Endava plc Q3 FY2025 earnings call

• The business environment is challenging with clients shifting priorities and slow to sign large contracts. Pipeline of large opportunities is growing but not converting to revenue as anticipated.
• Focus on controlling expenses, increasing share buyback authorization by $50 million, and accelerating partnership formalization.
• Partnerships with Open AI, Google, AlixPartners, SideFX, Backbase, etc., and examples of AI-driven projects in pharma, insurance, golf performance, and global services companies.
• Innovation lab Global Final in Belgrade showcased AI-driven solutions, and workforce prioritized in high demand areas like data, AI, and cloud.

Endava's revenue for the three months ended March 31, 2025 was £194.8 million, an 11.7% increase from £174.4 million in the prior year period. In constant currency, revenue grew 12.4%. Revenue by region: North America accounted for 37%, Europe 22%, the U.K. 35%, and the rest of the world 6%. Revenue from North America grew 37.1% year-over-year, while Europe declined 10.4%, the U.K. grew 13.2%, and the rest of the world declined 16.0%. Revenue from the 10 largest clients was 39% of total revenue, with average spend per client increasing 28% year-over-year.

• Q4 fiscal year 2025 revenue expected to be in the range of £186 million to £188 million, constant currency change minus-1.0% to 0%. Adjusted diluted EPS expected 22-24 pence per share.
• Full year 2025 revenue expected £771.5 million to £773.5 million, constant currency increase 6.0%-6.5%. Adjusted diluted EPS expected 111-113 pence per share.
• FX headwinds are a significant headwind, contributing a negative 3% impact on Q4 growth, and North America deal conversions and pipeline into revenue are slowing.

• Macro-economic turbulence leading to client deal delays.
• Weakening of the U.S. dollar impacting revenue.
• Competitive pricing pressures in the market.
• Uncertain client behavior leading to volatility in deal conversions.

Q: Bryan Bergin asked about internal changes compounding issues and workforce optimization.

A: John Cotterell said internal changes have strengthened client conversations, and workforce is shifting from lower value to higher value skills like AI, data, and cloud.

Q: Tyler DuPont inquired about pricing conversations and growth by geography.

A: John Cotterell said pricing is competitive but average day rates are stable, and Mark Thurston discussed FX impact on different regions.

Q: Harry Read asked about headcount and share-based comp.

A: John Cotterell mentioned productivity from AI efficiency and Mark Thurston talked about share-based comp percentage.

Q: Jonathan Lee asked about risk of extended revenue air pocket.

A: John Cotterell provided color on pipeline deals.

Q: Jamie Friedman asked about exchange rate impact and top clients.

A: Mark Thurston discussed FX impact on sectors and John Cotterell talked about delayed deals.

Q: Phani Kanumuri asked about utilization rates and EPS guidance.

A: Mark Thurston discussed utilization and EPS impact from FX and cost elements.

Q: James Faucette asked about gen-AI traction.

A: John Cotterell talked about AI shift in product work.