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Endava Announces Second Quarter Fiscal Year 2021 Results

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.
  • 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.

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.

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.

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).

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 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.

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)

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2020

June 30, 2020

December 31, 2019

£’000

£’000

£’000
(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.

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

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

%

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

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

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

EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT

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
(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%

Contacts:

INVESTOR CONTACT:
Endava Plc
Laurence Madsen, Investor Relations Manager
Investors@endava.com

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