Endava Announces Fourth Quarter FY18 and Full Year FY18 Financial Results

Endava (NYSE:DAVA), a global provider of digital transformation, agile development and intelligent automation services, today announced results for its fourth quarter ended June 30, 2018 and for its fiscal year 2018.

We are pleased with our fourth quarter results which reflected strength with existing customers as well as new. The integration of Velocity Partners in North America is proceeding smoothly, said John Cotterell, Endavas CEO.

Our strong client relationships contributed significantly to our constant currency revenue growth of 44.2% for the quarter and give us good visibility into the next quarter. We delivered that growth profitably, with PBT at £6.7m or 10.9% PBT margin and Adjusted PBT3 at £9.7m, or 15.7% Adjusted PBT margin, said Mark Thurston Endavas CFO.

1Revenue 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. 2Adjusted diluted EPS is our profit after taxes adjusted to exclude the impact of share-based compensation expense, amortization of acquired intangible assets, realized and unrealized foreign currency exchange gains and losses and initial public offering expenses incurred (all of which are non-cash other than realized foreign currency exchange gains and losses and initial public offering expenses) and the tax impact of these adjustments, divided by weighted average number of shares outstanding “ diluted. 3Adjusted PBT, is defined as our profit before taxes adjusted to exclude the impact of share-based compensation expense, amortization of acquired intangible assets, realized and unrealized foreign currency exchange gains and losses and initial public offering expenses incurred (all of which are non-cash other than realized foreign currency exchange gains and losses and initial public offering expenses).

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FOURTH QUARTER OF FISCAL 2018 FINANCIAL HIGHLIGHTS:

  • Revenue for the fourth quarter ended June 30, 2018 was £61.5 million, an increase of 42.8% compared to £43.0 million in the same period in the prior year.
  • Revenue growth rate at constant currency was 44.2%.
  • Profit before tax in the fourth quarter was £6.7 million compared to £5.5 million in the same period in the prior year or 10.9% of revenue compared to 12.8% in the same period in the prior year.
  • Adjusted Profit before tax in the fourth quarter was £9.7 million compared to £6.9 million in the same period in the prior year or 15.7% of revenue compared to 16.1% in the same period in the prior year.
  • IFRS Profit attributable to shareholders was £4.9 million, resulting in a Diluted EPS of £0.10.
  • Adjusted Profit attributable to shareholders was £7.6 million, resulting in an Adjusted Diluted EPS of £0.15.

FISCAL YEAR 2018 FINANCIAL HIGHLIGHTS:

  • Revenue for the fiscal year ended June 30, 2018 was £217.6 million, an increase of 36.5% compared to £159.4 million in the prior fiscal year.
  • Revenue in constant currency grew 37.2%.
  • Profit before tax for the fiscal year ended June 30, 2018 was £24.7 million compared to £21.7 million in the same period in the prior fiscal year or 11.3% of revenue compared to 13.6% in the prior fiscal year.
  • Adjusted Profit before tax was £33.5 million compared to £25.2 million in the prior fiscal year or 15.4% of revenue compared to 15.8% in the prior fiscal year.
  • IFRS Profit attributable to shareholders was £18.9 million, resulting in a Diluted EPS of £0.38.
  • Adjusted Profit attributable to shareholders was £26.8 million, resulting in an Adjusted Diluted EPS of £0.53.

CASH FLOW:

  • Cash flow from operations was £13.6 million for the three months ended June 30, 2018 up from £11.0 million in the three months ended June 30, 2017.
  • Free Cash Flow4 (a non-IFRS measure) was £11.9 million for the three months ended June 30, 2018 compared to free cash flow of £10.8 million for the three months ended June 30, 2017.
  • Cash flow from operations was £34 million for the fiscal year ended June 30, 2018 compared to £14.7 million in the fiscal year ended June 30, 2017.
  • Free Cash Flow (a non-IFRS measure) was £28.7 million for the fiscal year ended June 30, 2018 compared to free cash flow of £11.2 million for the fiscal year ended June 30, 2017.

As of June 30, 2018, Endava had cash and cash equivalents of £15.0 million, compared to £23.6 million at the end of June 30, 2017. Net borrowings at June 30, 2018 were £4.7 million compared to £5.8 million at June 30, 2017. On completion of the IPO Endava received £40.2m net proceeds which has been partially used to repay all amounts outstanding on our bank facility.

OTHER METRICS FOR THE QUARTER ENDED JUNE 30, 2018:

  • Headcount reached 4,819 with 4,340 average operational employees as of the quarter ended June 30, 2018.
  • Number of clients with over £1 million in spend grew to 46 on a rolling twelve months basis compared to 34 at June 30, 2017.
  • Top 10 clients accounted for 39% of revenue down from 47% as of the quarter ended June 30, 2017.
  • By geographic region, 26% of revenue was generated in North America, 31% was generated in Europe and 43% was generated in the United Kingdom as of the quarter ended June 30, 2018. This compares to 15% in North America, 34% in Europe and 51% in the United Kingdom as of the quarter ended June 30, 2017.
  • Revenue by sector was as follows for the three months ended June 30, 2018 on a rolling 12 Months basis, Payments and Financial Services 53%, TMT 28% and Other 19%. This compares to Payments and Financial Services 60%, TMT 28% and Other 12% for the three months ended June 30, 2017.

4Free cash flow is the Companys net cash from (used in) operating activities, plus grants received, less purchases and non-current tangible and intangible assets.

OTHER METRICS FOR THE FISCAL YEAR ENDED JUNE 30, 2018:

  • Headcount reached 4,819 with 3,957 average operational employees for the fiscal year ended June 30, 2018.
  • Top 10 clients accounted for 42% of total revenue down from 49% for the fiscal year ended June 30, 2017.
  • By geographic region, 21% of revenue was generated in North America, 34% was generated in Europe and 45% was generated in the United Kingdom as of the fiscal year ended June 30, 2018. This compares to 16% in North America, 34% in Europe and 50% in the United Kingdom as of fiscal year ended June 30, 2017.
  • Revenue by sector was as follows for the fiscal year ended June 30, 2018, Payments and Financial Services 57%, TMT 28% and Other 15%. This compares to Payments and Financial Services 57%, TMT 31% and Other 12% for the fiscal year ended June 30, 2017.

FOURTH QUARTER 2018 BUSINESS HIGHLIGHTS:

Endava opened a new Delivery Unit in Timisoara, Romania in May of this year. Timisoara is one of the four major university towns in Romania and the only one where Endava did not yet have a presence.

OUTLOOK:

Given the timing of the reporting for the quarter, the company is unable to provide outlook guidance for the first quarter of fiscal 2019 and for the fiscal year ended June 30, 2019. However, the company plans to provide guidance for both the second quarter of fiscal 2019 and for the fiscal year ended June 30, 2019 when it reports its first quarter of fiscal 2019 results.

CONFERENCE CALL DETAILS:

The company will host a conference call at 8:00 am EST today to review the fourth quarter and the fiscal year 2018 results. To participate in Endavas fourth quarter and fiscal year 2018 earnings conference call, please dial in at least five minutes prior to the scheduled start time (866) 393-4306 or (734) 385-2616 for international participants, Conference ID 8178518.

Investors may listen to the call on Endavas Investor Relations website at http://investors.Endava.com. The webcast will be recorded and available for replay until Friday October 26, 2018.

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, Financial Services, TMT, Consumer Products, Logistics and Healthcare. Endava had 4,819 employees as of June 30, 2018 located in offices in North America and Western Europe and delivery centres in Romania, Moldova, Bulgaria, Serbia, Macedonia, Argentina, Uruguay, Venezuela, and Colombia.

NON-IFRS FINANCIAL INFORMATION:

To supplement Endavas Group Statement of Comprehensive Income and Group Balance Sheet presented in accordance with IFRS, the company uses non-IFRS measures of certain components of financial performance. These measures include: revenue in constant currency, adjusted profit before tax, adjusted profit attributable to shareholders and 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 year ended June 30, 2017 were used to convert revenue for the fiscal year ended June 30, 2018 and the revenue for the comparable prior period.

Free cash flow is the Companys net cash from (used in) operating activities, plus grants received, less purchases of non-current tangible and intangible assets and plus initial public offering expenses paid. Adjusted profit before tax is the companys profit before taxes adjusted to exclude the impact of share-based compensation expense, amortization of acquired intangible assets, realized and unrealized foreign currency exchange gains and losses and initial public offering expenses incurred

In order for Endavas investors to be better able to compare its current results with those of previous periods, the company has shown a reconciliation of IFRS to non-IFRS financial measures. 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. Endava believes the presentation of its non-IFRS financial measures enhances an investors overall understanding of the companys historical financial performance. The presentation of the companys non-IFRS financial measures is not meant to be considered in isolation or as a substitute for the companys financial results prepared in accordance with IFRS, and its non-IFRS measures may be different from non-IFRS measures used by other companies.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

               

TWELVE MONTHS ENDED JUNE 30

     

THREE MONTHS ENDED JUNE 30

2018

£000

      2017

£000

      2018

£000

    2017

£000

REVENUE       217,613       159,368       61,473     43,046
Cost of sales       (145,443)       (108,760)       (40,058)     (29,125)
Direct cost of sales       (132,775)       (98,853)       (36,671)     (26,161)
Allocated cost of sales       (12,668)       (9,907)       (3,387)     (2,964)
GROSS PROFIT       72,170       50,608       21,415     13,921
Selling, general and administrative expenses       (46,737)       (27,551)       (14,982)     (7,558)
OPERATING PROFIT       25,433       23,057       6,433     6,363
Net Finance (expense) / income       (783)       (1,357)       247     (842)
PROFIT BEFORE TAX       24,650       21,700       6,680     5,521
Tax on profit on ordinary activities       (5,675)       (4,868)       (1,782)     (1,239)
PROFIT FOR THE PERIOD AND PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT 18,975       16,832       4,898     4,282

EARNINGS PER SHARE:

                             
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING       45,100,165       45,258,750       45,100,165     45,133,500
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – DILUTED       50,426,216       49,292,520       51,266,396     49,175,768
BASIC EPS       0.42       0.37       0.11     0.09
DILUTED EPS       0.38       0.34       0.10     0.09
 

CONSOLIDATED BALANCE SHEET

               
JUNE 30, 2018

£000

      JUNE 30, 2017

£000

ASSETS “ NON CURRENT                
Goodwill       41,062       16,198
Intangible assets       30,787       16,029
Property, plant and equipment       8,584       7,486
Deferred tax asset       2,488       867
Other assets -Non-current financial assets             14
TOTAL       82,921       40,594
ASSETS – CURRENT                
Inventories       16       62
Trade and other receivables       52,352       41,494
Corporation tax receivable       677       661
Cash and cash equivalents       15,048       23,571
TOTAL 68,093       65,788
TOTAL ASSETS 151,014 106,382
LIABILITIES – CURRENT                
Borrowings       19,744       29,402
Trade and other payables       40,243       24,358
Corporation tax payable       1,488       1,000
Contingent consideration       5,259      
Deferred consideration       4,401      
TOTAL 71,135 54,760
LIABILITIES – NON-CURRENT                
Borrowings       20       63
Contingent consideration       7,251      
Deferred tax liability       2,832       2,586
Other liabilities       277       253
TOTAL       10,380       2,902
 

CONSOLIDATED BALANCE SHEET (CONTINUED)

               
JUNE 30, 2018

£000

      JUNE 30, 2017

£000

EQUITY                
Share capital       996       996
Share premium       2,678       2,678
Merger relief reserve       4,430       4,430

Retained earnings

      59,260       38,072
Other reserves       4,410       4,819
Investment in own shares       (2,275)       (2,275)
TOTAL 69,499       48,720
TOTAL LIABILITIES AND EQUITY 151,014 106,382
 

CONSOLIDATED CASH FLOW STATEMENT

               

Twelve Months Ended June 30

     

Three Months Ended June 30

2018       2017       2018       2017
£000       £000       £000       £000
Operating activities
Profit for the year       18,975       16,832       4,898       4,282
Income tax charge       5,675       4,868       1,782       1,239
Adjustments       6,249       3,519       1,796       1,171
Tax paid       (5,608)       (5,471)       (1,920)       (1,650)
UK research & development credit received       1,854                  
Net changes in working capital       6,839       (5,008)       7,054       5,910
Net cash from operating activities 33,984 14,740 13,610 10,952
 
Investing activities                                
Purchase of non-current assets (tangibles and intangibles)       (5,483)       (6,372)       (1,803)       (2,954)
Proceeds / (Loss) from disposal of non-current assets       79       (106)       77       (106)
Acquisition of business / subsidiaries, consideration in cash       (28,765)       (13,807)       (1,089)       (810)
Cash and cash equivalents acquired with subsidiaries       2,342       768       89      
Interest received       35       18       5       4
Net cash used in investing activities (31,792) (19,499) (2,721) (3,866)
 
Financing activities                                
Proceeds from borrowings       26,462       17,007       3,483       10
Repayment of borrowings       (36,768)       (3,462)       (8,674)       (104)
Grant received       147       2,924             2,924
Interest paid       (573)       (391)       (160)       (93)
Dividends paid                        
Purchase of own shares             (1,240)             (176)
Net cash from/(used in)

financing activities

(10,732) 14,838 (5,351) 2,561
 
Net change in cash and cash equivalents (8,540) 10,079 5,538 9,647
Cash and cash equivalents at the beginning of the year       23,571       12,947       9,462       14,023
Exchange differences on cash and cash equivalents       17       545       48       (99)
Cash and cash equivalents at the end of the year 15,048       23,571       15,048       23,571
 

ENDAVA PLC RECONCILIATION OF ADJUSTED FINANCIAL MEASURES TO COMPARABLE IFRS FINANCIAL MEASURES (GBP IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

RECONCILIATION OF REVENUE GROWTH AT CONSTANT CURRENCY TO REVENUE GROWTH AS REPORTED UNDER IFRS:

     

TWELVE MONTHS ENDED JUNE 30

     

THREE MONTHS ENDED JUNE 30

2018 2017       2018 2017
£000 £000       £000 £000
REVENUE GROWTH AS REPORTED       36.5% 38.1%       42.8% 34.5%
Foreign exchange rates impact       0.7% (9.6%)       1.4% (6.6%)

REVENUE GROWTH AT CONSTANT CURRENCY 1

      37.2% 28.5%       44.2% 27.9%
     

1 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.

RECONCILIATION OF ADJUSTED FINANCIAL MEASURES TO COMPARABLE IFRS FINANCIAL MEASURES

RECONCILIATION OF ADJUSTED PROFIT AFTER TAX

               

TWELVE MONTHS ENDED JUNE 30

     

THREE MONTHS ENDED JUNE 30

2018

 

2017

 

     

2018

 

2017

 

£000

£000

     

£000

£000

PROFIT BEFORE TAX       24,650 21,700       6,680 5,521
Adjustments:                    
Share-based compensation expense       1,505 854       479 178
Amortisation of acquired intangible assets       2,653 1,715       849 459
Foreign currency exchange (gains) losses, net       17 967       (528) 755
Initial public offering expenses incurred       4,643       2,171
Total adjustments       8,818 3,537       2,971 1,392
ADJUSTED PROFIT BEFORE TAX       33,468 25,236       9,651 6,913

 

                   
PROFIT AFTER TAX       18,975 16,832       4,898 4,282
Adjustments:                    
Adjustments to PBT       8,818 3,537       2,971 1,392
Tax impact of adjustments       (976) (586)       (231) (221)

ADJUSTED PROFIT AFTER TAX 2

      26,817 19,783       7,638 5,453
DILUTED EPS (£)       0.38 0.34       0.10 0.09
ADJUSTED DILUTED EPS (£)       0.53 0.40       0.15 0.11
 

2Adjusted PAT is our profit after taxes adjusted to exclude the impact of share-based compensation expense, amortization of acquired intangible assets, realized and unrealized foreign currency exchange gains and losses and initial public offering expenses incurred (all of which are non-cash other than realized foreign currency exchange gains and losses and initial public offering expenses) and the tax impact of these adjustments.

SHARE BASED COMPENSATION EXPENSE

               

TWELVE MONTHS ENDED JUNE 30

     

THREE MONTHS ENDED JUNE 30

2018       2017       2018       2017
£000       £000       £000       £000
                                 
Direct cost of sales       1,006       560       320       112
Selling, general and administrative expenses       499       294       159       66
Total       1,505       854       479       178
 

RECONCILIATION OF ADJUSTED FINANCIAL MEASURES TO COMPARABLE IFRS FINANCIAL MEASURES

RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO FREE CASH FLOW

           

TWELVE MONTHS ENDED JUNE 30

     

THREE MONTHS ENDED JUNE 30

2018

     

2017

2018

     

2017

£000

     

£000

     

£000

     

£000

NET CASH PROVIDED FROM OPERATING ACTIVITIES 33,984 14,740 13,610 10,952
Adjustments:                                
Grant received       147       2,924             2,924
Purchases of non-current assets (tangible and intangible)       (5,404)       (6,478)       (1,726)       (3,060)
FREE CASH FLOW       28,727       11,186       11,884       10,816
 

ENDAVA PLC SUPPLEMENTARY INFORMATION (UNAUDITED)

               

TWELVE MONTHS ENDED JUNE 30

     

THREE MONTHS ENDED JUNE 30

2018       2017       2018       2017
TOTAL CLOSING NUMBER OF EMPLOYEES 4,819       3,744       4,819       3,744
AVERAGE OPERATIONAL EMPLOYEES 3,957       3,181       4,340       3,380
TOP 10 CUSTOMERS % 42%       49%       39%       47%
NUMBER OF CLIENTS WITH > £1M OF REVENUE

(ROLLING 12 MONTHS)

46       34       46       34
 

GEOGRAPHIC SPLIT OF REVENUE %

                               
North America       21%       16%       26%       15%
Europe       34%       34%       31%       34%
UK       45%       50%       43%       51%
100% 100% 100% 100%
 
INDUSTRY VERTICAL SPLIT OF REVENUE %                                
Payments and Financial Services       57%       57%       53%       60%
TMT       28%       31%       28%       28%
Other       15%       12%       19%       12%
100% 100% 100% 100%
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME “ TRANSLATED INTO $

     

TWELVE MONTHS ENDED JUNE 30

     

THREE MONTHS ENDED JUNE 30

2018

     

2017

2018

     

2017

$0003

     

$0004

     

$0005

     

$0006

REVENUE       293,255       202,158       83,708       55,021
Cost of sales       (195,999)       (137,962)       (54,547)       (37,228)
Direct cost of sales       (178,928)       (125,395)       (49,935)       (33,439)
Allocated cost of sales       (17,071)       (12,567)       (4,612)       (3,789)
GROSS PROFIT       97,256       64,196       29,161       17,794
Selling, general and administrative expenses       (62,983)       (34,948)       (20,401)       (9,661)
OPERATING PROFIT       34,274       29,248       8,760       8,133
Net Finance (expense) / income       (1,055)       (1,721)       336       (1,076)
PROFIT BEFORE TAX       33,218       27,526       9,096       7,057
Tax on profit on ordinary activities       (7,648)       (6,175)       (2,427)       (1,584)
PROFIT FOR THE PERIOD AND PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT 25,571 21,351 6,670 5,473
 
EARNINGS PER SHARE:                                
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING       45,100,165       45,258,750       45,100,165       45,133,500
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – DILUTED       50,426,216       49,292,520       51,266,396       49,175,768
BASIC EPS       0.57       0.47       0.15       0.12
DILUTED EPS       0.51       0.43       0.14       0.12

3 Translated solely for convenience into dollars at the rate of £1.00=$1.3476 4 Translated solely for convenience into dollars at the rate of £1.00=$1.2685. 5 Translated solely for convenience into dollars at the rate of £1.00=$1.3617. 6 Translated solely for convenience into dollars at the rate of £1.00=$1.2782.

INVESTORS:
Endava Plc
Laurence Madsen, Investor
Relations Manager
[email protected]

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