeds from sale of EBT shares

14,797

Issue of shares

9

61

52

Net cash from financing activities

(8,416)

7,210

(2,744)

(3,606)

Net change in cash and cash equivalents

(21,728)

17,546

(5,227)

6,615

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

101,327

70,172

84,221

78,975

Exchange differences on cash and cash equivalents

(763)

(559)

(158)

1,569

Cash and cash equivalents at the end of the period

78,836

87,159

78,836

87,159

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:

 

 

Nine Months ended

March 31

Three Months ended

March 31

 

2021

2020

2021

2020

REVENUE GROWTH RATE AS REPORTED UNDER IFRS

20.0 %

23.3 %

21.8 %

26.2 %

Foreign exchange rates impact

0.9 %

(0.7 %)

2.0 %

(0.5 %)

REVENUE GROWTH RATE AT CONSTANT CURRENCY INCLUDING WORLDPAY CAPTIVE 

20.9 %

22.6 %

23.8 %

25.7 %

Impact of Worldpay Captive

1.0 %

3.0 %

4.3 %

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

21.9 %

25.6 %

23.8 %

30.0 %

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

 

 

Nine Months Ended

March 31

Three Months Ended

March 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

 

 

 

 

 

PROFIT BEFORE TAX

35,830

18,507

16,497

18,294

Adjustments:

 

 

 

 

Share-based compensation expense

17,518

11,075

5,622

4,079

Discretionary EBT bonus

24,766

(2,891)

Amortisation of acquired intangible assets

3,345

2,933

1,065

1,124

Foreign currency exchange losses / (gains), net

6,031

(1,664)

727

(4,577)

Net gain on disposal of subsidiary

(2,215)

Total adjustments

26,894

34,895

7,414

(2,265)

ADJUSTED PROFIT BEFORE TAX

62,724

53,402

23,911

16,029

 

 

 

 

 

PROFIT FOR THE PERIOD

27,493

15,301

12,986

14,605

Adjustments:

 

 

 

 

Adjustments to profit before tax

26,894

34,895

7,414

(2,265)

Tax impact of adjustments

(4,083)

(7,073)

(1,117)

435

ADJUSTED PROFIT FOR THE PERIOD

50,304

43,123

19,283

12,775

 

 

 

 

 

Diluted EPS (£)

0.48

0.27

0.23

0.26

Adjusted diluted EPS (£)

0.89

0.77

0.34

0.23

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

 

 

Nine Months Ended

March 31

Three Months Ended

March 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

 

 

 

 

 

Net cash from operating activities

53,434

38,346

11,551

11,846

Adjustments:

 

 

 

 

Grant received

267

661

47

Purchases of non-current assets (tangibles and intangibles)

(3,602)

(7,925)

(1,366)

(2,215)

Adjusted Free cash flow

50,099

31,082

10,232

9,631

SUPPLEMENTARY INFORMATION

SHARE-BASED COMPENSATION EXPENSE

 

 

Nine Months

Ended

March 31

Three Months

Ended

March 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

 

 

 

 

 

Direct cost of sales

10,513

6,148

3,449

2,318

Selling, general and administrative expenses

7,005

4,927

2,173

1,761

Total

17,518

11,075

5,622

4,079

DEPRECIATION AND AMORTISATION

 

 

Nine Months Ended

March 31

Three Months Ended

March 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

 

 

 

 

 

Direct cost of sales

11,341

9,153

3,478

3,243

Selling, general and administrative expenses

5,147

4,473

1,579

1,639

Total

16,488

13,626

5,057

4,882

EMPLOYEE BENEFIT TRUST DISCRETIONARY BONUS

 

 

Nine Months Ended

March 31

Three Months Ended

March 31

 

2021

2020

2021

2020

 

£’000

£’000

£’000

£’000

 

 

 

 

 

Direct cost of sales

22,555

(2,627)

Selling, general and administrative expenses

2,211

(264)

Total

24,766

(2,891)

EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT

 

 

Nine Months Ended

March 31

Three Months Ended

March 31

 

2021

2020

2021

2020

 

 

 

 

 

Closing number of total employees (including directors)

8,127

6,468

8,127

6,468

Average operational employees

6,634

5,532

7,068

5,787

 

 

 

 

 

Top 10 customers %

37%

38%

36%

36%

Number of clients with > £1m of revenue

(rolling 12 months)

81

67

81

67

 

 

 

 

 

Geographic split of revenue %

 

 

 

 

North America

29%

28%

29%

27%

Europe

26%

24%

25%

25%

UK

42%

45%

43%

45%

Rest of World (RoW)

3%

3%

3%

3%

Industry vertical split of revenue %

 

 

 

 

Payments and Financial Services

50%

53%

53%

54%

TMT

28%

25%

27%

25%

Other

22%

22%

20%

21%