Endava Announces Third Quarter Fiscal Year 2022 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 March 31, 2022, the third quarter of its 2022 fiscal year ("Q3 FY2022").
"Strong revenue growth for Endava this quarter is underpinned by a very favourable business environment, with demand for our digital acceleration services strong across all regions and verticals," said John Cotterell, Endava CEO. "Endava delivers leading edge innovative projects to drive new growth and customer experiences. Endava's ability to support clients from ideation to production differentiates us as an attractive strategic partner, leading to a revenue increase of 50.9% in constant currency for Q3FY2022 driven by both the expansion of work with existing clients and the acquisition of new ones this quarter."
THIRD QUARTER FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS:
OTHER METRICS FOR THE QUARTER ENDED MARCH 31, 2022:
UPDATES ON RUSSIA-UKRAINE CRISIS CONSIDERATIONS:
As previously reported, in late February 2022, Russian military forces launched significant military action against Ukraine (the "Russia-Ukraine crisis"). As of the date of this report, the Russia-Ukraine crisis has not had a material impact on Endava's financial results. Endava generates no revenue from Russia, Ukraine and Belarus, and none of its employees are located in these countries. In fact, over 75% of the Group's European staff is based in countries that are members of the North Atlantic Treaty Organization (NATO). As of March 31, 2022, Endava had approximately 1,200 employees based in Moldova, a neighboring country of Ukraine, and approximately 9% of its revenue is derived from teams located in Moldova. Endava currently believes its business in Moldova has not been impacted by the Russia-Ukraine crisis, and there has been no sign of decline in productivity in that country. If the conflict involving Russia and Ukraine were to spread to Moldova, Endava has contingency plans in place and would assist its employees in relocating to neighboring countries, a process made easier by the fact that management believes a majority of the employees based in Moldova have a passport from a European Union country. As of the date of this report, clients have generally expressed support for Endava's employees in Moldova, and the Company has not experienced withdrawn or reduced teams as a result of the Russia-Ukraine crisis. In addition, Endava has received queries from prospective clients as they intend to reduce their exposure to delivery teams located in Russia, Ukraine and Belarus, and it is reviewing such business opportunities.
Fourth Quarter Fiscal Year 2022:
Endava expects revenues will be in the range £177.0 million to £179.0 million, representing constant currency revenue growth of between 29.0% and 31.0%. Endava expects adjusted diluted EPS to be in the range of £0.48 to £0.49 per share.
Full Fiscal Year 2022:
Endava expects revenues will be in the range of £652.0 million to £654.0 million, representing constant currency growth of between 46.0% and 46.5%. Endava expects adjusted diluted EPS to be in the range of £1.91 to £1.92 per share.
This above guidance for Q4 Fiscal Year 2022 and the Full Fiscal Year 2022 assumes the exchange rates at the end of April (when the exchange rate was 1 British Pound to 1.26 US Dollar and 1.19 Euro).
Endava is not able, at this time, to provide an outlook for IFRS diluted EPS for Q4 FY2022 or FY2022 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, May 12, 2022, to review its Q3 FY2022 results. To participate in Endava's Q3 FY2022 earnings conference call, please dial in at least five minutes prior to the scheduled start time (888) 330-2391 or (240) 789-2702 for international participants, Conference ID 8763704.
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, May 27, 2022.
ABOUT ENDAVA PLC:
Endava is reimagining the relationship between people and technology. 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 clients become digital, experience-driven businesses by assisting them in their journey from idea generation to development and deployment of products, platforms and solutions. Endava collaborates with its clients, seamlessly integrating with their teams, catalysing ideation and delivering robust solutions.
Endava services clients in Payments and Financial Services, TMT, Consumer Products, Retail, Mobility and Healthcare. As of March 31, 2022, 11,001 Endavans served clients from locations in Australia, North America, Singapore and Western Europe and delivery centres in Bosnia & Herzegovina, Bulgaria, Croatia, Moldova, North Macedonia, Poland, Romania, Serbia, Slovenia, Argentina, Colombia, Mexico, Uruguay and Venezuela.
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 March 31, 2021 were used to convert revenue for the fiscal quarter ended March 31, 2022 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, amortisation of acquired intangible assets and, realised and unrealised foreign currency exchange (gains)/losses, all of which are non-cash items. 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 fourth fiscal quarter of fiscal year 2022 and the full fiscal year 2022. 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 Russia-Ukraine crisis 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 28, 2021, as updated in Exhibit 99.2 to our Current Report on Form 6-K with the SEC on March 30, 2022. 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
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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:
RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX AND ADJUSTED PROFIT FOR THE PERIOD:
RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW
SHARE-BASED COMPENSATION EXPENSE
DEPRECIATION AND AMORTISATION
EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT
(1) The presentation of the income statement has been changed to separately disclose the net impairment losses on financial assets on the face of the Consolidated Statement of Comprehensive Income (refer to Note 3C of our Annual Report on Form 20-F for the fiscal year ended June 30, 2021 for details).
(2) The Condensed Consolidated Balance Sheet as of 30 June 2021 has been revised to include the impact to the provisional amounts recognised related to the acquisition of Five and Levvel, as the acquisition accounting was finalised during the measurement period.
(3) The Condensed Consolidated Balance Sheet as of 31 March 2021 has been revised to include the impact to the provisional amounts recognised related to the acquisition of Five, as the acquisition accounting was finalised during the measurement period.
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