Endava (DAVA) Reports Q3 EPS of GBP0.26; Provides 4Q & FY20 EPS/Revenue Outlook

Endava (NYSE: DAVA) reported Q3 EPS of GBP0.26, versus GBP0.11 reported last year. Revenue for the quarter came in at GBP92.24 million, versus GBP73.06 million reported last year.

THIRD QUARTER FISCAL YEAR 2020 FINANCIAL HIGHLIGHTS:

• Revenue for Q3 FY2020 was £92.2 million, an increase of 26.2% compared to £73.1 million in the same period in the prior year.
• Revenue growth rate at constant currency (a non-IFRS measure) was 25.7% for Q3 FY2020 compared to 23.2% in the same period in the prior year.
• Profit before tax for Q3 FY2020 was £18.3 million compared to profit before tax of £7.6 million in the same period in the prior year.
• The Endava Limited Guernsey Benefit Trust ("EBT"), the beneficiaries of which are Endava's employees, funded the second and final tranche of a previously announced non-recurring discretionary employee bonus on May 5, 2020. The Q3 FY2020 results include a credit of £2.9m arising from adjustment to the previously recognised bonus liability, to reflect the prevailing share price and exchange rate at March 31, 2020. Endava expects a true-up charge in Q4 FY2020 of approximately £3m relating to the funding of the second and final tranche, subject to exchange rate volatility upon payment.
• Adjusted profit before tax (a non-IFRS measure) for Q3 FY2020 was £16.0 million, compared to £13.2 million in the same period in the prior year, or 17.4% of revenue, compared to 18.1% of revenue in the same period in the prior year.
• Profit for the period was £14.6 million in Q3 FY2020, resulting in a diluted EPS of £0.26, compared to profit for the period of £6.3 million and diluted EPS of £0.11 in the same period in the prior year.
• Adjusted profit for the period (a non-IFRS measure) was £12.8 million in Q3 FY2020, resulting in adjusted diluted EPS (a non-IFRS measure) of £0.23 compared to adjusted profit for the period of £10.6 million and adjusted diluted EPS of £0.19 in the same period in the prior year.

CASH FLOW:

• Net cash from operating activities was £11.8 million in Q3 FY2020 compared to £12.6 million in the same period in the prior year.
• Adjusted free cash flow (a non-IFRS measure) was £9.6 million in Q3 FY2020 compared to £11.4 million in the same period in the prior year.
• At March 31, 2020, Endava had cash and cash equivalents of £87.2 million, compared to £70.2 million at June 30, 2019.

OTHER METRICS FOR THE QUARTER ENDED MARCH 31, 2020:

• Headcount reached 6,468 at March 31, 2020, with 5,787 average operational employees in Q3 FY2020, compared to a headcount of 5,573 at March 31, 2019 and 5,012 average operational employees in the same quarter of the prior year.
• Number of clients with over £1 million in revenue was 67 on a rolling twelve months basis at March 31, 2020, unchanged from March 31, 2019.
• Top 10 clients accounted for 36% of revenue in Q3 FY2020, compared to 40% in the same period in the prior year.
• By geographic region, 27% of revenue was generated in North America, 25% was generated in Europe, 45% was generated in the United Kingdom and 3% was generated in the rest of the world in Q3 FY2020. This compares to 27% in North America, 27% in Europe and 46% in the United Kingdom in the same period in the prior year.
• By industry vertical, 54% of revenue was generated from Payments and Financial Services, 25% from TMT and 21% from Other. This compares to 53% Payments and Financial Services, 28% TMT and 19% Other in the same period in the prior year.

"Endava delivered another strong quarter with revenue for Q3 FY2020 of £92.2 million, an increase of 26.2% Year on Year on a reported basis or 25.7% on a constant currency basis from £73.1 million in the same period in the prior year. Our proforma constant currency growth rate reflecting the sale of the Worldpay Captive was 30.0% Year on Year. While the current crisis has somewhat impacted our very near term outlook, as the world attempts to emerge from the impacts of the first few months of the pandemic, we believe digital transformation should accelerate and we anticipate benefiting from the predicted recovery," said John Cotterell, Endava's CEO.

COVID-19 UPDATE:

Endava is working regularly with its clients and its employees to adapt to the uncertain and rapidly evolving situation arising from the COVID-19 pandemic. The Company has a well-established Business Continuity Management System (BCMS) in line with the international standard for business continuity, ISO 22301:2019, and has created a framework for Business Continuity Management which requires development of specific plans at the delivery unit level to deal with significant disaster events, including pandemics. Starting in mid-March, the Company has deployed its established business continuity plans, enabling its employees to work remotely, suspending all non-essential travel worldwide for its employees, and canceling or postponing company-sponsored events, employee attendance at industry events and in-person work-related meetings, without impact on utilisation or velocity of work to date. "Endava believes its commitment to helping people succeed and its core values of openness, thoughtfulness and adaptability have created a culture that positioned the Company well to face the challenges presented by the ongoing COVID-19 pandemic," stated John Cotterell, Endava's CEO.

OUTLOOK:

At this time, it is difficult to predict the duration and full scope of potential impacts driven by the ongoing COVID-19 pandemic. At the beginning of Q4 2020, we began to see a slowdown in our sales pipeline and a reduction in the size of our client teams and delay in projects due to the global economic uncertainty created by the COVID-19 pandemic. With these uncertainties and assumptions in mind, Endava is providing updated guidance for Q4 2020 and FY2020.

GUIDANCE:

Endava sees Q4 2020 EPS of GBP0.15-GBP0.16. Endava sees Q4 2020 revenue of GBP86-87 million.

Endava sees FY2020 EPS of GBP0.92-GBP0.93, versus prior guidance of GBP346.50-GBP347.50.

Fourth Quarter Fiscal Year 2020:

• Endava expects revenues will be in the range £86m to £87m, representing constant currency revenue growth of between 15.5% and 16.5%. Endava expects adjusted diluted EPS to be in the range of £0.15 to £0.16 per share.

Full Fiscal Year 2020:

• Endava expects revenues will be in the range £346.5m to £347.5m, representing constant currency revenue growth of between 23.0% and 23.5%. Endava expects adjusted diluted EPS to be in the range of £0.92 to £0.93 per share.
• Endava's guidance regarding constant currency revenue growth is pro-forma for the sale of Endava Technology SRL, also referred to as “the Worldpay Captive,” to Worldpay. The transaction closed on August 31, 2019.
• This quarter, Endava is providing guidance for Q4 FY2020 and for the Full Fiscal Year 2020 using the exchange rates at the end of April, when the exchange rate was 1 GBP to 1.25 USD and 1.15 Euro.

For earnings history and earnings-related data on Endava (DAVA) click here.

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