6-K
Endava plc (DAVA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the Month of February 2021
Commission File Number: 001-38607
ENDAVA PLC
(Name of Registrant)
125 Old Broad Street
London EC2N 1AR
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
x Form 20-F ¨ Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
EXHIBIT LIST
| Exhibit | Description |
|---|---|
| 99.1 | Press Release February 17, 2021 |
| 99.2 | Investor Presentation Q2 FY21 |
Exhibit 99.1, other than the portions of Exhibit 99.1 under the caption "Outlook", is hereby expressly incorporated by reference into the registrant’s registration statement on Form S-8 filed with the Securities and Exchange Commission ("SEC") on December 7, 2018 (File no. 333-228717) and the registrant's registration statement on Form F-3 filed with the SEC on October 18, 2019 (File no. 333-229213).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ENDAVA PLC | ||
|---|---|---|
| Date: February 17, 2021 | By: | /s/ John Cotterell |
| Name: John Cotterell | ||
| Title: Chief Executive Officer |
Document
| Q2 FY2021 |
|---|
ENDAVA ANNOUNCES SECOND QUARTER FISCAL YEAR 2021 RESULTS
Q2 FY2021
22.5% Year on Year Revenue Growth to £105.2 million
21.4% Revenue Growth at Constant Currency
IFRS diluted EPS £0.14 compared to £(0.25) in the prior year comparative period
Adjusted diluted EPS £0.29 compared to £0.30 in the prior year comparative period
London, U.K. – 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, 2020, the second quarter of its 2021 fiscal year ("Q2 FY2021").
"Endava delivered another strong quarter with revenue for Q2 FY2021 of £105.2 million, an increase of 22.5% Year on Year. Demand for digital transformation remains unabated, and we continued to broaden our client base during the quarter, " said John Cotterell, Endava's CEO.
SECOND QUARTER FISCAL YEAR 2021 FINANCIAL HIGHLIGHTS:
•Revenue for Q2 FY2021 was £105.2 million, an increase of 22.5% compared to £85.9 million in the same period in the prior year.
•Revenue growth rate at constant currency (a non-IFRS measure) was 21.4% for Q2 FY2021 compared to 20.5% in the same period in the prior year.
•Profit before tax for Q2 FY2021 was £10.6 million compared to loss before tax of £(17.3) million in the same period in the prior year. The loss during the same period in the prior year was the result of the declaration of a non-recurring, discretionary employee bonus, which is referred to as the "discretionary EBT Bonus", of £27.7 million in December 2019.
•Adjusted profit before tax (a non-IFRS measure) for Q2 FY2021 was £20.6 million, compared to £20.5 million in the same period in the prior year, or 19.6% of revenue, compared to 23.8% of revenue in the same period in the prior year.
•Profit for the period was £7.8 million in Q2 FY2021, resulting in a diluted EPS of £0.14, compared to loss for the period of £(13.8) million and diluted EPS of £(0.25) in the same period in the prior year.
| Q2 FY2021 |
|---|
•Adjusted profit for the period (a non-IFRS measure) was £16.4 million in Q2 FY2021, resulting in adjusted diluted EPS (a non-IFRS measure) of £0.29 compared to adjusted profit for the period of £16.8 million and adjusted diluted EPS of £0.30 in the same period in the prior year.
CASH FLOW:
•Net cash from operating activities was £20.4 million in Q2 FY2021 compared to £11.1 million in the same period in the prior year.
•Adjusted free cash flow (a non-IFRS measure) was £18.7 million in Q2 FY2021 compared to £8.0 million in the same period in the prior year.
•At December 31, 2020, Endava had cash and cash equivalents of £84.2 million, compared to £101.3 million at June 30, 2020.
OTHER METRICS FOR THE QUARTER ENDED DECEMBER 31, 2020:
•Headcount (including directors) reached 7,464 at December 31, 2020, with 6,629 average operational employees in Q2 FY2021, compared to a headcount of 6,267 at December 31, 2019 and 5,472 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 75 at December 31, 2020, compared to 65 at December 31, 2019.
•Top 10 clients accounted for 37% of revenue in Q2 FY2021, unchanged compared to December 31, 2019.
•By geographic region, 29% of revenue was generated in North America, 27% was generated in Europe, 42% was generated in the United Kingdom and 2% was generated in the rest of the world in Q2 FY2021. This compares to 29% in North America, 23% 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, 49% of revenue was generated from Payments and Financial Services, 28% from TMT and 23% from Other. This compares to 53% from Payments and Financial Services, 24% from TMT and 23% from Other in the same period in the prior year.
| Q2 FY2021 |
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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 third quarter of its 2021 fiscal year and its full 2021 fiscal year based upon what it currently sees in its markets.
Third Quarter Fiscal Year 2021:
Endava expects revenues will be in the range £110.0 million to £111.5 million, representing constant currency revenue growth of between 20.0% and 21.5%. Endava expects adjusted diluted EPS to be in the range of £0.27 to £0.28 per share.
Full Fiscal Year 2021:
Endava expects revenues will be in the range £423.0 million to £426.0 million, representing constant currency growth of between 22.0% and 22.5%. Endava expects adjusted diluted EPS to be in the range of £1.10 to £1.13 per share.
The constant currency growth figure now quoted for the full fiscal year 2021 guidance is pro-forma for the sale of the Worldpay Captive, which Endava sold in August 2019 and still remains in the full year comparative.
This above guidance for Q3 Fiscal Year 2021 and the Full Fiscal Year 2021 assumes the exchange rates at the end of January (when the exchange rate was 1 British Pound to 1.37 US Dollar and 1.13 Euro).
Endava is not able, at this time, to provide an outlook for IFRS diluted EPS for Q3 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.
| Q2 FY2021 |
|---|
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 17, 2021, to review its Q2 FY2021 results. To participate in Endava’s Q2 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 8574719.
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 5, 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 7,464 employees (including directors) as of December 31, 2020 located in North America, Western Europe and Australia and delivery centres in Romania, Moldova, Bulgaria, Serbia, North Macedonia, Slovenia, Bosnia & Herzegovina, Argentina, Uruguay, Venezuela, and Colombia.
| Q2 FY2021 |
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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, 2019 were used to convert revenue for the fiscal quarter ended December 31, 2020 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).
| Q2 FY2021 |
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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 2021 and the full fiscal year 2021 and the challenges presented by the ongoing COVID-19 pandemic and the associated global economic uncertainty. 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
| Q2 FY2021 |
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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.
INVESTOR CONTACT:
Endava Plc
Laurence Madsen, Investor Relations Manager
Investors@endava.com
| Q2 FY2021 |
|---|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Six Months Ended December 31 | Three Months Ended December 31 | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| £’000 | £’000 | £’000 | £’000 | |
| REVENUE | 200,365 | 168,252 | 105,240 | 85,900 |
| Cost of sales | ||||
| Direct cost of sales | (120,479) | (122,592) | (63,003) | (73,828) |
| Allocated cost of sales | (9,912) | (8,311) | (5,180) | (4,391) |
| Total cost of sales | (130,391) | (130,903) | (68,183) | (78,219) |
| GROSS PROFIT | 69,974 | 37,349 | 37,057 | 7,681 |
| Selling, general and administrative expenses | (44,261) | (36,480) | (22,994) | (19,139) |
| OPERATING PROFIT/ (LOSS) | 25,713 | 869 | 14,063 | (11,458) |
| Net finance (expense) / income | (6,380) | (2,871) | (3,455) | (5,799) |
| Gain on sale of subsidiary | — | 2,215 | — | — |
| PROFIT/ (LOSS) BEFORE TAX | 19,333 | 213 | 10,608 | (17,257) |
| Tax on profit on ordinary activities | (4,826) | 483 | (2,809) | 3,441 |
| PROFIT/ (LOSS) FOR THE PERIOD | 14,507 | 696 | 7,799 | (13,816) |
| OTHER COMPREHENSIVE INCOME | ||||
| Items that may be reclassified subsequently to profit or loss: | ||||
| Exchange differences on translating foreign operations | (3,491) | (4,385) | (2,644) | (2,460) |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT | 11,016 | (3,689) | 5,155 | (16,276) |
| EARNINGS PER SHARE (EPS): | ||||
| Weighted average number of shares outstanding - Basic | 54,831,134 | 52,848,507 | 55,168,042 | 53,140,682 |
| Weighted average number of shares outstanding - Diluted | 56,850,290 | 55,663,120 | 57,107,940 | 55,957,472 |
| Basic EPS (£) | 0.26 | 0.01 | 0.14 | (0.26) |
| Diluted EPS (£) | 0.26 | 0.01 | 0.14 | (0.25) |
| Q2 FY2021 | ||||
| --- |
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, 2020 | June 30, 2020 | December 31, 2019 | |
|---|---|---|---|
| £’000 | £’000 | £’000<br><br>(Restated) (1) | |
| ASSETS - NON-CURRENT | |||
| Goodwill | 102,739 | 56,885 | 59,467 |
| Intangible assets | 34,961 | 38,751 | 31,478 |
| Property, plant and equipment | 11,985 | 12,747 | 11,776 |
| Lease right-of-use assets | 46,836 | 51,134 | 49,109 |
| Financial assets | 639 | 639 | 881 |
| Deferred tax assets | 13,552 | 13,340 | 11,447 |
| TOTAL | 210,712 | 173,496 | 164,158 |
| ASSETS - CURRENT | |||
| Trade and other receivables | 91,527 | 82,614 | 74,251 |
| Corporation tax receivable | 2,611 | 2,922 | 4,171 |
| Financial assets | 577 | 584 | 592 |
| Cash and cash equivalents | 84,221 | 101,327 | 78,975 |
| TOTAL | 178,936 | 187,447 | 157,989 |
| TOTAL ASSETS | 389,648 | 360,943 | 322,147 |
| LIABILITIES - CURRENT | |||
| Lease liabilities | 12,150 | 11,132 | 11,443 |
| Trade and other payables | 63,121 | 58,599 | 72,511 |
| Corporation tax payable | 1,865 | 1,449 | 983 |
| Contingent consideration | 1,091 | 1,442 | 1,131 |
| Deferred consideration | 2,786 | 3,764 | 1,707 |
| TOTAL | 81,013 | 76,386 | 87,775 |
| LIABILITIES - NON CURRENT | |||
| Lease liabilities | 39,141 | 42,233 | 39,545 |
| Deferred tax liabilities | 5,497 | 5,861 | 2,837 |
| Deferred consideration | 5,017 | — | 1,901 |
| Other liabilities | 138 | 136 | 108 |
| TOTAL | 49,793 | 48,230 | 44,391 |
| EQUITY | |||
| Share capital | 1,110 | 1,099 | 1,095 |
| Share premium | 230 | 221 | 137 |
| Merger relief reserve | 25,527 | 25,527 | 24,571 |
| Retained earnings | 239,469 | 214,638 | 156,313 |
| Other reserves | (7,308) | (3,817) | 9,548 |
| Investment in own shares | (186) | (1,341) | (1,683) |
| TOTAL | 258,842 | 236,327 | 189,981 |
| TOTAL LIABILITIES AND EQUITY | 389,648 | 360,943 | 322,147 |
1) The restatement refers to a reclassification of £20,141,000 from share premium to merger relief reserve.
| Q2 FY2021 |
|---|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Ended December 31 | Three Months Ended December 31 | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| £’000 | £’000 | £’000 | £’000 | |
| OPERATING ACTIVITIES | ||||
| Profit/ (Loss) for the period | 14,507 | 696 | 7,799 | (13,816) |
| Income tax charge/ (credit) | 4,826 | (483) | 2,809 | (3,441) |
| Non-cash adjustments | 27,486 | 15,886 | 15,069 | 13,930 |
| Tax paid | (648) | (3,535) | (800) | (2,703) |
| UK research and development credit received | 1,311 | — | 1,311 | — |
| Net changes in working capital | (5,599) | 13,936 | (5,775) | 17,121 |
| Net cash from operating activities | 41,883 | 26,500 | 20,413 | 11,091 |
| INVESTING ACTIVITIES | ||||
| Purchase of non-current assets (tangible and intangible) | (2,344) | (5,830) | (1,703) | (3,324) |
| Proceeds from disposal of non-current assets | 108 | 120 | 43 | 107 |
| Acquisition of business / subsidiaries (net of cash acquired) | (52,132) | (27,061) | (1,342) | (25,538) |
| Proceeds from sale of subsidiary net of cash disposed of | — | 2,744 | — | 166 |
| Cash and cash equivalents acquired with subsidiaries | 1,603 | 3,289 | — | 3,289 |
| Interest received | 53 | 353 | 26 | 154 |
| Net cash used in investing activities | (52,712) | (26,385) | (2,976) | (25,146) |
| FINANCING ACTIVITIES | ||||
| Proceeds from sublease | 289 | 302 | 132 | 148 |
| Repayment of borrowings | — | (9) | — | — |
| Repayment of lease liabilities | (5,746) | (4,569) | (2,792) | (2,413) |
| Interest paid | (444) | (375) | (233) | (209) |
| Grant received / (repaid) | 220 | 661 | (89) | 97 |
| Proceeds from sale of EBT shares | — | 14,797 | — | 14,797 |
| Issue of shares | 9 | 9 | 1 | — |
| Net cash from financing activities | (5,672) | 10,816 | (2,981) | 12,420 |
| Net change in cash and cash equivalents | (16,501) | 10,931 | 14,456 | (1,635) |
| Cash and cash equivalents at the beginning of the period | 101,327 | 70,172 | 70,039 | 83,628 |
| Exchange differences on cash and cash equivalents | (605) | (2,128) | (274) | (3,018) |
| Cash and cash equivalents at the end of the period | 84,221 | 78,975 | 84,221 | 78,975 |
| Q2 FY2021 | ||||
| --- |
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 | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| REVENUE GROWTH RATE AS REPORTED UNDER IFRS | 19.1 | % | 21.7 | % | 22.5 | % | 19.6 | % |
| Foreign exchange rates impact | 0.1 | % | (0.7 | %) | (1.1 | %) | 0.9 | % |
| REVENUE GROWTH RATE AT CONSTANT CURRENCY INCLUDING WORLDPAY CAPTIVE | 19.2 | % | 21.0 | % | 21.4 | % | 20.5 | % |
| Impact of Worldpay Captive | 1.6 | % | 2.3 | % | — | 4.0 | % | |
| PRO-FORMA REVENUE GROWTH RATE AT CONSTANT CURRENCY ADJUSTED FOR THE SALE OF THE WORLDPAY CAPTIVE | 20.8 | % | 23.3 | % | 21.4 | % | 24.5 | % |
| Q2 FY2021 | ||||||||
| --- |
RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX AND ADJUSTED PROFIT FOR THE PERIOD:
| Six Months Ended December 31 | Three Months Ended December 31 | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| £’000 | £’000 | £’000 | £’000 | |
| PROFIT/ (LOSS) BEFORE TAX | 19,333 | 213 | 10,608 | (17,257) |
| Adjustments: | ||||
| Share-based compensation expense | 11,896 | 6,996 | 5,965 | 3,673 |
| Discretionary EBT bonus | — | 27,657 | — | 27,657 |
| Amortisation of acquired intangible assets | 2,280 | 1,809 | 1,114 | 913 |
| Foreign currency exchange losses, net | 5,304 | 2,913 | 2,892 | 5,466 |
| Net gain on disposal of subsidiary | — | (2,215) | — | — |
| Total adjustments | 19,480 | 37,160 | 9,971 | 37,709 |
| ADJUSTED PROFIT BEFORE TAX | 38,813 | 37,373 | 20,579 | 20,452 |
| PROFIT/ (LOSS) FOR THE PERIOD | 14,507 | 696 | 7,799 | (13,816) |
| Adjustments: | ||||
| Adjustments to profit before tax | 19,480 | 37,160 | 9,971 | 37,709 |
| Tax impact of adjustments | (2,966) | (7,508) | (1,416) | (7,115) |
| ADJUSTED PROFIT FOR THE PERIOD | 31,021 | 30,348 | 16,354 | 16,778 |
| Diluted EPS (£) | 0.26 | 0.01 | 0.14 | (0.25) |
| Adjusted diluted EPS (£) | 0.55 | 0.55 | 0.29 | 0.30 |
| Q2 FY2021 | ||||
| --- |
RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW
| Six Months Ended December 31 | Three Months Ended December 31 | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| £’000 | £’000 | £’000 | £’000 | |
| Net cash from operating activities | 41,883 | 26,500 | 20,413 | 11,091 |
| Adjustments: | ||||
| Grant received / (repaid) | 220 | 661 | (89) | 97 |
| Net purchases of non-current assets (tangible and intangible) | (2,236) | (5,710) | (1,660) | (3,217) |
| Adjusted Free cash flow | 39,867 | 21,451 | 18,664 | 7,971 |
| Q2 FY2021 | ||||
| --- |
SUPPLEMENTARY INFORMATION
SHARE-BASED COMPENSATION EXPENSE
| Six Months Ended December 31 | Three Months Ended December 31 | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| £’000 | £’000 | £’000 | £’000 | |
| Direct cost of sales | 7,064 | 3,830 | 3,566 | 2,133 |
| Selling, general and administrative expenses | 4,832 | 3,166 | 2,399 | 1,540 |
| Total | 11,896 | 6,996 | 5,965 | 3,673 |
DEPRECIATION AND AMORTISATION
| Six Months Ended December 31 | Three Months Ended December 31 | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| £’000 | £’000 | £’000 | £’000 | |
| Direct cost of sales | 7,863 | 5,910 | 4,293 | 3,159 |
| Selling, general and administrative expenses | 3,568 | 2,833 | 1,795 | 1,457 |
| Total | 11,431 | 8,743 | 6,088 | 4,616 |
EMPLOYEE BENEFIT TRUST DISCRETIONARY BONUS
| Six Months Ended December 31 | Three Months Ended December 31 | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| £’000 | £’000 | £’000 | £’000 | |
| Direct cost of sales | — | 25,182 | — | 25,182 |
| Selling, general and administrative expenses | — | 2,475 | — | 2,475 |
| Total | — | 27,657 | — | 27,657 |
| Q2 FY2021 | ||||
| --- |
EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT
| Six Months Ended December 31 | Six Months Ended December 31 | Three Months Ended December 31 | ||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| Closing number of total employees (including directors) | 7,464 | 6,267 | 7,464 | 6,267 |
| Average operational employees | 6,417 | 5,405 | 6,629 | 5,472 |
| Top 10 customers % | 38% | 39% | 37% | 37% |
| Number of clients with > £1m of revenue<br>(rolling 12 months) | 75 | 65 | 75 | 65 |
| Geographic split of revenue % | ||||
| North America | 29% | 28% | 29% | 29% |
| Europe | 26% | 24% | 27% | 23% |
| UK | 43% | 46% | 42% | 45% |
| Rest of World (RoW) | 2% | 2% | 2% | 3% |
| Industry vertical split of revenue % | ||||
| Payments and Financial Services | 50% | 53% | 49% | 53% |
| TMT | 28% | 25% | 28% | 24% |
| Other | 22% | 22% | 23% | 23% |
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irdeckq2fy21feb162021
Q2 FY2021 INVESTOR PRESENTATION
2 This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this presentation, other than statements of historical facts, are forward-looking statements. The words “believe,” “estimate,” “expect,” “may,” “will” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements include, but are not limited to, the statements regarding the impact of the COVID-19 pandemic and associated global economic uncertainty on demand for our technology services, our business strategy and our plans and objectives for future operations, our addressable market, potential technological disruptions, and client demand for our services. 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 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; our ability to manage our rapid growth or achieve anticipated growth; 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; our ability to adapt to technological change and innovate solutions for our clients; our ability to collect on billed and unbilled receivables from clients; our ability to effectively manage our international operations, including our exposure to foreign currency exchange rate fluctuations; our ability to remediate the identified material weaknesses and maintain an effective system of disclosure controls and internal control over financial reporting 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 (the “SEC”) on September 15, 2020. Except as required by law, we assume no duty to update any of these forward-looking statements after the date of this presentation to conform these statements to actual results or revised expectations. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this presentation. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements contained in this presentation. This presentation also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Neither we nor any other person makes any representation as to the accuracy or completeness of such data or undertakes any obligation to update such data after the date of this presentation. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk. By attending or receiving this presentation you acknowledge that you will be solely responsible for your own assessment of the market and our market position and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of our business. This presentation includes non-IFRS financial measures which have certain limitations and should not be considered in isolation, or as alternatives to or substitutes for, financial measures determined in accordance with IFRS. The non-IFRS measures as defined by us may not be comparable to similar non-IFRS measures presented by other companies. Our presentation of such measures, which may include adjustments to exclude unusual or non-recurring items, should not be construed as an inference that our future results will be unaffected by these or other unusual or non-recurring items. See the IFRS to Non-IFRS Reconciliation section for a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures. Disclaimer
REIMAGINING THE RELATIONSHIP BETWEEN PEOPLE & TECHNOLOGY 3
We accelerate our clients’ ability to take advantage of new business models and market opportunities by ideating and delivering dynamic platforms and intelligent digital experiences that are designed to fuel rapid, ongoing transformation of their businesses. 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 our clients become more engaging, responsive, and efficient. REIMAGINING THE RELATIONSHIP BETWEEN PEOPLE & TECHNOLOGY 4
5 1 Opportunity & Approach Q2 FY2021
6 WE ARE A LEADING NEXT-GEN TECHNOLOGY SERVICES PROVIDER AND HELP ACCELERATE DISRUPTION BY DELIVERING RAPID EVOLUTION TO ENTERPRISES. OUR PEOPLE SYNTHESIZE CREATIVITY, TECHNOLOGY, AND DELIVERY AT SCALE IN MULTI-DISCIPLINARY TEAMS, ENABLING US TO SUPPORT OUR CLIENTS FROM IDEATION TO PRODUCTION. FROM PROOF OF CONCEPT, TO PROTOTYPE, TO PRODUCTION, WE USE OUR ENGINEERING EXPERTISE TO DELIVER ENTERPRISE PRODUCTS AND PLATFORMS CAPABLE OF HANDLING MILLIONS OF TRANSACTIONS PER DAY. IN THIS NEW REALITY, WE’LL BUILD THE EXPERIENCES, TECHNICAL SCAFFOLDING, AND INFRASTRUCTURE DESIGNED TO ENABLE AN ENTIRELY NEW SET OF INTERACTIONS BETWEEN PEOPLE AND TECHNOLOGY. We enable change IN OUR WORLD TODAY, MANY BUSINESSES ARE PREPARING FOR EXTENDED PERIODS OF TIME DEFINED BY LIMITED PHYSICAL CONTACT BETWEEN HUMANS. AN ORGANIZATION’S ABILITY TO OPERATE PRIMARILY IN A DIGITAL LANDSCAPE MAY DICTATE ITS ABILITY TO BOTH SURVIVE AND SUCCEED. WE BELIEVE, MOVING FORWARD, TRUE DIGITAL TRANSFORMATION AND THE ESTABLISHMENT OF A FLEXIBLE BUSINESS MODEL WILL BECOME MISSION CRITICAL FOR BUSINESSES. The new reality
LARGE AND FAST GROWING MARKET OPPORTUNITY DELIVER RAPID EVOLUTION BY COMBINING NEXT-GEN TECHNOLOGIES WITH DEEP INDUSTRY EXPERTISE STRONG GROWTH AND FINANCIAL PERFORMANCE IDEATION TO PRODUCTION CAPABILITIES, DISTRIBUTED AGILE AT SCALE, DOMAIN EXPERTISE AND NEAR-SHORE DELIVERY FOUNDER-LED, EXPERIENCED MANAGEMENT TEAM WITH STRONG CULTURE 7
8 TRADITIONAL IT SERVICES BUS. & TECH CONSULTANTS ENGINEERING ENTERPRISE AGILE AUTOMATION NEXT-GEN TECH STRATEGY USER EXPERIENCE DIGITAL AGENCIES
WE SERVE A LARGE ADDRESSABLE MARKET * Worldwide Semiannual Digital Transformation Spending Guide IDC OCTOBER 2020 $478B 2020 $815B 2024 14.3 % CAGR FOR DIGITAL TRANSFORMATION SERVICES 9
EMPLOYEE GEOGRAPHY ( INCLUDING DIRECTORS): FY16 FY17 FY18 FY19 FY20 Q2FY20 Q2FY21 Western Europe 237 233 232 254 448 431 465 Central Europe - EU Countries 1,572 2,314 2,578 3,062 3,368 3,171 3,809 1,809 2,547 2,810 3,316 3,816 3,602 4,274 Central Europe - Non-EU Countries 928 1,073 1,279 1,583 1,810 1,711 2,194 Latin America - 68 665 780 895 861 896 North America 58 56 65 75 103 93 98 APAC 2 2,795 3,744 4,819 5,754 6,624 6,267 7,464 CLOSE TO CLIENT Australia Austria Denmark Germany Ireland Netherlands United Kingdom United States NEARSHORE DELIVERY European Union: Romania, Bulgaria and Slovenia Central European: North Macedonia, Moldova, Serbia and Bosnia & Herzegovina Latin America: Argentina, Colombia, Uruguay & Venezuela 7,464 AS OF DEC 31, 2020 GLOBAL EMPLOYEES 10 42 OFFICES / / 39 CITIES / / 19 COUNTRIES
HISTORY OF ENDAVA 7,464 FOUNDED IN COMPUDAVA ALPHEUS NICKELFISH PS TECH ISDC EXPAND TO CE VELOCITY PARTNERSCONCISE UK IT CONSULTANCY 60 240 1,000 2000 2021 EXPAND TO USA EXPAND TO LATAM IPO NYSE JULY 2018 MOLDOVA NEARSHORE DELIVERY GERMANY CONSULTING BUSINESS USA DIGITAL, UX & STRATEGY FIRM USA & LATAM NA SALES & LATAM DELIVERY SERBIA AGILE DELIVERY NETHERLANDS & CE AGILE DELIVERY 2,000 BAIN PARTNERSHIP ANNOUNCED HEADCOUNT Q2 FY21 INTUITUS UNITED KINGDOM IT CONSULTANCY PRIVATE EQUITY EXOZET GERMANY DIGITAL AGENCY 11 COMTRADE DIGITAL SERVICES ADRIATIC REGION SOFTWARE ENGINEERING SERVICES
12 WE CREATE VALUE THROUGH THE DELIVERY OF
13 BUSINESS ANALYSIS DATA & ANALYTICS DIGITAL PRODUCT STRATEGY PE DIGITAL & IT ADVISORY PROGRAMME MANAGEMENT TECHNOLOGY STRATEGY AUTOMATED TESTING. CLOUD NATIVE SOFTWARE ENG. CONTINUOUS DELIVERY . DISTRIBUTED AGILE DELIVERY INTELLIGENT AUTOMATION SECURE DEVELOPMENT AGILE APPLICATIONS MGMT CLOUD INFRASTRUCTURE DEVSECOPS SERVICE DELIVERY SMART DESK TELEMETRY & MONITORING ARCHITECTURE EXTENDED REALITY MACHINE LEARNING & AI PRODUCT DESIGN USER EXPERIENCE DESIGN VISUAL DESIGN
14 TODAY TIME TECHNOLOGY DISRUPTION WAVES & CONVERGENCE BANKING PAYMENTS RETAIL / CPG LOGISTICS HEALTHCARE
15 DOMAIN EXPERTISE: PAYMENT RO I O PP OR TU N IT Y 2016 2017 2018 2019 2020 PROTOTYPING PAYMENTS PLATFORMS ROBOTIC AUTOMATION REAL OMNI-CHANNEL CUSTOMER CENTRIC UX FINANCIAL INCLUSION CHATBOTS MICRO MERCHANTS & NANO PAYMENTS SCHEMELESS BIOMETRIC IN APP P2P BLOCKCHAIN QUANTUM CRYPTOCURRENCY PSD2 OPEN APIs MESSAGE APPS FRICTIONLESS PAYMENTS SMART POS SYSTEMS AR COMPUTER VISION
16 AS WE STRIVE TO BE THE ASPIRATIONAL BRAND FOR IT PROFESSIONALS IN THE REGIONS IN WHICH WE OPERATE, WE ATTRACT HIGH QUALITY TALENT. TO SUPPORT THIS GROWTH, WE NEED LEADERSHIP AND HAVE DEVELOPED THE ‘PASS IT ON’ INITIATIVE WHICH DRIVES LOYALTY AND LOWERS ATTRITION. WE USE TUCK-IN ACQUISITIONS TO ACCELERATE OUR GROWTH STRATEGY - TO EITHER ESTABLISH OURSELVES IN A NEW GEO OR TO ESTABLISH A NEW AREA OF EXPERTISE AND MARKET GROWTH. BRAND CULTURE M&A Scalability
17 ENSURING THE HEALTH & WELL-BEING OF OUR EMPLOYEES AND THEIR FAMILIES WORKING WITH OUR CLIENTS TO ADAPT TO THE CURRENT ENVIRONMENT RETAINING OUR PEOPLE AND THEIR INCOMES THROUGH THIS CRISIS PERIOD Priorities CURRENTLY OVER 90% OF OUR EMPLOYEES ARE WORKING FROM HOME. THE CITIES IN WHICH WE OPERATE HAVE EXCELLENT CONNECTIVITY AND INFRASTRUCTURE. WE CONTINUE TO ONBOARD NEW EMPLOYEES AND RECRUITS VIRTUALLY. Where we stand COVID-19 Response
18 2 Financials Q2 FY2021
19 MASTER SERVICE AGREEMENTS WITH CLIENTS PRIMARILY T&M BASED PRICING LONG-TERM CLIENT RELATIONSHIPS STRONG REVENUE GROWTH HEALTHY MARGINS LOW CAPEX REQUIREMENTS POSITIVE ADJUSTED FREE CASH FLOW Financial Highlights
20 STRONG REVENUE GROWTH FY15 FY16 FY17 FY17 FY19 FY20 _ 6m18 6m19 105.2 85.9 95.182.4351.0287.9217.6159.4115.484.1 CAGR 33.1% OVER LAST 5 YEARS, 89.4% OF REVENUE (ON AVERAGE) EACH FISCAL YEAR WAS GENERATED FROM CLIENTS IN THE PREVIOUS YEAR. FY15 FY16 FY17 JUNE 30 DEC 31 6M20 6M21FY18 FY19 +19.1% YOYRevenue (£m) FY20 Q1 Q2 168.3 200.3
21 FY15 FY16 FY17 FY18 FY19 FY20 _ FY17 FY18 10.6 8.717.525.330.124.621.720.815.2 ROBUST PROFITABILITY FY15 FY16 FY17 FY18 FY19 FY20 _ FY17 FY18 20.620.5 18.216.968.651.933.525.222.816.1 19.2% 19.7% 15.8% 22.2% 19.4%MARGIN FY15 FY16 FY17 JUNE 30 FY18 15.4% 0.1%MARGIN FY15 FY16 FY17 JUNE 30 DEC 31 6M20 6M21FY18 FY19 FY19 18.0% DEC 31 6M20 6M21 9.6% * See page 27 for reconciliation of IFRS to Non-IFRS metrics CAGR 34% Adjusted Profit Before Tax (£m)*Profit Before Tax (£m) 18.1% 18.0% 13.6%MARGIN 11.3% 10.5% FY20 7.2% FY20 19.5% Q1 Q2 (17.3) Q1 Q2 (20.1%) 10.1% 6M Q2 20.5% 19.2% 23.8% 19.6% Q1 Q2 6M 21.2% 9.2% Q1 0.2 19.3 37.4 38.8
DEEP CLIENT RELATIONSHIPS FY15 FY17 FY18 _ FY18 7565656346342618 FY15 FY16 FY17 FY17 FY17 FY17 q218 q219 q218 q219 37%37%38%39%38%38%42%49%54%66% TOP TEN FY15 FY16 FY17 JUNE 30 FY15 FY16 FY17 JUNE 30 FY18 FY186M20 Q2FY21 DEC 31 FY19 FY19 22* Calculated on a 12 month rolling basis. Top Client Revenue % No. of Clients / Revenue > £1m* FY20 DEC 31 FY20 Q2FY20 Q2FY216M21 Q2FY20
23 INCREASING NUMBER & SPEND OF CLIENTS FY15 FY16 FY17 FY17 FY17 FY20 _ FY17 FY18 521367416275258188154112 FY15 FY16 FY17 FY18 FY18 FY18 - Q218 Q219 Q218 Q219 229258401440647699597504434284 0 3345 6690 10035 13380 FY15 FY16 FY17 FY18 FY19 FY20 Q218 Q219 Q218 Q219 3,8603,1907,5806,51013,38010,8709,0407,8206,2005,510 FY15 FY16 FY17 JUNE 30 FY18 6M20 6M21FY19 DEC 31 FY20 Q2FY20 Q2FY21 DEC 31 Total No. of Clients Average Spend: TOP TEN CLIENTS (£000s) Average Spend: REMAINING CLIENTS (£000s) FY15 FY16 FY17 AS OF JUNE 30 FY18 FY19 Q2FY20 Q2FY21 DEC 31 FY20 FY15 FY16 FY17 JUNE 30 FY18 Q2FY20 Q2FY21FY19 DEC 31 FY20 6M20 6M21 DEC 31
DIVERSE REVENUE BASE: GEOGRAPHY & INDUSTRY VERTICALS 23% 28% 49% PAYMENTS AND FINANCIAL SERVICES TECHNOLOGY, MEDIA & TELECOMMUNICATIONS OTHER REVENUE % BY VERTICAL Q2 FY21 FY15 FY16 FY17 FY18 FY19 FY20 _ FY19 FY20 0.30.20.3 29%29%29% 27% 21% 16%18% 10% 27% 23%24%28%34% 34% 18% 12% 42%45%44%45%45%50%64%78% UK EUROPE N.AMERICA RoW * FY15 FY16 FY17 JUNE 30 DEC 31 Q2FY20 Q2FY21FY18 FY19 2% 24 * Other includes consumer products,
healthcare, mobility and retail verticals Revenue by Region 3% FY20 3%
LOW CAPEX & POSITIVE ADJUSTED FCF 0.00 8.00 16.00 24.00 32.00 FY15 FY16 FY17 FY18 FY18 FY20 _ FY17 FY18 18.7 8.0 21.213.531.529.828.711.210.19.5 FY15 FY17 FY18 _ FY18 1.7 3.2 0.62.59.77.35.46.52.72.1 MARGIN FY15 FY16 FY17 6M20 6M21FY18 % OF REVENUE 11.3% 8.8% 7.0% 12.7% 19.9% FY15 FY16 FY17 JUNE 30 FY18 13.2%2.5% 2.4% 4.1% 3.4% 1.1%2.5% JUNE 30 DEC 31 FY19 2.5% FY19 10.4% 25* See page 27 for reconciliation of IFRS to Non-IFRS metrics Capital Expenditures (£m) Adjusted Free Cash Flow (£m)* FY20 2.8% FY20 9.0% DEC 31 6M20 6M21 39.9 21.5 2.3 5.7 3.7% 1.6% 3.0% 0.6% 6M Q2 Q1 9.3% 17.7% 16.4% 22.3% 6M Q2 Q1 Q1 Q2 Q1 Q2
3 Appendix Q2 FY2021 26
27 IFRS TO NON-IFRS RECONCILIATION
