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Endava Announces First Quarter Fiscal Year 2020 Results

November 19, 2019

LONDON--(BUSINESS WIRE)--Nov 19, 2019--

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, 2019, the first quarter of its 2020 fiscal year (“Q1 FY2020”).

“We are off to a very strong start in our new fiscal year with revenue of £82.4 million in Q1 FY2020, an increase of 24.0% Year on Year on a reported basis from £66.4 million in the same quarter in the prior year attesting to our solid organic revenue growth. Our recent acquisition of Intuitus Limited, along with the launch of our integrated IT due diligence product with Bain & Company, are expected to be catalysts to accelerate our penetration of the Private Equity market segment, in line with our strategy of further diversifying our client base,” said John Cotterell, Endava’s CEO.

FIRST QUARTER FISCAL YEAR 2020 FINANCIAL HIGHLIGHTS *:

CASH FLOW:

* All Q1 FY2020 figures reflect our adoption of IFRS 16 - Leases effective as of July 1, 2019, on a modified retrospective basis.

OTHER METRICS FOR THE QUARTER ENDED SEPTEMBER 30, 2019

BUSINESS HIGHLIGHTS:

On October 12, 2019, Endava entered into a new multicurrency revolving credit facility with HSBC Bank plc, as agent, and HSBC UK Bank plc, DNB (UK) Limited, Keybank National Association and Silicon Valley Bank as mandated lead arrangers, bookrunners and original lenders. The Multicurrency Revolving Credit Facility is an unsecured revolving credit facility in the amount of £200 million with an initial term of three years, and it replaced the prior £50 million secured facility with HSBC UK Bank Plc. The Multicurrency Revolving Credit Facility also provides for uncommitted accordion options of up to an aggregate of £75 million in additional borrowing. The Multicurrency Revolving Credit Facility is intended to support the Company’s future capital investments and development activities.

On November 4, 2019, Endava announced the purchase of Intuitus Limited (“Intuitus”), headquartered in Edinburgh, Scotland. Intuitus is a leading independent provider of information technology due diligence and other technology advisory services to Private Equity clients.

On November 14, 2019, Endava and Bain & Company announced the launch of an integrated IT due diligence product. Endava and Bain extended their partnership into the private equity space in order to provide a strong mix of skills to the private equity space and build on their collaboration on digital transformations.

OUTLOOK

Second Quarter Fiscal Year 2020:

We expect revenues will be in the range £82.5m to £83.2m, representing constant currency growth of between 20% and 21%. We expect adjusted diluted EPS to be in the range of £0.21 to £0.22 per share.

Full Fiscal Year 2020:

We expect revenues will be in the range £340.0m to £343.0m, representing constant currency growth of between 22% and 23%. We expect adjusted diluted EPS to be in the range of £0.86 to £0.89 per share.

Our guidance regarding constant currency growth is pro-forma for the sale of Endava Technology SRL, also referred to as “the Captive,” to Worldpay. The transaction closed on August 31, 2019.

Our guidance for the Full Fiscal Year 2020 is below the range we provided last quarter due solely to a movement in foreign exchange rates as a result of the strengthening of the British Pound. We provided guidance for the Full Fiscal Year 2020 last quarter using the exchange rates at the end of August, when the exchange rate was 1 GBP to 1.21 USD and 1.10 Euro. This quarter, we are providing guidance for Q2 FY2020 and for the Full Fiscal Year 2020 using the exchange rates at the end of October, when the exchange rate was 1 GBP to 1.29 USD and 1.16 Euro, an increase of 7% and 5%, respectively.

Endava is not able, at this time, to provide an outlook for IFRS diluted EPS for Q2 FY2020 or FY2020 because of the unreasonable effort of estimating 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.

CONFERENCE CALL DETAILS:

The Company will host a conference call at 8:00 am EST today, November 19, 2019, to review its Q1 FY2020 results. To participate in Endava’s Q1 FY2020 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 9837517.

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 6, 2019.

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, Consumer Products, Retail, Logistics and Healthcare. Endava had 5,904 employees as of September 30, 2019 located in offices in North America and Western Europe and delivery centres in Romania, Moldova, Bulgaria, Serbia, North Macedonia, 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, 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, 2018 were used to convert revenue for the fiscal quarter ended September 30, 2019 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 and losses, initial public offering expenses incurred, Sarbanes-Oxley compliance readiness expenses incurred, fair value movement of contingent consideration and gain on disposal of subsidiary (all of which are non-cash other than realised foreign currency exchange gains and losses, initial public offering expenses, Sarbanes-Oxley compliance readiness expenses incurred and gain on disposal of subsidiary). 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).

In order for Endava’s investors to be better able to compare its current period 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. 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.

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,” 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 fiscal year 2020 and statements regarding the anticipated impact on our business of our partnership with Bain and our acquisition of Intuitus. 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 favourable pricing and utilisation 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 September 25, 2019. 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.

 

 

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

 

Three Months Ended

September 30

 

2019

2018

 

£’000

£’000

REVENUE

82,352

66,414

Cost of sales

 

 

Direct cost of sales

(48,764)

(40,358)

Allocated cost of sales

(3,921

)

(3,569

)

Total cost of sales

(52,685

)

(43,927

)

GROSS PROFIT

29,667

 

22,487

 

Selling, general and administrative expenses

(17,340

)

(14,662

)

OPERATING PROFIT

12,327

 

7,825

 

Net finance (expense) / income

2,928

 

(5,191

)

Gain on sale of subsidiary

2,215

 

 

PROFIT BEFORE TAX

17,470

 

2,634

Tax on profit on ordinary activities

(2,958)

(586)

PROFIT FOR THE PERIOD AND PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT

14,512

 

2,048

 

Other comprehensive income

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

Exchange differences on translating foreign operations

(1,925)

(268)

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

12,587

 

1,780

 

 

 

 

EARNINGS PER SHARE:

 

 

Weighted average number of shares outstanding - Basic

52,556,332

 

48,258,033

 

Weighted average number of shares outstanding - Diluted

55,422,182

 

53,842,639

 

Basic EPS (£)

0.28

0.04

Diluted EPS (£)

0.26

 

0.04

 

CONDENSED BALANCE SHEETS

 

 

September 30, 2019

June 30, 2019

September 30, 2018

 

£’000

£’000

£’000

 

 

 

 

ASSETS - NON-CURRENT

 

 

 

Goodwill

36,251

 

36,760

 

41,494

 

Intangible assets

29,063

 

28,910

 

30,381

 

Property, plant and equipment

10,828

 

10,579

 

9,238

 

Lease right-of-use assets

37,382

 

 

 

Financial assets

1,066

 

 

 

Deferred tax assets

9,841

 

9,550

 

2,492

 

TOTAL

124,431

 

85,799

 

83,605

 

ASSETS - CURRENT

 

 

 

Trade and other receivables

67,901

 

65,917

 

61,130

 

Corporation tax receivable

793

 

790

 

76

 

Financial assets

617

 

 

 

Cash and cash equivalents

83,628

 

70,172

 

41,765

 

TOTAL

152,939

 

136,879

 

102,971

 

TOTAL ASSETS

277,370

 

222,678

 

186,576

 

LIABILITIES - CURRENT

 

 

 

Borrowings

12

 

21

 

41

 

Lease liabilities

8,552

 

 

 

Trade and other payables

48,095

 

48,502

 

40,825

 

Corporation tax payable

4,970

 

2,920

 

 

Contingent consideration

1,285

 

1,244

 

1,212

 

Deferred consideration

 

1,516

 

4,512

 

TOTAL

62,914

 

54,203

 

46,590

 

LIABILITIES - NON CURRENT

 

 

 

Lease liabilities

29,603

 

 

 

Borrowings

 

 

12

 

Deferred tax liabilities

1,950

 

2,033

 

2,795

 

Other liabilities

118

 

113

 

279

 

TOTAL

31,671

 

2,146

 

3,086

 

EQUITY

 

 

 

Share capital

1,089

 

1,089

 

1,061

 

Share premium

17,280

 

17,271

 

48,614

 

Merger relief reserve

4,430

 

4,430

 

4,430

 

Retained earnings

165,314

 

146,963

 

63,659

 

Other reserves

(3,502

)

(1,577

)

21,411

 

Investment in own shares

(1,826

)

(1,847

)

(2,275

)

TOTAL

182,785

 

166,329

 

136,900

 

TOTAL LIABILITIES AND EQUITY

277,370

 

222,678

 

186,576

 

CONDENSED STATEMENTS OF CASH FLOWS

 

 

Three Months Ended

September 30

 

2019

2018

 

£’000

£’000

OPERATING ACTIVITIES

 

 

Profit for the period

14,512

 

2,048

 

Income tax charge

2,958

 

586

 

Non-cash adjustments

1,956

 

8,497

 

Tax paid

(832

)

(1,492

)

Net changes in working capital

(3,185

)

(7,588

)

Net cash from operating activities

15,409

 

2,051

 

 

 

 

INVESTING ACTIVITIES

 

 

Purchase of non-current assets (tangibles and intangibles)

(2,506

)

(1,894

)

Proceeds from disposal of non-current assets

13

 

 

Acquisition of business / subsidiaries - settlement of deferred consideration

(1,523

)

 

Proceeds from sale of subsidiary net of cash disposed

2,578

 

 

Interest received

199

 

74

 

Net cash used in investing activities

(1,239

)

(1,820

)

 

 

 

FINANCING ACTIVITIES

 

 

Proceeds from sublease

154

 

 

Repayment of borrowings

(9

)

(20,015

)

Repayment of lease liabilities

(2,156

)

 

Interest paid

(166

)

(148

)

Grant received

564

 

105

 

Net proceeds from initial public offering

 

44,828

 

Issue of shares

9

 

 

Net cash from financing activities

(1,604

)

24,770

 

Net change in cash and cash equivalents

12,566

 

25,001

 

 

 

 

Cash and cash equivalents at the beginning of the period

70,172

 

15,048

 

Exchange differences on cash and cash equivalents

890

 

1,716

 

Cash and cash equivalents at the end of the period

83,628

 

41,765

 

RECONCILIATION OF ADJUSTED FINANCIAL MEASURES TO COMPARABLE IFRS FINANCIAL MEASURES

 

RECONCILIATION OF REVENUE GROWTH RATE AT CONSTANT CURRENCY TO REVENUE GROWTH RATE AS REPORTED UNDER IFRS:

Three Months ended

September 30

 

2019

2019

REVENUE GROWTH RATE AT CONSTANT CURRENCY

21.5

%

39.8

%

Foreign exchange rates impact

2.5

%

(0.1

%)

REVENUE GROWTH RATE AS REPORTED UNDER IFRS

24.0

%

39.7

%

 

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

Three Months Ended

September 30

 

2019

2018

 

£’000

£’000

PROFIT BEFORE TAX

17,470

2,634

Adjustments:

 

 

Share-based compensation expense

3,323

1,884

Amortisation of acquired intangible assets

896

879

Foreign currency exchange (gains) losses, net

(2,553)

(705)

Initial public offering expenses incurred

976

Sarbanes-Oxley compliance readiness expenses incurred

194

Fair value movement of contingent consideration

5,805

Net gain on disposal of subsidiary

(2,215)

Total adjustments

(549)

9,033

ADJUSTED PROFIT BEFORE TAX

16,921

11,667

 

 

 

PROFIT FOR THE PERIOD

14,512

2,048

Adjustments:

 

 

Adjustments to profit before tax

(549)

9,033

Tax impact of adjustments

(393)

(1,683)

ADJUSTED PROFIT FOR THE PERIOD

13,570

9,398

 

 

 

Diluted EPS (£)

0.26

0.04

Adjusted diluted EPS (£)

0.24

0.17

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

Three Months Ended September 30

2019

2018

 

£’000

£’000

Net cash from operating activities

15,409

 

2,051

 

Adjustments:

 

 

Grant received

564

 

105

 

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

(2,493

)

(1,894

)

Adjusted free cash flow

13,480

 

262

 

SUPPLEMENTARY INFORMATION

 

SHARE-BASED COMPENSATION EXPENSE

 

Three Months Ended September 30

2019

2018

 

£’000

£’000

Direct cost of sales

1,697

 

748

 

Selling, general and administrative expenses

1,626

 

1,136

 

Total

3,323

 

1,884

 

DEPRECIATION AND AMORTISATION

 

Three Months Ended September 30

2019

2018

 

£’000

£’000

Direct cost of sales

2,751

 

900

 

Selling, general and administrative expenses

1,376

 

1,028

 

Total

4,127

 

1,928

 

EMPLOYEES, TOP 10 CUSTOMERS and REVENUE SPLIT

 

Three Months Ended September 30

 

2019

2018

Closing number of total employees

5,904

5,182

Average operational employees

5,339

4,608

 

 

 

Top 10 customers %

41

%

39

%

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

62

52

 

 

 

Geographic split of revenue %

 

 

North America

27

%

27

%

Europe

26

%

29

%

UK

45

%

44

%

Rest of World (RoW)

2

%

-

 

 

 

Industry vertical split of revenue %

 

 

Payments and Financial Services

53

%

53

%

TMT

25

%

27

%

Other

22

%

20

%

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191119005584/en/

CONTACT: INVESTOR:

Endava Plc

Laurence Madsen, Investor Relations Manager

Investors@endava.com

KEYWORD: UNITED KINGDOM EUROPE

INDUSTRY KEYWORD: ELECTRONIC DESIGN AUTOMATION PROFESSIONAL SERVICES DATA MANAGEMENT TECHNOLOGY SOFTWARE CONSULTING HARDWARE

SOURCE: Endava plc

Copyright Business Wire 2019.

PUB: 11/19/2019 07:45 AM/DISC: 11/19/2019 07:45 AM

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