Business Wire | Feb 17, 2021 07:20AM EST

Endava Announces Second Quarter Fiscal Year 2021 Results

Feb. 17, 2021

LONDON--(BUSINESS WIRE)--Feb. 17, 2021--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 Three Months Ended December 31 December 31

2020 2019 2020 2019

lb'000 lb'000 lb'000 lb'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 (44,261) (36,480) (22,994) (19,139) administrative expenses

OPERATING PROFIT/ (LOSS) 25,713 869 14,063 (11,458)

Net finance (expense) / (6,380) (2,871) (3,455) (5,799) income

Gain on sale of subsidiary - 2,215 - -

PROFIT/ (LOSS) BEFORE TAX 19,333 213 10,608 (17,257)

Tax on profit on ordinary (4,826) 483 (2,809) 3,441activities

PROFIT/ (LOSS) FOR THE 14,507 696 7,799 (13,816) PERIOD

OTHER COMPREHENSIVE INCOME

Items that may bereclassified subsequently to profit or loss:

Exchange differences ontranslating foreign (3,491) (4,385) (2,644) (2,460)operations

TOTAL COMPREHENSIVE INCOMEFOR THE PERIOD 11,016 (3,689) 5,155 (16,276) ATTRIBUTABLE TO OWNERS OFTHE PARENT



EARNINGS PER SHARE (EPS):

Weighted average number of 54,831,134 52,848,507 55,168,042 53,140,682 shares outstanding - Basic

Weighted average number ofshares outstanding - 56,850,290 55,663,120 57,107,940 55,957,472 Diluted

Basic EPS (lb) 0.26 0.01 0.14 (0.26)

Diluted EPS (lb) 0.26 0.01 0.14 (0.25)

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2020 June 30, 2020 December 31, 2019

lb'000 lb'000 lb'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 Three Months Ended December 31 December 31

2020 2019 2020 2019

lb'000 lb'000 lb'000 lb'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 1,311 - 1,311 - received

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 (2,344) (5,830) (1,703) (3,324) (tangible and intangible)

Proceeds from disposal of 108 120 43 107 non-current assets

Acquisition of business / (52,132) (27,061) (1,342) (25,538) subsidiaries (net of cash acquired)

Proceeds from sale of subsidiary net - 2,744 - 166 of cash disposed of

Cash and cash equivalents acquired 1,603 3,289 - 3,289 with subsidiaries

Interest received 53 353 26 154

Net cash used in investing (52,712) (26,385) (2,976) (25,146) activities



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 (16,501) 10,931 14,456 (1,635) equivalents



Cash and cash equivalents at the 101,327 70,172 70,039 83,628 beginning of the period

Exchange differences on cash and (605) (2,128) (274) (3,018) cash equivalents

Cash and cash equivalents at the end 84,221 78,975 84,221 78,975 of the period

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 Three Months ended ended December 31 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 19.2 % 21.0 % 21.4 % 20.5 %INCLUDING WORLDPAY CAPTIVE

Impact of Worldpay Captive 1.6 % 2.3 % - 4.0 %

PRO-FORMA REVENUE GROWTH RATE AT CONSTANTCURRENCY ADJUSTED FOR THE SALE OF THE WORLDPAY 20.8 % 23.3 % 21.4 % 24.5 %CAPTIVE

RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX AND ADJUSTED PROFIT FOR THE PERIOD:

Six Months Ended Three Months Ended December 31 December 31

2020 2019 2020 2019

lb'000 lb'000 lb'000 lb'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 2,280 1,809 1,114 913 assets

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 (lb) 0.26 0.01 0.14 (0.25)

Adjusted diluted EPS (lb) 0.55 0.55 0.29 0.30

RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW

Six Months Ended Three Months Ended December 31 December 31

2020 2019 2020 2019

lb'000 lb'000 lb'000 lb'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 (2,236) (5,710) (1,660) (3,217) (tangible and intangible)

Adjusted Free cash flow 39,867 21,451 18,664 7,971

SUPPLEMENTARY INFORMATION

SHARE-BASED COMPENSATION EXPENSE

Six Months Ended Three Months Ended December 31 December 31

2020 2019 2020 2019

lb'000 lb'000 lb'000 lb'000



Direct cost of sales 7,064 3,830 3,566 2,133

Selling, general and administrative 4,832 3,166 2,399 1,540 expenses

Total 11,896 6,996 5,965 3,673

DEPRECIATION AND AMORTISATION

Six Months Ended Three Months Ended December 31 December 31

2020 2019 2020 2019

lb'000 lb'000 lb'000 lb'000



Direct cost of sales 7,863 5,910 4,293 3,159

Selling, general and administrative 3,568 2,833 1,795 1,457 expenses

Total 11,431 8,743 6,088 4,616

EMPLOYEE BENEFIT TRUST DISCRETIONARY BONUS

Six Months Ended Three Months Ended December 31 December 31

2020 2019 2020 2019

lb'000 lb'000 lb'000 lb'000



Direct cost of sales - 25,182 - 25,182

Selling, general and administrative - 2,475 - 2,475 expenses

Total - 27,657 - 27,657

EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT

Six Months Three Months Ended Ended December 31 December 31

2020 2019 2020 2019



Closing number of total employees (including 7,464 6,267 7,464 6,267directors)

Average operational employees 6,417 5,405 6,629 5,472



Top 10 customers % 38% 39% 37% 37%

Number of clients with > lb1m of revenue 75 65 75 65(rolling 12 months)



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%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210217005526/en/

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