Q2 FY201943.6%Year on Year Growth in
Revenue to £71.8 million42.4% Constant Currency Revenue
GrowthIFRS diluted EPS £0.14 compared to £0.10 in the prior
year periodAdjusted diluted EPS £0.20 compared to £0.12 in
the prior year period
Endava plc (NYSE:DAVA), a global provider of digital
transformation, agile development and intelligent automation
services, today announced results for the three months ended
December 31, 2018, the second quarter of its 2019 fiscal year ("Q2
FY2019").
"Q2 FY2019 was another record quarter for Endava, with revenue
of £71.8 million, a strong growth of 43.6% Year on Year on a
reported basis from £50 million in the same quarter in the previous
fiscal year. This remarkable revenue growth was driven by the
expansion of our existing customers particularly our larger ones,
as well as the acquisition of new customers." said John
Cotterell, Endava’s CEO.
“We delivered strong results in Q2 FY2019 with Profit Before Tax
at £9.4 million and Adjusted Profit Before Tax at £13.6 million.
Our strong client relationships contributed to our revenue growth
and underpin future growth.” said Mark Thurston Endava’s CFO.”
FINANCIAL HIGHLIGHTS:
- Revenue for the second quarter ended
December 31, 2018 was £71.8 million an increase of 43.6% compared
to £50.0 million in the same period in the prior year.
- Revenue growth rate at constant
currency (a non-IFRS measure) was 42.4% in the second quarter
compared to 29.0% in the same period in the prior year.
- Profit before tax in the second quarter
was £9.4 million compared to £6.0 million in the same period in the
prior year or 13.1% of revenue compared to 12.0% in the same period
in the prior year.
- Adjusted profit before tax (a non-IFRS
measure) in the second quarter was £13.6 million compared to £7.5
million in the same period in the prior year or 18.9% of revenue
compared to 15.0% in the same period in the prior year.
- Profit for the period was £7.4 million
in the second quarter, resulting in a diluted EPS of £0.14,
compared to profit for the period of £4.8 million and diluted EPS
of £0.10 in the same period in the prior year.
- Adjusted profit for the period (a
non-IFRS measure) was £10.9 million in the second quarter,
resulting in adjusted diluted EPS (a non-IFRS measure) of £0.20
compared to adjusted profit for the period of £6.1 million and
adjusted diluted EPS of £0.12 in the same period in the prior
year.
- Net cash from operating activities was
£9.6 million in the second quarter compared to £8.6 million in the
same period in the prior year.
- Free cash flow (a non-IFRS measure) was
£9.2 million in the second quarter compared to free cash flow of
£7.4 million in the same period in the prior year.
- At December 31, 2018, Endava had cash
and cash equivalents of £51.0 million, compared to £15.0 million at
June 30, 2018. Net cash at December 31, 2018 was £51.0 million
compared to net borrowing of £4.7 million at June 30, 2018.
OTHER METRICS:
- Headcount reached 5,389 at December 31,
2018, with 4,845 average operational employees in the second
quarter compared to a headcount of 4,580 at December 31, 2017 and
3,684 average operational employees in the second quarter of the
prior year.
- Number of clients with over £1 million
in spend grew to 60 on a rolling twelve months basis at December
31, 2018 compared to 42 at December 31, 2017.
- Top 10 clients accounted for 38% of
revenue in the second quarter down from 45% in the same period in
the prior year.
- By geographic region, 27% of revenue
was generated in North America, 28% was generated in Europe and 45%
was generated in the United Kingdom in the second quarter. This
compares to 15% in North America, 37% in Europe and 48% in the
United Kingdom in the same period in the prior year.
- Revenue by industry vertical was as
follows in the second quarter, Payments and Financial Services 53%,
TMT 27% and Other 20%. This compares to Payments and Financial
Services 62%, TMT 26% and Other 12% in the same period in the prior
year.
OUTLOOK:
For Q3 FY2019:
We expect revenues will be in the range £71.0m to £72.0m,
representing constant currency growth of between 20% and 21%. We
expect adjusted diluted EPS to be in the range of 16.0p to 17.0p
per share.
Full Fiscal Year 2019:
We expect revenues will be in the range £284.0m to £286.0m,
representing constant currency growth of between 29% and 30%. We
expect adjusted diluted EPS to be in the range of 69.0p to 72.0p
per share.
Endava is not able, at this time, to provide an outlook for IFRS
diluted EPS for Q3 FY2019 or FY2019 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, 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 to
review the second quarter 2019 results. To participate in Endava’s
second 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
5350136.
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 15, 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, Financial Services,
TMT, Consumer Products, Logistics and Healthcare. Endava had 5,389
employees as of December 31, 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 Statements of Comprehensive
Income and Consolidated Balance Sheets 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 diluted EPS, adjusted profit before
tax, adjusted profit for the period 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 quarter ended December 31, 2017 were used to
convert revenue for the fiscal quarter ended December 31, 2018 and
the revenue for the comparable prior period.
Adjusted diluted EPS is defined as the Company's profit for the
period adjusted to exclude the impact of share-based compensation
expense, amortisation of acquired intangible assets, realized and
unrealized foreign currency exchange gains and losses, fair value
adjustment of contingent consideration, initial public offering
expenses incurred and Sarbanes-Oxley compliance readiness expenses
incurred (all of which are non-cash other than realized foreign
currency exchange gains and losses, initial public offering and
Sarbanes-Oxley compliance readiness expenses) and the tax impact of
these adjustments, divided by weighted average number of shares
outstanding - diluted.
Adjusted profit before tax is defined as the Company’s profit
for the period 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, initial public
offering expenses incurred and Sarbanes-Oxley compliance readiness
expenses incurred (all of which are non-cash other than realized
foreign currency exchange gains and losses, initial public offering
and Sarbanes-Oxley compliance readiness expenses).
Adjusted profit for the period is defined as the Company's
profit for the period adjusted to exclude the impact of share-based
compensation expense, amortisation of acquired intangible assets,
realized and unrealized foreign currency exchange gains and losses,
fair value adjustment of contingent consideration, initial public
offering expenses incurred and Sarbanes-Oxley compliance readiness
expenses incurred (all of which are non-cash other than realized
foreign currency exchange gains and losses, initial public offering
and Sarbanes-Oxley compliance readiness expenses).
Free cash flow is the Company’s net cash from/(used in)
operating activities, plus grants received, less net purchases of
non-current (tangible and intangible) assets.
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 third 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.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
Six Months EndedDecember
31
Three Months EndedDecember
31
2018 2017
2018 2017
£’000 £’000
£’000 £’000
REVENUE 138,248
97,542 71,834
50,011 Cost of sales
Direct cost of sales
(83,026) (60,321)
(42,668) (30,904) Allocated cost of sales
(7,305 ) (6,046 )
(3,737 ) (3,099 ) Total cost of
sales (90,331 ) (66,367 )
(46,405 ) (34,003 )
GROSS PROFIT 47,917
31,175
25,429 16,008
Selling, general and administrative expenses
(31,008 ) (18,050 )
(16,345 ) (9,832 )
OPERATING PROFIT
16,909
13,125 9,084
6,176 Net finance (expense) /
income (4,860 ) (660 )
331 (153 )
PROFIT BEFORE TAX 12,049
12,465
9,415 6,023 Tax on profit
on ordinary activities (2,584)
(2,607) (1,998)
(1,250)
PROFIT FOR THE PERIOD AND PROFIT ATTRIBUTABLE TO OWNERS
OF THE PARENT 9,465
9,858 7,417
4,773 Other comprehensive
income
Items that
may be reclassified subsequently to profit or loss:
Exchange differences on
translating foreign operations 662
255 930 234
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO OWNERS
OF THE PARENT 10,127
10,113
8,347 5,007
EARNINGS
PER SHARE:
Weighted average number of shares outstanding - Basic
48,859,382 45,100,165
49,454,195
45,100,165 Weighted average number of shares outstanding -
Diluted 54,454,333
49,436,677 54,892,513
49,596,219 Basic EPS 0.19
0.22 0.15
0.11 Diluted EPS 0.17
0.20 0.14
0.10
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2018
June 30, 2018 December 31, 2017
£’000
£’000 £’000
ASSETS - NON-CURRENT
Goodwill
42,447 41,062
40,517 Intangible assets
30,303 30,787
31,356 Property, plant and equipment
9,989 8,584
8,716 Deferred tax assets
2,519 2,488
919
TOTAL 85,258
82,921
81,508 ASSETS - CURRENT
Inventories —
16 14 Trade and other
receivables 63,766
52,352 49,349 Corporation tax
receivable 546 677
— Cash and cash equivalents
51,044 15,048
25,066
TOTAL
115,356
68,093 74,429
TOTAL ASSETS 200,614
151,014
155,937 LIABILITIES - CURRENT
Borrowings 39
19,744 38,917 Trade and
other payables 41,892
40,243 28,522 Corporation
tax payable 1,270
1,488 741 Contingent
consideration 1,244
5,259 5,141 Deferred
consideration 4,691
4,401 11,993
TOTAL
49,136
71,135 85,314
LIABILITIES - NON CURRENT
Borrowings
3 20
45 Contingent consideration —
7,251 6,961
Deferred consideration —
— 1,235 Deferred
tax liabilities 2,601
2,832 2,692 Other
liabilities 284
277 267
TOTAL
2,888
10,380 11,200
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 73,956
59,260 48,519 Other
reserves 22,804
4,410 5,075 Investment in own
shares (2,275 ) (2,275 )
(2,275 )
TOTAL
148,590 69,499
59,423 TOTAL LIABILITIES AND
EQUITY 200,614
151,014 155,937
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months EndedDecember
31
Three Months EndedDecember
31
2018 2017 2018
2017 £’000 £’000 £’000
£’000 OPERATING ACTIVITIES Profit for the
period 9,465 9,858 7,417 4,773
Income tax charge 2,584 2,607 1,998 1,250 Non-cash adjustments
13,305 2,672 4,808 1,057 Tax paid (2,911 ) (2,274 ) (1,419 ) (963 )
UK research and development credit received — 1,854 — 917 Net
changes in working capital (10,778 ) (2,289 ) (3,190 ) 1,544
Net
cash from operating activities 11,665 12,428
9,614 8,578 INVESTING ACTIVITIES
Purchase of non-current assets (tangibles and intangibles) (3,964 )
(2,767 ) (2,070 ) (1,137 ) Proceeds/(Loss) from disposal of
non-current assets 25 — 25 — Acquisition of business / subsidiaries
(net of cash acquired) — (17,392 ) — (17,392 ) Interest received
126 23 52 19
Net cash used in investing activities
(3,813 ) (20,136 ) (1,993
) (18,510 ) FINANCING ACTIVITIES
Proceeds from borrowings 3,500 22,979 3,500 22,971 Repayment of
borrowings (23,526 ) (13,643 ) (3,511 ) (4,620 ) Interest Paid (222
) (203 ) (74 ) (127 ) Grant received 1,784 — 1,679 — Net proceeds
from initial public offering 44,828 — — —
Net cash from
financing activities 26,364 9,133 1,594
18,224 Net change in cash and cash equivalents
34,216 1,425 9,215 8,292 Cash
and cash equivalents at the beginning of the period
15,048 23,571 41,765 16,634 Exchange
differences on cash and cash equivalents 1,780 70 64 140
Cash
and cash equivalents at the end of the period 51,044
25,066 51,044 25,066
RECONCILIATION OF ADJUSTED FINANCIAL MEASURES TO COMPARABLE
IFRS FINANCIAL MEASURES
RECONCILIATION OF REVENUE GROWTH AT CONSTANT CURRENCY TO
REVENUE GROWTH AS REPORTED UNDER IFRS:
Six Months Ended December
31
Three Months EndedDecember
31
2018
2017 2018
2017 REVENUE GROWTH AT CONSTANT CURRENCY
41.1 % 31.7
% 42.4 %
29.0 % Foreign exchange rates impact
0.6 % 1.2
% 1.2 %
(0.5 %) REVENUE GROWTH AS REPORTED UNDER
IFRS 41.7 %
32.9 % 43.6
% 28.5 %
RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX AND ADJUSTED
PROFIT FOR THE PERIOD:
Six Months EndedDecember
31
Three Months EndedDecember
31
2018 2017
2018 2017 £’000
£’000 £’000
£’000
PROFIT BEFORE TAX
12,049 12,465
9,415
6,023 Adjustments:
Share-based compensation expense
5,010 720
3,125 354 Amortisation of
acquired intangible assets 1,752
960 873
479 Foreign currency exchange (gains) losses,
net (1,141 ) 481
(436 ) 44 Initial
public offering expenses incurred 1,055
685 79
604 Sarbanes-Oxley compliance readiness
expenses incurred 698
— 504
— Fair value movement of contingent consideration
5,805 —
— —
Total adjustments 13,179
2,846
4,145 1,481
ADJUSTED PROFIT BEFORE TAX
25,228 15,311
13,560
7,504
PROFIT FOR THE PERIOD
9,465 9,858
7,417 4,773
Adjustments:
Adjustments to profit before tax
13,179 2,846
4,145
1,481 Tax impact of adjustments
(2,349 ) (386 )
(666 )
(180 ) ADJUSTED PROFIT FOR THE PERIOD
20,295
12,318 10,896
6,074
Diluted EPS (£)
0.17 0.20
0.14 0.10
Adjusted diluted EPS (£) 0.37
0.25 0.20
0.12
RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO FREE
CASH FLOW
Six Months EndedDecember
31
Three Months EndedDecember
31
2018 2017
2018 2017
£’000 £’000
£’000 £’000
Net cash from operating
activities 11,665
12,428
9,614 8,578
Adjustments:
Grant received 1,784
— 1,679
— Net purchases of non-current assets
(tangible and intangible) (3,939 )
(2,767 ) (2,045 )
(1,137 )
Free cash flow
9,510 9,661
9,248 7,441
SUPPLEMENTARY INFORMATION
SHARE-BASED COMPENSATION EXPENSE
Six Months EndedDecember
31
Three Months EndedDecember
31
2018 2017
2018 2017
Direct cost of sales
1,939 482
1,191 237 Selling,
general and administrative expenses 3,071
238 1,934
117
Total
5,010 720
3,125 354
EMPLOYEES, TOP 10 CUSTOMERS and REVENUE SPLIT
Six Months Ended December 31
Six Months EndedDecember
31
Three Months EndedDecember
31
2018
2017 2018
2017 Closing number of total employees
5,389 4,580
5,389 4,580 Average
operational employees 4,726
3,621 4,845 3,684
Top 10
customers % 38 %
45 % 38
% 45 % Number of clients
with > £1m of revenue(rolling 12 months) 60
42 60
42
Geographic split of revenue %
North America 27 %
15 % 27 %
15 % Europe 28 % 37 %
28 % 37 % UK
45 % 48 %
45 % 48 %
Industry vertical split of
revenue %
Payments and Financial Services 53 %
61 % 53 %
62 % TMT 27 % 27 %
27 % 26 % Other
20 % 12 % 20 %
12 %
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME –
TRANSLATED INTO US$
Six Months EndedDecember
31
Three Months EndedDecember
31
2018 2017
2018 2017
US$’0001
US$’0002 US$’0003
US$’0004 REVENUE
179,004 128,609
92,429
66,395 Cost of sales
Direct cost of sales (107,502)
(79,533) (54,901)
(41,028) Allocated cost of sales
(9,459 ) (7,972 ) (4,808
) (4,114 ) Total cost of sales
(116,961 ) (87,505 )
(59,709 ) (45,142 )
GROSS PROFIT
62,043
41,104 32,720
21,253 Selling, general and
administrative expenses (40,149 )
(23,799 ) (21,031 )
(13,053 )
OPERATING PROFIT
21,894 17,305
11,689
8,200 Net Finance (expense) / income
(6,293 ) (870 )
426 (203 )
PROFIT BEFORE
TAX 15,601
16,435 12,115
7,997 Tax on profit on
ordinary activities (3,346)
(3,437) (2,571)
(1,660)
PROFIT FOR THE PERIOD AND PROFIT ATTRIBUTABLE TO OWNERS
OF THE PARENT 12,255
12,998
9,544 6,337 Other
comprehensive income
Items that may be reclassified subsequently to profit or
loss:
Exchange
differences on translating foreign operations
857 336 1,197
311
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
ATTRIBUTABLE TO OWNERS OF THE PARENT
13,112 13,334
10,741
6,648
EARNINGS PER SHARE:
Weighted average number of shares
outstanding 48,859,382
45,100,165 49,454,195
45,100,165
Weighted average
number of shares outstanding - Diluted
54,454,333 49,436,677
54,892,513 49,596,219
Basic EPS 0.25
0.29 0.19 0.14
Diluted EPS 0.23
0.26 0.17
0.13
1Translated solely for convenience into US dollars at the rate
of £1.00=1.29482Translated solely for convenience into US dollars
at the rate of £1.00=1.31853Translated solely for convenience into
US dollars at the rate of £1.00=$1.2867.4Translated solely for
convenience into US dollars at the rate of £1.00=$1.3276.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190228005413/en/
INVESTOR CONTACT:Endava PlcLaurence Madsen, Investor
Relations ManagerInvestors@endava.com
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