Q1 FY2019
39.7% Year over Year Growth in Revenue to
£66.4 million
39.8% Constant Currency Revenue
Growth1
IFRS Diluted EPS £0.04 compared to £0.10 in
the comparative prior year
Adjusted diluted EPS2 £0.17
compared to £0.13 in the comparative prior year
Endava (NYSE:DAVA), a global provider of digital transformation,
agile development and intelligent automation services, today
announced results for its first quarter ended September 30,
2018.
“We are pleased with our results for the first quarter of FY19
demonstrating our strength in growing new and existing customers,
across all geographies and industry verticals.” said John
Cotterell, Endava’s CEO.
“Our strong client relationships contributed significantly to
our constant currency revenue growth of 39.8% for the quarter and
give us good visibility into the next quarter. We delivered that
growth profitably, with PBT at £2.6 million and Adjusted PBT3 at
£11.7 million,” said Mark Thurston Endava’s CFO.”
FIRST QUARTER OF FISCAL 2019 FINANCIAL HIGHLIGHTS:
- Revenue for the first quarter ended
September 30, 2018 was £66.4 million an increase of 39.7% compared
to £47.5 million in the same period in the prior year.
- Revenue growth rate at constant
currency was 39.8% .
- Profit before tax in the first quarter
was £2.6 million compared to £6.4 million in the same period in the
prior year or 4.0% of revenue compared to 13.6% in the same period
in the prior year.
- Adjusted Profit before tax in the first
quarter was £11.7 million compared to £7.8 million in the same
period in the prior year or 17.6% of revenue compared to 16.4% in
the same period in the prior year.
- IFRS Profit attributable to
shareholders was £2.0 million, resulting in a Diluted EPS of £0.04
compared to IFRS Profit attributable to shareholders of £5.1
million and Diluted EPS of £0.10 in the same period in the prior
year. During the quarter, a fair value adjustment to contingent
consideration of £5.8m in relation to the Velocity Partners'
acquisition had a one-off impact on earnings and reduced the IFRS
Diluted EPS by £0.11. See "Additional Information" for further
details.
- Adjusted Profit attributable to
shareholders was £9.4 million, resulting in an Adjusted Diluted EPS
of £0.17 compared to Adjusted Profit attributable to shareholders
of £6.2 million and Adjusted Diluted EPS of £0.13 in the same
period in the prior year.
CASH FLOW:
- Cash flow from operations was £2.1
million for the three months ended September 30, 2018 compared to
£3.9 million in the same period in the prior year.
- Free Cash Flow (a non-IFRS measure) was
£0.3 million for the three months ended September 30, 2018 compared
to free cash flow of £2.2 million in the same period in the prior
year.
- As of September 30, 2018, Endava had
cash and cash equivalents of £41.8 million, compared to £15.0
million at the end of June 30, 2018. Net cash at September 30, 2018
was £41.7 million compared to net borrowing of £4.7 million at June
30, 2018.
OTHER METRICS FOR THE QUARTER ENDED SEPTEMBER 30,
2018:
- Headcount reached 5,182 with 4,608
average operational employees as of the quarter ended September 30,
2018 compared to a headcount of 3,934 and 3,558 average operational
employees at September 30, 2017.
- Number of clients with over £1 million
in spend grew to 52 on a rolling twelve months basis compared to 37
at September 30, 2017.
- Top 10 clients accounted for 39% of
revenue down from 46% as of the quarter ended September 30,
2017.
- By geographic region, 27% of revenue
was generated in North America, 29% was generated in Europe and 44%
was generated in the United Kingdom for the quarter ended September
30, 2018. This compares to 15% in North America, 37% in Europe and
48% in the United Kingdom for the quarter ended September 30,
2017.
- Revenue by sector was as follows for
the three months ended September 30, 2018, Payments and Financial
Services 53%, TMT 27% and Other 20%. This compares to Payments and
Financial Services 60%, TMT 29% and Other 11% for the three months
ended September 30, 2017.
ADDITIONAL INFORMATION:
During the quarter, the Company took a fair value adjustment of
£5.8m related to contingent consideration in connection with the
Velocity Partners’ acquisition. This adjustment had a one-off
impact on earnings and reduced IFRS Diluted EPS by £0.11. This
charge is shown as a Net finance expense. Contingent consideration
was recognised on acquisition of Velocity Partners as a financial
liability, which was settled in ordinary shares on the effective
date of the Company’s initial public offering (IPO). The value of
these ordinary shares was measured using the share price of the
Company’s ordinary shares at IPO, which was higher than the
original estimated share price used to record the financial
liability at the date of acquisition. The fair value adjustment was
excluded as part of Adjusted profit before tax financial measure,
the financial liability was fully settled and the Other Reserves in
the balance sheet was increased by the ordinary shares to be
issued.
OUTLOOK:
For Q2 FY19:
We expect revenue will be in the range £67.0 million to £67.5
million, representing constant currency growth of between 33% and
34%. We expect diluted adjusted EPS to be in the range of 15.0p to
16.0p per share.
Full Fiscal Year 2019:
We expect revenue will be in the range £275 million to £278
million, representing constant currency growth of between 25% and
26%. We expect diluted adjusted EPS to be in the range of 64p to
66p per share.
CONFERENCE CALL DETAILS:
The company will host a conference call at 8:00 am EST today to
review the first quarter 2019 results. To participate in Endava’s
first quarter 2019 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
5498218.
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 14,
2018.
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, Financial Services,
TMT, Consumer Products, Logistics and Healthcare. Endava had 5,182
employees as of September 30, 2018 located in offices in North
America and Western Europe and delivery centres in Romania,
Moldova, Bulgaria, Serbia, Macedonia, Argentina, Uruguay,
Venezuela, and Colombia.
NON-IFRS FINANCIAL INFORMATION:
To supplement Endava’s Consolidated Statement of Comprehensive
Income and Consolidated Balance Sheet presented in accordance with
IFRS, the company uses non-IFRS measures of certain components of
financial performance. These measures include: revenue in constant
currency, adjusted profit before tax, adjusted profit attributable
to shareholders and 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 year ended
September 30, 2017 were used to convert revenue for the fiscal
year ended September 30, 2018 and the revenue for the comparable
prior period.
Free cash flow is the Company’s net cash from/(used in)
operating activities, plus grants received, less purchases of
non-current tangible and intangible assets. Adjusted profit before
tax is the company’s profit before taxes adjusted to exclude the
impact of share-based compensation, amortization of acquired
intangible assets, realized and unrealized foreign currency
exchange gains and losses, fair value adjustment of contingent
consideration and initial public offering expenses incurred.
In order for Endava’s investors to be better able to compare its
current 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. Endava 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 use of
terms and phrases such as “believe,” “expect,” “will,” 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 full-fiscal
year 2019. 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 favorable pricing and utilization 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 October 11, 2018. 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.
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
Three Months Ended September 30 2018
2017 £’000 £’000 REVENUE
66,414 47,531 Cost of sales Direct cost of sales
(40,358
)
(29,417
)
Allocated cost of sales (3,569 ) (2,947 ) Total cost of sales
(43,927 ) (32,364 )
GROSS PROFIT 22,487 15,167
Selling, general and administrative expenses (14,662 ) (8,218 )
OPERATING PROFIT 7,825 6,949 Net finance
expense (5,191 ) (507 )
PROFIT BEFORE TAX 2,634
6,442 Tax on profit on ordinary activities
(586
)
(1,357
)
PROFIT FOR THE PERIOD AND PROFIT ATTRIBUTABLE TO OWNERS OF THE
PARENT 2,048 5,085 EARNINGS PER
SHARE: Weighted average number of shares outstanding 48,258,033
45,100,165 Weighted average number of shares outstanding - diluted
53,842,639 49,200,754 Basic EPS (£) 0.04 0.11 Diluted EPS (£) 0.04
0.10
CONSOLIDATED BALANCE SHEET
September 30, 2018 June 30, 2018 September
30, 2017 £’000 £’000 £’000 ASSETS -
NON-CURRENT Goodwill 41,494 41,062 16,135 Intangible assets
30,381 30,787 16,002 Property, plant and equipment 9,238 8,584
7,946 Deferred tax assets 2,492 2,488 866
TOTAL
83,605 82,921 40,949 ASSETS - CURRENT
Inventories 4 16 90 Trade and other receivables 61,126 52,352
45,440 Corporation tax receivable 76 677
-
Cash and cash equivalents 41,765 15,048 16,634
TOTAL
102,971 68,093 62,164 TOTAL ASSETS
186,576 151,014 103,113 LIABILITIES -
CURRENT Borrowings 41 19,744 20,567 Trade and other payables
40,825 40,243 25,071 Corporation tax payable
-
1,488 363 Contingent consideration 1,212 5,259
-
Deferred consideration 4,512 4,401
-
TOTAL 46,590 71,135 46,001
LIABILITIES - NON-CURRENT Borrowings 12 20 53 Contingent
consideration
-
7,251
-
Deferred tax liabilities 2,795 2,832 2,623 Other liabilities 279
277 253
TOTAL 3,086 10,380 2,929
EQUITY Share capital 1,061 996 996 Share premium 48,614
2,678 2,678 Merger relief reserve 4,430 4,430 4,430 Retained
earnings 63,659 59,260 43,523 Other reserves 21,411 4,410 4,831
Investment in own shares (2,275 ) (2,275 ) (2,275 )
TOTAL
136,900 69,499 54,183 TOTAL LIABILITIES AND
EQUITY 186,576 151,014 103,113
CONSOLIDATED CASH FLOW
STATEMENT
Three Months Ended September 30 2018
2017 £’000 £’000 OPERATING
ACTIVITIES Profit for the period 2,048
5,085 Income tax charge 586 1,357 Adjustments 8,497 1,615
Tax paid
(1,492
)
(1,311
)
UK research and development credit received
-
937 Net changes in working capital
(7,588
)
(3,833
)
Net cash from operating activities 2,051 3,850
INVESTING ACTIVITIES Purchase of non-current assets
(tangibles and intangibles)
(1,894
)
(1,630
)
Interest received 74 4
Net cash used in investing activities
(1,820 ) (1,626 ) FINANCING
ACTIVITIES Proceeds from borrowings
-
8 Repayment of borrowings
(20,015
)
(9,023
)
Net proceeds from initial public offering 44,828
-
Grant received 105
-
Interest paid
(148
)
(76
)
Net cash from / (used) in financing activities 24,770
(9,091
)
Net change in cash and cash equivalents 25,001
(6,867 ) Cash and cash equivalents at the
beginning of the period 15,048 23,571 Exchange
differences on cash and cash equivalents 1,716 (70 )
Cash and
cash equivalents at the end of the period 41,765
16,634 RECONCILIATION OF ADJUSTED FINANCIAL
MEASURES TO COMPARABLE IFRS FINANCIAL MEASURES (GBP IN
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
RECONCILIATION OF REVENUE GROWTH AT CONSTANT CURRENCY TO REVENUE
GROWTH AS REPORTED UNDER IFRS: Three Months Ended
September 30 2018 2017 REVENUE
GROWTH AS REPORTED 39.7 % 37.9 %
Foreign exchange rates impact
0.1 % (3.1
%) REVENUE GROWTH AT CONSTANT CURRENCY 1
39.8 % 34.8 %
RECONCILIATION OF ADJUSTED PROFIT AFTER
TAX:
Three Months Ended September 30 2018
2017 £’000 £’000 PROFIT BEFORE
TAX 2,634 6,442 Adjustments: Share-based
compensation expense 1,884 366 Amortisation of acquired intangible
assets 879 481 Foreign currency exchange (gains) losses, net (705)
437 Initial public offering expenses incurred 1,170 81 Fair value
adjustment of contingent consideration 5,805
-
Total adjustments 9,033 1,365 Adjusted
Profit before tax3 11,667 7,807
PROFIT AFTER TAX 2,048 5,085
Adjustments: Adjustments to profit before tax
9,033
1,365 Tax impact of adjustments
(1,683) (206)
ADJUSTED PROFIT AFTER TAX4 9,398 6,244
Diluted EPS (£) 0.04 0.10 Adjusted
diluted EPS (£) 0.17 0.13
SHARE-BASED COMPENSATION
EXPENSE
Three Months Ended September 30 2018
2017 £’000 £’000 Direct cost of sales
748 245 Selling, general and administrative expenses 1,136 121
Total 1,884 366
RECONCILIATION OF NET CASH FROM
OPERATING ACTIVITIES TO FREE CASH FLOW5
Three Months Ended September 30 2018
2017 £’000 £’000 Net cash from
operating activities 2,051 3,850
Adjustments: Grant received 105
-
Purchases of non-current assets (tangible and intangible) (1,894 )
(1,630 )
Free cash flow 262 2,220
SUPPLEMENTARY INFORMATION
(UNAUDITED)
Three Months Ended September 30 2018
2017 Total closing number of employees
5,182 3,934 Average operational employees
4,608 3,558 Top 10 customers % 39
% 46 % Number of clients with > £1m of
revenue (rolling 12 months) 52 37
GEOGRAPHIC SPLIT OF REVENUE % North America 27 % 15 % Europe
29 % 37 % UK 44 % 48 %
INDUSTRY VERTICAL SPLIT OF REVENUE
% Payments and Financial Services 53 % 60 % TMT 27 % 29 % Other
20 % 11 %
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME – TRANSLATED INTO $
Three Months Ended September 30 2018
2017
$’0006
$’0007
REVENUE 86,531 62,232 Cost of sales Direct
cost of sales (52,582 ) (38,516 ) Allocated cost of sales (4,649 )
(3,859 ) Total cost of sales (57,231 ) (42,375 )
GROSS
PROFIT 29,300 19,857 Selling, general and
administrative expenses (19,104 ) (10,760 )
OPERATING PROFIT
10,196 9,097 Net finance expense (6,763 ) (664 )
PROFIT BEFORE TAX 3,433 8,433 Tax on profit on
ordinary activities (763 ) (1,777 )
PROFIT FOR THE PERIOD AND
PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT 2,670
6,656 EARNINGS PER SHARE: Weighted average
number of shares outstanding 48,258,033 45,100,165
Weighted
average number of shares outstanding - diluted 53,842,639
49,200,754
Basic EPS 0.06 0.15
Diluted EPS 0.05 0.14
1 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.
2 Adjusted diluted EPS is defined as our profit after taxes
adjusted to exclude the impact of share-based compensation expense,
amortization of acquired intangible assets, realized and unrealized
foreign currency exchange gains and losses, fair value adjustment
of contingent consideration and initial public offering expenses
incurred (all of which are non-cash other than realized foreign
currency exchange gains and losses and initial public offering
expenses) and the tax impact of these adjustments, divided by
weighted average number of shares outstanding - diluted.
3 Adjusted PBT is defined as our profit before taxes adjusted to
exclude the impact of share-based compensation expense,
amortization of acquired intangible assets, realized and unrealized
foreign currency exchange gains and losses, fair value adjustment
of contingent consideration and initial public offering expenses
incurred (all of which are non-cash other than realized foreign
currency exchange gains and losses and initial public offering
expenses).
4 Adjusted PAT is defined as our profit after taxes adjusted to
exclude the impact of share-based compensation expense,
amortization of acquired intangible assets, realized and unrealized
foreign currency exchange gains and losses, fair value adjustment
of contingent consideration and initial public offering expenses
incurred (all of which are non-cash other than realized foreign
currency exchange gains and losses and initial public offering
expenses) and the tax impact of these adjustments.
5 Free cash flow is the Company’s net cash from/(used in)
operating activities, plus grants received, less purchases of
non-current (tangible and intangible) assets.
6 Translated solely for convenience into dollars at the rate of
£1.00=$1.3029.
7 Translated solely for convenience into dollars at the rate of
£1.00=$1.3093.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181129005315/en/
Endava PlcLaurence Madsen, Investor Relations
ManagerInvestors@endava.com
Endava (NYSE:DAVA)
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