Endava Plc Q4 FY2024 earnings call

• Endava has been partnering with clients for over two decades to guide digital transformation, recognizing AI's impact. It has repositioned the business, diversifying industry verticals and client geographies.
• Launched Dava.X with specialist areas like AI and data, core modernization, etc. Strengthened team and invested in tools for efficiency.
• Acquisition of GalaxE is progressing, with cross sell projects. Discussed AI use cases across various industries, e.g., working with insurance, medical providers, furniture supplier.
• Partnered with OpenAI for internal AI integration, and with Phoenix Suns and Mercury for fan engagement. Published 2024 Sustainability Report with approved SBTi targets.
• Committed to meaningful partnerships, e.g., panel discussion with Snowflake, Guidewire, Stripe.

For the three months ended June 30th, 2024, Endava's revenue was GBP194.4 million, a 2.4% increase from the prior year. In constant currency, revenue grew 3.5%. North America accounted for 38% of revenue, growing 28.9% year-over-year; Europe was 25%, growing 8.5%; UK was 30%, declining 19.2%; Rest of the World was 7%, declining 13.0%. Payments revenue declined 30.5%, accounting for 19% of total revenue; banking and capital markets grew 10.7% (17% of total); insurance grew 13.9% (9% of total); TMT grew 0.4% (21% of total); mobility declined 11.7% (9% of total); other grew 58.8% (25% of total). For the fiscal year ended June 30th, 2024, revenue was GBP740.8 million, a 6.8% decrease from the prior year. North America was down 6.4%; Europe up 4.7%; UK down 20.0%; Rest of the World up 34.9%. Payments declined 23.0%; banking and capital markets declined 14.0%; insurance increased 13.4%; TMT declined 2.7%; mobility declined 8.3%; other increased 17.2%.

• Q1 fiscal year 2025 revenue expected to be in the range of GBP194 million to GBP195 million, constant currency growth 4.5%-5.0%, adjusted diluted EPS GBP0.21-0.22.
• Full year fiscal year 2025 revenue expected to be in the range of GBP800 million to GBP810 million, constant currency increase 10.0%-11.5%, adjusted diluted EPS GBP1.12-1.17.
• Impact of USD weakness on revenue guide and investments in teams, technologies, and GalaxE integration affecting adjusted PBT margin by ~2.5% in FY'25.

• Forward-looking statements subject to risks where actual results may differ materially.
• Industry headwinds, client spending delays, and challenges in AI implementation and market dynamics pose risks.
• Macro uncertainties, CFOs raising bar on business cases, and longer decision cycles for AI-related projects.

Q: Jonathan Lee asked about top customers and payment softness.

A: John Cotterell discussed that revenue from one large client is steady with other revenues building up, and the second client is picking up with private equity investment.

Q: Bryan Bergin asked about AI driven sales elongation and margins.

A: John Cotterell noted sales elongation due to higher business case bar and AI engineering challenges; Mark Thurston mentioned reinvestment in Dava.X weighing on adjusted PBT margin through first half of FY'25.

Q: Puneet Jain asked about visibility and GalaxE integration.

A: John Cotterell talked about pipelines and cross selling opportunities with GalaxE; Mark Thurston mentioned migration onto systems and sharpening go-to-market.

Q: Bryan Keane asked about GenAI materiality and payments outlook.

A: John Cotterell said GenAI materiality is a couple of years out with lead indicators in pipelines; payments is less exposed now with diversification.

Q: James Faucette asked about decision cycles and GalaxE impact.

A: John Cotterell said longest cycles are AI core modernization related; Mark Thurston said too early to give indicators on revenue per head.

Q: Kate Kronstein asked about investments and partnerships.

A: Mark Thurston expanded on investments in Dava.X, go-to-market, and ChatGPT partnership; John Cotterell mentioned partnerships with Google, AWS, Snowflake, etc.